Burger King IPO

Buy the IPO of the Burger King India Limited from us and get all the details and regular updates.
The IPO comprises fresh issues worth Rs 400 crore and an OFS of up to six crore shares. With average ticket value of Rs 500–550, the company had 202 outlets in 47 cities as of June 2019. NEW DELHI: Quick service restaurant chain Burger King India has filed draft papers for its initial public offering (IPO).

Burger King India Limited draft papers have been filed with SEBI and the company is looking to raise ₹ 400 Crores. Burger King India Limited is planning to list its shares on NSE and BSE.

Company Summary:

The globally recognized Burger King brand, also known as the ‘HOME OF THE WHOPPER’ was founded in 1954 in the United States and is owned by Burger King Corporation, a subsidiary of Restaurant Brands International Inc.

Restaurant Brands International Inc holds a portfolio of fast-food brands that are recognized around the world that include the BURGER KING, POPEYES and TIM HORTONS brands.

The Burger King brand is the second-largest fast-food burger brand globally as measured by the number of restaurants, with a global network of over 18,000 restaurants.

Burger King India Limited is the national master franchisee of the BURGER KING brand in the Quick Service Restaurant (QSR) Industry in India. The master franchisee arrangement provides them with the ability to use Burger King’s globally recognized brand name.

According to the DRHP, as at 30, June 2019 the company had 202 restaurants, including seven Sub-Franchised Burger King restaurants, across 16 states and 47 cities across India.

According to the DRHP filed by the company with SEBI, the company has plans to have approximately 325 restaurants by 31st Dec 2020.

Revenue Model:

· Revenue from operations of the company comprises:

revenue from the sale of food and beverages — revenue from sales through the restaurants directly operated by the company

revenue from sub-franchisee operations — includes royalties received from sub-franchisees

other operating income — includes income from scrap sales

Industry Overview:

· The food services market in India has been booming in recent times, owing to the rising disposable income of the middle class.

· The market was estimated at ₹ 4,096 billion in Fiscal 2019. It is projected to grow at a CAGR of 10.5% over the next five years and is expected to reach ₹ 6,753 billion by Fiscal 2024. *

Market Structure

The Indian food market is classified into two segments

·        Unorganized — includes dhabas, roadside small eateries, hawkers and street stalls

·        Organized — Chains (domestic or International outlets having more than 3 branches across the country) or standalone outlets.

·        Chains are further divided into six sub-segments

·        Fine Dining (FDR) — targets rich and upper-middle-class consumers

·        Casual Dining (CDR) — oriented towards affordable dining

·        Pub, Bar, Club, and Lounge (PBCL) — mainly serve alcohol and related beverages

·        Quick Service Restaurants (QSR) — focused on speed of service and affordability including takeaway/delivery sub formats

·        Cafes — includes coffee bars and parlors

·        Frozen Desserts Outlets (FD/IC) — small kiosk outlets of ice cream brands

Peer Analysis:

The efficiency of the company is low compared to its peers.

But the company has outperformed its closest peer Westlife, that runs McDonald’s chain.

Burger King has generated 66 percent revenue growth compared to Westlife which has generated revenue growth of only 19 percent during the year.

Burger King plans to roll out 700 restaurants by 2025 from 216 at present. In comparison to this Westlife, started operations 20 years ago had 304 restaurants until the end of September and opened only 19 stores in each of the past two years. (Source: Economic Times)

Apart from higher growth, several other factors work in favor of Burger King like Burger King India’s royalty payment to the parent company is capped at 5 percent. For Westlife, royalty payment is capped at 5 percent until 2023 and will eventually rise to 8 percent. (Source: Economic Times)

Financial Review of Burger King India Limited:

Total Assets of the company has been increasing at a CAGR of 64.8% from 2016 to 2019.

Total Revenue of the company has been increasing at a CAGR of 66% from 2016 to 2019.

The asset turnover ratio of Burger King is lowest among its peers which means that the company’s efficiency to use its assets to generate revenue is lowest.

Gross margin percentage of the company is also the lowest among its peers

Pros:

Exclusive Rights

The company has exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India. The BURGER KING brand is the second-largest fast-food burger brand globally.

Brand positioning for millennials

The company has positioned its brand to target the large and growing millennial population in India.

Approximately 60% of Indians eating out are millennials, and the millennial population in India has grown from 418 million in FY11 to 444 million in FY19.

This trend is expected to continue as India’s population continues to grow.

Cons:

Competition

The QSR industry in India is highly competitive and is affected by various factors like consumer tastes, economic conditions and disposable income levels.

Due to increased competition the company could experience downward pressure on prices, lower demand for its products, an inability to take advantage of new business opportunities including finding suitable restaurant locations and a loss of market share.

Regulations

The company is subject to health, safety and environment laws and regulations enforced by local and national bodies.

The costs of compliance with health, safety, and environment laws might continue to increase in the future and could adversely affect a company’s gross margins.

Dependency on suppliers:

The company’s operations are highly dependent on the adequate and timely delivery of quality ingredients, packaging materials, and other necessary supplies.

If the suppliers fail to provide these supplies in a timely manner, a company’s business and financial condition could be adversely affected.