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Retail investors bite into Burger King India as IPO crosses finish line
Photo Credit: VCCircle

The initial public offering (IPO) of fast-food chain Burger king India Ltd sailed through on the first day of the issue on Wednesday thanks to huge demand from retail individual investors.

Burger King India, which is the national master franchisee of Burger King Corporation, received bids for 233.2 million shares as against the 74.49 million shares that are on offer after excluding the anchor allotment, stock-exchange data showed. The book was subscribed 3.13 times at the end of day one. The IPO will close on Friday.

Retail investors, whose maximum application value cannot exceed Rs 2 lakh, bid for 15.53 times their quota. The portion set aside for non-institutional investors such as corporate houses and high-net-worth individuals (HNIs) was covered 71%. Institutional investors bid about 18% of their quota, stock-exchange data showed. 

At least 75% of Mumbai-based Burger King’s IPO is reserved for institutional investors, owing to its past three-year profitability track record. This explains the rush among retail investors as just 10% of the IPO is reserved for them.

In a typical IPO, at least 50% of shares are reserved for institutional investors, 35% for retail investors and 15% for non-institutional and non-retail investors such as corporate bodies and HNIs.

Ahead of the IPO, Burger King India raised Rs 364.5 crore ($49.6 million) from anchor investors including Singapore sovereign wealth fund GIC Pte Ltd.

The company allotted 60.75 million shares to about two dozen anchor investors at the upper end of the Rs 59-60 apiece price band, it said in a stock-exchange filing.

GIC subscribed to shares worth Rs 30 crore. Eight domestic mutual funds including Sundaram MF, ICICI MF and SBI MF were among the other anchor investors.

Private equity firm Everstone Capital, through its investment vehicle QSR Asia Pte Ltd – the promoter entity – owned a 94.34% stake in Burger King India. The PE firm has proposed to sell 60 million shares, or a fifth of its stake.

The IPO will also see the company raise Rs 450 crore in fresh capital, according to Burger King India’s IPO disclosures. The total IPO size is Rs 810 crore.

Burger King India owns the rights to develop, establish, operate and franchise Burger King-branded restaurants in the South Asian nation.

In the US, the brand is owned by Burger King Corp, a subsidiary of Restaurant Brands International Inc., which holds a portfolio of fast-food brands that are recognised around the world and that also include Popeyes and Tim Hortons.

The Burger King brand is the second-largest burger brand globally as measured by the total number of restaurants, with a global network of over 18,000 restaurants in more than 100 countries and the US at the end of June 2019.

In India, it operates through a total of 239 restaurants including eight sub-franchised restaurants. 

The company had aimed for approximately 325 restaurants, including sub-franchised outlets, by the end of 2020. However, the Covid-19 pandemic and various precautionary measures enforced by the governments and law enforcement agencies have had a “substantial impact” on its operations.

The firm will use Rs 432.24 crore out of the fresh net proceeds to roll out new company-owned Burger King outlets, besides using Rs 162.24 crore to repay or make advance payment of its borrowings, Rs 270 crore in capital expenditure for setting up new outlets, and an undisclosed amount for general corporate purposes.

Kotak Mahindra Capital, CLSA India, Edelweiss Financial Services and JM Financial are part of the syndicate arranging and managing the share sale.

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