With this, they have exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India.
By Urvashi Valecha
Although the current fiscal year has been difficult for consumer businesses, the quick service chain Burger King India is raising capital through its initial public offering on Wednesday to fund its growth and repay some of its debt.
While the pandemic has hit its revenue hard during the lockdown, according to the chain’s red herring prospectus, it expects the second half of the financial year to be better as most cities have lifted restrictions.
There are reasons for his optimism as Burger King’s revenue grew 2.2x in the 2018-20 financial year to Rs 8 41.2 crore. New store additions were multiplied by 2.95 to reach 260 stores in fiscal 2020. Its same-store sales growth was 12.2% and 29.2% in fiscal years 20218 and 2019, respectively. In the first half of the financial year, its same-store sales growth declined by 59%, while revenue fell by 68%, resulting in an operating loss of Rs 3.9 crore .
Given that FY21 is a disruptive year for the fast service industry due to the pandemic, recovery to pre-Covid levels would be slow. According to Sharekhan of BNP Paribas, at an IPO price range of Rs 59-60, the IPO is valued at 29.5 times to 29.3 times its enterprise value (EV) FY20 over to Ebitda, taking into account diluted equity in the upper and lower price range. Burger King India’s revenue recorded a compound annual growth rate (CAGR) of almost 50% in FY18 and FY20. after tax. Gross margin improvement was nearly 64% in FY2020 and negative working capital helped operating cash flow improve in the period from FY18 to 2020. 20. “Strong franchise model, negative working capital, market share gains from stand-alone players, and strong store expansion plans would help improve growth prospects in the coming years,” Sharekhan said. of BNP Paribas.
At the EV level to Ebitda, Burger King’s valuation is lower than other listed quick service peers Jubilant Foodworks and Westlife. Jubilant holds the master franchise for Domino’s Pizza and Dunkin Donuts, among others, in India, and has FY19 revenue of Rs 3,530.7 crore and FY20 Rs 3,885.8 crore, respectively. . Westlife Development, which is the master franchise holder of McDonald’s in western and southern India, had revenue of Rs 1,402.2 crore in FY19 and Rs 1,547, Rs 8 crore for FY20. Burger King India’s operating profit margin (OPM) was 12.5% for FY19 and 12.4% for FY20. OPM for Jubilant Foodworks was 17.2% in FY19 and 22.6% in FY20. Additionally, OPM for Westlife Development was 8.9% in FY19 and 14.1% in FY20.
Burger King India owns the national master franchise of Burger King, a global quick service brand. With this, they have exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India. According to a report by Axis Capital, BKI currently has 261 outlets in India.
Domino’s Pizza has the most outlets with 1,354. Followed by Subway at 541, McDonald’s at 481, KFC at 454 and Wow! Momo at 317, shows Axis Capital’s report. The company said it intends to use its new products by rolling out new company-owned Burger King restaurants through the repayment or prepayment of the company’s outstanding loans, for capital expenditures and general business needs.
