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Burger King IPO: Retail demand robust, strong HNI participation on the cards

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NEW DELHI: Led by strong retail participation, Burger King IPO got fully subscribed on Day 1 itself. But if one is to go by dealers in the unlisted market, the issue is likely to see strong HNI participation ahead.

Only a 10 per cent of the quota is reserved for retail individual investors (RIIs). For non-institutional investors, which includes HNIs, the quota is kept at 15 per cent. At least 10 brokerages have recommended a ‘subscribe’ to the issue, with a few such as Motilal Oswal Securities also expecting listing gains.

The unlisted share was commanding a grey market premium of Rs 30-32 on Wednesday, said Dinesh Gupta of Unlisted Zone. In terms of percentage, this premium stood at 53 per cent at the upper limit of the price band Rs 59-60.

“Investors are taking it as the next Jubilant FoodWorks, which has delivered nearly 20 times return since listing in 2010. The fact that the issue is valued at a discount to peers on a mcap-to-sales ratio basis, a key ratio for the industry, has made it look attractive. That said, one must note that the retail quota for the issue is just 10 per cent and thus getting allotment could be difficult. In case of HNIs as well, we expect the quota to be subscribed by at least 225 times,” Gupta said.

Gupta shared the following cost sheet for HNIs:

Burger King IPO cost sheet for HNI investors.

The IPO of the quick-service restaurant chain was subscribed 3.13 times on the first day of its bidding process. The portion reserved for retail investors was subscribed more than 15.5 times. High net worth investors category got bids for 70 per cent set aside for them. Qualified institutional buyers (QIB) bade for 16 per cent of their portion in the IPO. QIBs and HNIs generally put their bids on the last day of offer.
Sagar Shah of Ascent Wealth Advisors said the grey market premium rose to Rs 32-33 on Thursday.

“The brand has power and is easily recognisable. Given the low quota reserved for retail and HNIs, the demand from these categories is likely to exceed the quotas multiple times,” Shah said while noting that the IPO was earlier expected to be priced at around Rs 90-100 range.

At the higher end of the price band, the issue is valued at 2.7 times FY20 price to sales and 8.3 times FY20 price to book value, which is reasonable compared to peers, said Motilal Oswal Securities.

“Considering its strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India, we expect its financials to improve going ahead. Thus, we would recommend investors to subscribe for listing gains to the IPO,” the brokerage said.

Choice Broking said that the company is in a growth phase and has scheduled an aggressive restaurant expansion plan. “Considering Covid-19 as an exceptional phase for the sector, we feel that with positive advancement in vaccine development and considerable relaxation in the economic activities, Burger King would report improved financials over the period. Considering the discounted valuations, we assign a ‘subscribe’ rating to the issue,” it said.

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