Burger King IPO
1. As the name itself suggests, Burger King is a specialized ‘Burger’ fast-food franchise. Burger King India is a fast-food franchise operating in various parts of India. It is one of the fastest-growing international QSR (Quick Service Restaurants) chains in India during the first five years of its operations based on the number of restaurants.
2. The globally recognized Burger King brand, also known as the “HOME OF THE WHOPPER®”, was founded in 1954 in the United States and is owned by Burger King Corporation, a subsidiary of Restaurant Brands International Inc., which holds a portfolio of fast-food brands that are recognized around the world that include the BURGER KING®, POPEYES®, and TIM HORTONS® brands.
3. The Burger King brand is the second-largest fast-food 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 U.S. territories as of June 30, 2019.
4. It has started operation in India with the first restaurant opened up in November 2014, with the aim of growing quickly, consistently, and efficiently into a pan-India QSR chain and capitalizing on the growing market opportunity in India for QSR restaurants. As of Dec 2019, they have 255 restaurants, including seven Sub-Franchised Burger King Restaurants, across 16 states and union territories and 47 cities across India.
What are the Master Franchise and Development agreements?
We all know the Burger King founding company is in the USA, and in order to expand its presence in India, it has signed the Master Franchise and Development Agreement with Burger King India Limited, which gives exclusive right to develop, establish, and operate and franchise the Burger King restaurants in India.
Under this agreement, Burger King India Limited Company is required to develop and open at least 700 restaurants (including Company-owned Burger King Restaurants and Sub-Franchised Burger King Restaurants) by December 31, 2026, which includes the following cumulative opening requirements for calendar years 2019, 2020, 2021 and 2022, subject to a six month cure period if the Company has achieved at least 70% of the difference between such target and the total number of Burger King restaurants opened in India on December 31st of the prior development year.
2019 = 250
2020 = 250
2021 = 300
2022 = 370
Cost of setting up a Burger King company-owned Restaurant?
Equipment cost = 0.92 Cr
Leasehold improvements and other related costs = 1.5 Cr
Information technology infrastructure costs = 0.14 Cr
Store opening franchisee fees = 0.25 Cr.
The total cost of setting up is ~2.8 Crores.
So, to open new ~115 more restaurants up to 2022, they will be needing around ~322 Crores. The company is raising close to 270 Crores from the IPO and the rest money they have to arrange from internal accrual or from debt.
However, as per the agreement, at any point in time, the Burger King company-owned restaurants should not be less than 60%.
Impact of COVID-19 on Burger King India?
We all know that due to COVID-19, the lockdown was imposed in our country, which has badly impacted the business of the burger king and put a high strain on the liquidity position of the company. To make availability of liquidity to sustain the operations of the business;
1. Burger King India Limited has raised 58 Crores from promoters by issuing shares at Rs.44 in May 2020.
2. They have access to 29 Crores of liquidity on term loan from ICICI bank.
3. They have also engaged in rent relief negotiations with all the landlords and arrived at negotiated agreements with respect to reductions in rent.
Objects of the Burger King IPO:
Burger King IPO Details:
|Open Date:||Dec 02 2020|
|Close Date:||Dec 04 2020|
|Total Shares:||13.5 Cr|
|Face Value:||₹ 10 Per Equity Share|
|Issue Type:||Book Building|
|Issue Size:||810 Cr.|
|Lot Size:||250 Shares|
|Issue Price:||₹ 59-60 Per Equity Share|
|Listing Date:||Dec 14 2020|
Promoters And Management:
Financials of Burger King IPO:
|Cost of material||92||143||230||300||150||49|
|Profit before tax||-71||-80||-37||-70||-15||-116|
|EPS in Rs||-3||-3||-1||-2.52||-0.56||-3.99|