Casual dining chain Barbeque Nation has hired two additional merchant bankers, SBI Capital and Ambit Capital, and is preparing a fresh draft red herring prospectus to be filed with market regulator SEBI this month or early next month, sources told Moneycontrol. The Dhanani family-promoted Barbeque Nation, backed by private equity firm CX Partners, has been trying to go public since mid-2017. However, regulatory hurdles and unfavourable market conditions have delayed the planned Dalal Street debut.
“SBI Capital and Ambit Capital have recently been appointed for the IPO and join IIFL & Axis Capital which had been taken on board earlier this year when the listing plans of the firm were revived. The target is to hit the markets before March 2020, but that may be challenging due to the tight timeline,” a source told Moneycontrol.
The Dhanani family hold 45.7 percent in Barbeque Nation through a subsidiary of their listed flagship Sayaji Hotels. CX Partners owns 21.72 percent in the firm and renowned stock market investor Rakesh Jhunjhunwala's investment firm Alchemy Capital holds 2.07 percent.
“The IPO will be a mixture of primary and secondary issue of shares and proceeds will be used as growth capital to add more branches,” another source told Moneycontrol.
“By a conservative estimate, the IPO should net between Rs 500 –Rs 700 crore, but the valuations may vary depending on the outcome of the road shows in January 2020.
“CX Partners has been invested in Barbeque Nation since 2013 and has been pushing for an IPO to make a partial exit. Members of the Sayaji family too may pare their stake,” added a third source.
In August 2017, Barbeque Nation had filed a DRHP with market regulator Sebi for an IPO seeking to raise around Rs 700 crore, and the proceeds from the issue were to be used for branch expansion, paying back loans and general corporate purposes. But SEBI delayed the approval, citing “pending regulatory action for past violations". The IPO finally got the SEBI approval in January 2018.
“Barbeque Nation is the single largest player in the organised casual dining segment. It has a strong customer connect and brand value . Moreover, the strategic location of the stores ensures repeat customers , mostly in big groups. There is likely to be a rub-off effect from Burger King, which is the other IPO bound company in the food segment that filed its DRHP in November ,” said another source.
In January 2019, ratings agency ICRA had said the outlook for Barbeque Nation is stable citing its strong brand image in the restaurant segment which facilitates entry into new markets at competitive rentals, in turn supporting the company's revenues and operating margins. "Barbeque Nation Hospitality Ltd ( BNHL) has witnessed healthy revenue growth over the last two-three years aided by addition of new stores and consequent increase in number of covers sold in the same," the report said. But ICRA also highlighted that, " Going forward, ongoing expansion in the UAE and India is expected to continue to impact margins of the company."
As of 31st March 2019, Barbeque Nation's revenue from operations stood at Rs 739.01 crores, net profit at Rs 10.96 crores and Ebidta at Rs 77.73 crores. The chain has more than 125 outlets in India, 4 in the UAE and 1 outlet in Malaysia according to its website.
The market size of the Indian restaurants and food services industry stands at Rs 3.7 lakh crore as of 2018 registering a y-o-y growth of about 10 percent and a CAGR growth of 8.4 percent between 2013 and 2018. Going forward, CARE Ratings expects the restaurant and food service industry to register a growth of about 10.4 percent CAGR for the next 5 years between 2018 and 2022 to reach Rs 5.5 lakh crore by 2022.
Ambit Capital declined to comment in response to an email query from Moneycontrol. Moneycontrol is awaiting a response to queries sent to Barbeque Nation, Sayaji Hospitality, CX Partners, Rakesh Jhunjhunwala and SBI Capital.