Barbeque Nation IPO - Should U Go 4 A Piece Of The Pie?
The Barbeque Nation IPO opens on March 24, 2021. The total issue size is Rs 452.87 crores, comprises approximately 90 lakh equity shares; the chain that pioneered the concepts of grills on the table has placed its offering at RS 498-500 price band.. The bidding window will close after two days on Friday, March 26, 2021. The company will use 75cr from the IPO proceeds for repayments towards outstanding’s and @ 55cr will be used for opening new outlets.
Barbeque Nation has presence in 77 cities In India and Operates 147 outlets. It also has presence in UAE, Malaysia and Oman. It owns 61.35% of the equity share capital on a fully diluted basis in one of its subsidiaries, Red Apple, which owns and operates nine restaurants under the brand name “Toscano”— a casual dining Italian restaurant chain—and one each under “La Terrace” and “Collage”.
Barbeque Nation has been a pioneer of the Grill on your table concept and is one of the most recognized restaurant brands in the rapidly growing casual dining restaurant (CDR) market. A high portion of the company’s revenues comes from its lunch covers. The company’s delivery business has grown from Rs 26.09 crore in fiscal ended March 2020 to Rs 37.89 crore during the eight months ended Nov. 30. The company is focusing to increase same store sales growth, revenue per store and profitability as the vintage of Barbeque Nation. With the COVID-19 pandemic and the subsequent nationwide lockdown, Barbeque Nation saw its business being completely shut in April and May, last year. But, the company innovated to bring about a new delivery offering – Barbeque in a Box and launched it in June 2020. This seems to be paying off as the delivery business is seen to be contributing in double digits to its total revenue. According to the HDFC Securities report, as of December 31, 2020, the average rating of Barbeque Nation Restaurants on an online food aggregator was 4.38 out of 5.00.
From a financial stand point of view the company has reported losses in every financial year since FY18, though revenue has been increasing in same periods. The company reported consolidated loss at Rs 32.93 crore on revenue of Rs 846.97 crore in FY20, loss at Rs 38.4 crore on revenue of Rs 739 crore in FY19 and loss at Rs 5.8 crore on revenue at Rs 586.3 crore in FY18. For eight months period ended November 2020, it posted a loss of Rs 100.65 crore on revenue Rs 201 crore, largely impacted by the COVID-19 pandemic. But at the operating level, the performance remained better with EBITDA (earnings before interest, tax, depreciation and amortization) at Rs 140.37 crore, Rs 149.39 crore, Rs 168 crore and Rs 12.59 crore in FY18, FY19, FY20 and in eight months period ended November 2020,
Barbeque Nation has a lot going for it and the long-term structural story of casual dining space in India is intact on the back of improving demographics, shift to branded players and expansion in the tier 2/tier-3 towns. At the higher end of the price band, the company is asking for a valuation of 2.4x FY20 EV/Sales. Also based on a quick number crunching the company is forecasted to report a 3.7 percent CAGR de-growth in consolidated topline over FY20-23 to Rs 757.19 crore in FY23. Gross and EBITDA margins are likely to expand by 15bps and 223bps over the period to be at 65.6 percent and 21.6 percent, respectively, in FY23. The company would continue to report loss at PAT level over FY20-23." One also needs to understand the model offered – primarily it’s a all you can eat and more importantly grill on the table. Its pretty difficult to replicate the above two key parameters in the delivery box. The increasing number of Covid cases in India and the impact on the model is another factor. Another important thing to remember is that It had also mopped up Rs 150 crore in January this year through pre-IPO placement at Rs 252 per share, which is nearly half of its IPO issue price. Talk about asking for a premium. All this factors makes the issue very expensive and very difficult to recommend. This is a avoid
There is an IPO euphoria going. Great subscription might not translate to great listing prices. Anupam Rasyan was over subscribed by 48 times. It has listed today and is currently down by 5% on its IPO listing price. Tread Lightly.