Burger King's Stock Market Debut Becomes Biggest Since 2017
Burger King India Ltd. surged 131% on its first day of trading, the latest successful debut after a spurt of technology company listings helped boost initial share sale pipeline.
The operator of Burger King-branded restaurants in India saw demand nearly 157 times more than the number of shares in its initial public offering earlier this month. With restaurants open for business post-lockdown and vaccines on the way, investors are betting that Indians will soon be thronging fast food chains.
The stock began trading at Rs 115 versus an offer price of Rs 60 and climbed to a high of Rs 138.40 at the 3:30 p.m. close of trade in Mumbai. The debut is the best since 2017 when Astron Paper & Board Mill Ltd. jumped 142%.
Key Insights
- The company's franchisee agreement with Restaurant Brands International Inc. allows it to use the Burger King brand in India until December 31, 2039
- The agreement also requires Burger King India to open at least 700 restaurants by the end of 2025
- The 4%-5% royalty paid to Burger King is lower than the range paid by franchisees of most comparable quick-service restaurants in India, according to the company's prospectus
- "We advise long term investors to stay invested in the company," said Keshav Lahoti, an equity analyst at Angel Broking in Mumbai, "Even after such bumper listing, there is no issue with the valuation of the company. In the future, we expect the company to gain market share by opening more stores compared to the competitors"
- In the first half of the fiscal year ending March, revenue declined 68% year on year, and the company reported losses due to the impact of Covid-19, according to Hemang Jani, head equity strategist at Motilal Oswal Financial Services Ltd.
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- Burger King India's IPO marks a broadening in the wave of debuts late in 2020, which had become increasingly dominated by technology companies
- Rival Jubilant Foodworks Ltd. has seen revenue continue to erode in the quarter ended September, but not as badly as when India was under lockdown
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