Restaurant chain operator Barbeque Nation Hospitality's initial public offering opens for subscription today at a price band of Rs 498-Rs 500 per share. It will close on March 26.
The company, which is backed by ace investor Rakesh Jhunjhunwala, aims to raise around Rs 453 crore through its public issue, which is a fresh issue as well as an offer for sale. It has already raised Rs 150 crore through a pre-IPO placement from Xponentia Capital and Jubilant Foodworks.
The IPO comprises a fresh issue of Rs 180 crore and an offer for sale of up to 54,57,470 equity shares by existing selling shareholders.
Most brokerages are not very bullish on the issue due to consistent losses in previous years and also the impact of COVID-19 on the dine-in business. However, the company has shown a smart recovery of 84 percent of pre-COVID levels with an improving business outlook. Brokerages feel the long-term growth story for the company is intact but they are not confident about the listing.
YES Securities - AVOID
The brokerage says the pricing looks on the higher side with not a lot left on the table for investors. "We also note that earlier fundraises in 2018 have been done at a much higher price, but fundamentals have deteriorated since," it said.
Despite a strong growth outlook for the space and strong brand equity for the company which should help gain market share, the brokerage advises avoiding the IPO, awaiting better entry opportunities post listing.
Angel Broking - Neutral
"While the company has posted revenue growth of 20 percent CAGR between FY18-FY20, it has been continuously incurring losses at PAT level. The COVID-19 pandemic too has had an adverse impact on the operations of the company, hence we expect profits will remain under pressure over the medium term," said the firm.
The higher end of the price band is expensive given the current environment and hence the company recommends a 'neutral' rating.
Choice Broking - AVOID
"The emergence of the second wave of the COVID-19 infections, could delay the business normalcy speed. Also without any meaningful change in the business fundamental, the issue price is almost double the pre-IPO placement price. Thus, we assign an 'avoid' rating for the issue," it said.
Sharekhan - Neutral
The long-term structural story of casual dining space in India is intact on back of improving demographics, shift to branded players and expansion in the tier 2/tier-3 towns, said Sharekhan. This, along with a better business model, negative working capital, improving operating cash flows and focus on expansion in the key markets, would help Barbeque Nation deliver better operating performance in the coming years in the backdrop of a stable macro-environment, it said.
Prabhudas Lilladher - Subscribe
This is the only brokerage with a 'subscribe' rating for the IPO. The brokerage says:
The company has several growth levers such as 1) Huge scope of expansion given low penetration, 2) Expansion of delivery business which has already grown from 3 percent of revenues pre-COVID to 15 percent of revenues in November 2020, 3) Strong value proposition with niche positioning in high growth casual dining segment.
"Although, we expect reasonable listing gains given IPO euphoria in the markets, the operational delivery needs to improve significantly for any serious re-rating in the long term," it added.
However, little scalability of international operations and not so impressive track record of the promoter group in scaling up Sayaji Hotels, pledged promoter shares, insolvency proceedings and offer for sale by promoters in IPO, merit caution, said Prabhudas Lilladher.
