Should you invest in Barbeque Nation IPO?

Barbeque Nation Hospitality Limited was launched in 2006. Barbeque Nation is one of the leading casual dining restaurant chains in India. It offers the best quality of food offerings, ambiance, and services to customers. It also owns and operates Toscano Restaurants and UBQ by Barbeque Nation that caters to the delivery segment.

Barbeque Nation IPO?

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UBQ by Barbeque Nation provides a la carte Indian cuisine in the value segment, initially through leading food delivery service providers for the delivery of their food. As of November 30, 2019, they were providing delivery in 71 cities in India of a la carte Indian cuisine under UBQ by Barbeque Nation from our existing kitchen infrastructure.The company has recently diversified into another brand “Red Apple” which operates 10 Italian restaurants in 2 cities of India i.e. Bengaluru and Chennai.

Promoters & Shareholding:

Sayaji Hotels Limited, Sayaji Housekeeping Services Limited, Kayum Dhanani, Raoof Dhanani, and Suchitra Dhanani are the company promoters with a pre-issue share holding of 60.21%.

Also read: Should you apply for Kalyan Jewellers India Ltd IPO?

Public Issue Details:

Offer for sale:Fresh issue ofapprox3,600,000Eq Shares of Rs5, aggregating up to Rs 180.00 Cr and Equity Shares of Rs.5 totalling up to Rs.272.87 Crore of OFS.

Total IPO Size: Rs452.87 Cr

Price band: Rs498 to Rs 500

Objective:To make prepayment/repayment of all or a part of the company’s outstanding borrowings availed on a consolidated basis and to meet general corporate purposes.

Bid qty: minimum of 13shares (1 lot) for Rs15,000and maximum of 13 lots.

Offer period: 24th March 2021 –26th March 2021

Date of listing: 7th April 2021

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Pros:

  • Barbeque Nation Hospitality Limited is one of the leading casual dining restaurant chains in India.
  • Experienced promoters and managers team.
  • They have expanded their portfolio of offerings through acquisitions.
  • The company is being backed by a coveted investor,RakeshJhunjhunwala.

Also read: Should you invest in Suryoday Small Finance Bank Ltd IPO?

Cons:

  • One of their Promoter and Director, Raoof Dhanani is involved in a criminal proceeding and an insolvency proceeding.
  • Consolidated profits have declined in some of the recent fiscals.
  • The company has been incurring losses in the last 3 years and 8 months.
  • Deterioration in the performance of relationships with third-party delivery aggregators may adversely impact its business.

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Subscribe or avoid?

According to Technopak, the chain CDR market is one of the fastest-growing segments in the Indian restaurant industry and is projected to grow at a CAGR of approximately 20% from Fiscal 2019 to Fiscal 2024. Barbeque Nation Restaurants have experienced steady growth in the number of covers over the last three Fiscals, and the proportion of total revenues from weekday sales and lunch covers at Barbeque Nation Restaurants is relatively higher as compared with the industry average according to the Technopak Report.

On the financial side,The Company has generated strong revenue growth in the last 3 years and 8 months but the net profit has been on a decline. They have reported net losses of Rs 32.93 Cr, Rs 38.38 Cr, and Rs 5.8 Cr in FY20, FY19, and FY18 respectively. In the last 6 months, the company has reported a loss of Rs 100.65 Cr in the last 8 months from March 2020 to Nov 2020 which was mainly due to the lockdown measures in India due to Covid-19. For the last three fiscals, the company has posted an average negative EPS of Rs. (11.12) per share, due to this, we cannot determine whether the IPO is overpriced or underpriced. The company has good revenue growth but declining profits. We would suggest waiting for the performance to recover from Covid-19 restrictions and reflect in the company results.

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