The IPO season is back after a long hiatus and now every other week or fortnight we are seeing an issue, while the latest i.e. Gland Pharma IPO was given a miss by investors both from the HNI and retail space, grey market premium suggests that the IPO of Burger King in line with Gland Pharma IPO can reap handsome gains for investors.
Here's what different brokerages make from the offer of Burger King
Before getting into insights into the issue:
Issue size: Rs. 810 crore
Issue opening date: December 2
Price band: Rs. 59-60 per share
Bids: for a minimum of 250 equity shares and 250 shares thereafter
Objective: In its expansion the funds or proceeds mopped up shall be put to use. Under the Master Franchise and Development Agreement, the company is required to develop and open at least 700 restaurants by December 31, 2026.
While the liquidity push in the market shall be giving the momentum to the IPO market until next Diwali, Burger King IPO is also aiming at mopping a total of Rs. 810 crore. That will comprise Rs. 450 crore as fresh issuance and remaining shall be offer for sale.
As per IPO central.com, the grey market premium for Burger King has been Rs. 32, while its price band has been fixed at Rs. 59-60 per share.
Being the company in the growth phase, it recorded good revenues over the last 3 years. But due to the pandemic, this streak seems to be coming to an end in FY21. But as in now, the company is not profitable and the impact of covid 19 is largely imminent.
In the last six months the company posted a loss to the tune of Rs. 119 crore on sales of Rs. 151.7 crore.
Note while the GMP has been high it can fell drastically overnight, so it shall not be wise to go sole by the premium that it commands.
Angel Broking giving the valuation finds the issue of Burger King attractive. Burger King peer Jubilant Foodworks is currently trading at 8.7 EV/sales on FY20 basis. Burger King won't get such a premium valuation as Jubilant Foodworks as it does not have a profitability track record like Jubilant, says the brokerage. "Its outlets are young and we believe majority of the Indian people prefers Jubilant - Pizza over burger sold by Burger King. So Burger King has priced its issue at a significant discount compared to Jubilant Foodworks, so looking at the valuation and the growth the company is expected to do in the future, the issue is looking attractive to us at the first look," says Keshav Lahoti, Associate Equity Analyst, Angel Broking.
So, given the discount that the issue offers, you can surely take a moderate bet on the issue.