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Barbeque Nation goes public: Key things to know about the IPO

The Indian food segment and restaurant chain market has evolved over the years, more so with the entry of global fast-food chains like McDonald's, Pizza Hut and Domino's, which were then followed by the likes of Subway and Barbeque Nation.

One of the frontrunners among India's casual dining chain businesses, Barbeque Nation has also made its way into the 2020-21 initial public offer (IPO) season traffic, with its ₹453 crore issue thrown open for subscription on March 24.

Barbeque Nation Hospitality's footprint has extended beyond the Indian borders. As of December 2020, the company had 164 restaurants under its umbrella, of which, 147 are spread across Indian cities, while the rest comprise of restaurants that fall under the brand name in other countries as well as some Italian restaurants that operate under different brand names. The company has backers like private equity firm CX Partners and Dalal Street bigwig Rakesh Jhunjhunwala's Alchemy Capital. For this financial year, the curtains will be drawn on the IPO season by Barbeque Nation IPO.

Here's all you need to know about the offer of the last company to go public this financial year.

  • The bidding for the IPO was thrown open on March 24 and will close on March 26, 2021.
  • Barbeque Nation Hospitality filed its preliminary papers in February last year and received approval to float its IPO from the Securities and Exchange Board of India (SEBI) in July.
  • The price band for the IPO was set at ₹498 to ₹500 per share with a face value of ₹5 per piece, and these shares are to be listed on both, the BSE and the NSE.
  • The IPO comprises a fresh issue of about ₹180 crore and an offer-for-sale (OFS) of around ₹273 crore. The fresh issue size is around 36 lakh shares while the size of the OFS is 54.57 lakh shares. Each lot consists of a minimum of 30 shares.
  • Ahead of the IPO, the company on March 23, 2021, allocated 40,57,861 equity shares to anchor investors at ₹500 per share, bringing in up to ₹202.89 crore. Big names on the list of anchor investors include ICICI Prudential, SBI Mutual Funds, Nomura Funds and Goldman Sachs, among others. The company also raked in about ₹150 crore through the pre-IPO placement at ₹252 per share, which is nearly half of its IPO issue price.
  • Of the net proceeds from the ₹180 crore fresh issue, ₹54.62 crore is to be used as capital expenditure for expansion and opening of new restaurants and ₹75 crore is meant for prepayment or repayment of all or a portion of certain outstanding borrowings of the company. The balance amount is to be used for general corporate purposes.
  • The company also proposes to add 20 new Barbeque Nation Restaurants in FY2022 and another 6 Barbeque Nation Restaurants in FY2023.
  • Post-IPO, the promoter shareholding in Barbeque Nation Hospitality will drop from the earlier 47.8% to 37.8%.
  • Book-running lead managers for the issue are IIFL Securities Ltd., Axis Capital Ltd., Ambit Capital Pvt. and SBI Capital Markets Ltd.

For those who are considering applying for the same, ICICIdirect offers a convenient, paperless option to do so right from the comfort of your home. All you need is a demat account to get the application process going. Also, here are some possible pros and cons of the offer to help you better understand the prospect and make a wise, well-informed investment decision.

According to an ICICIdirect research report, the company is well-positioned to further grow in the food and restaurant segment in India and can make the most of the growing consumer spending vis-a-vis increasing disposable incomes in the hands of people. Also, as many smaller restaurants were forced to close down amid the pandemic-driven lockdowns, there is more space for organised chains to grow and expand business. Moreover, its recovery from the fallout of the lockdown has also been a speedy one, and it also saw a rise in delivery revenues from 3% in pre-COVID-19 times to 15% at present. Barbeque Nation Hospitality also generates healthy operating margins of around 19-22%. It has a strong restaurant brand in India and benefits from its strong processes and backend systems put in place over its 14-year long run.

However, there are certain risks and concerns that surround the Barbeque Nation IPO vis-a-vis the future growth prospects of the brand, one of these are delivery revenues, which remain relatively low despite the increase from pre-pandemic times. While food delivery business saw considerable uptick amid and even after the lockdown period, the report notes that the opportunity for casual dining restaurants in the food delivery segment is limited, which is a concern for the company's future growth. There is also the excessive competition in the space that can possibly disrupt pricing. Also, concept restaurants constantly need to reinvent themselves to dodge redundancy, which is again a factor that could have adverse effects if the brand fails to identify and address the same.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Please note, distribution of Mutual Funds related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism.

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