Fast-food chain Burger king India Ltd, controlled by private equity firm Everstone Capital, received an astounding response to its initial public offering with strong demand across all investor categories.
The offering of 74.49 million shares—excluding the anchor investors’ portion—received bids for 116.69 billion shares. This means the book was subscribed 157 times, stock-exchange data showed at the end of bidding Friday.
The quota reserved for institutions and retail investors was subscribed 86.6 times and 68.1 times, respectively.
The portion set aside for non-institutional investors, including corporate bodies and wealthy individuals, was covered 354 times.
Wealthy individuals typically bid on the final day of a public offering to keep their IPO financing costs at a minimum. They borrow short-term capital from various avenues, barring banks, to fund their IPO applications and deploy only a small fraction of their own capital—called margin money—upfront.
The IPO was fully covered within a few hours of the issue opening on Wednesday and garnered more interest on Thursday.
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 IPO will 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, including the Rs 360 crore that Everstone will raise by selling part of its stake.
Everstone sold more stake in Burger King in off-market deals in the days leading up to the IPO. Its stake will dilute to roughly 53% after accounting for fresh shares in the offering as against 94.43% stake it held earlier.
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. It will also use Rs 162.24 crore to repay loans and Rs 270 crore in capital expenditure to set up new outlets.
Kotak Mahindra Capital, CLSA India, Edelweiss Financial Services and JM Financial are part of the syndicate arranging and managing the share sale.