as a play on the growing food retailing space. The organised
space is pegged to grow at an annualised rate of 19 per cent to Rs 82,500 crore over the next five years. Some believe the growth of leading brands could be even higher as the pandemic has led to the closure of many smaller stores, reducing competition. The fall in rentals is another tailwind for the QSR industry.
Through the IPO, Burger King has raised Rs 450 crore, which will be used to rollout new outlets and retire debt. The IPO also comprised of secondary share sale worth Rs 360 crore. Burger King currently operates about 270 outlets, and it aims to scale this up to 700 by 2026. The IPO proceeds will help open about 190 new stores by 2023.
“Burger King has clear growth considering the amount of stores they are targeting. Also, the opportunities in the sector are limited with just three or four players,” said Abhimanyu Sofat, head of research, IIFL.
The company competes with international chains such as McDonald’s, KFC, Domino’s Pizza, Subway, and Pizza Hut.
At Monday’s closing price, Burger King commanded a market cap of about Rs 5,300 crore — only 20 per cent less than that of Westlife Development, the company that holds the master franchise in Western and South India for McDonald’s.
“At the current market price, Burger King is valued at 5.7 times FY20 price/sales and 17.3x FY20 price/book value, which fully captures its strong brand positioning, robust store expansion plans, and bright growth prospects of the QSR industry. However, given its weak financials, the valuation seems a little stretched versus players like Jubiliant Food and Westlife,” said Hemang Jani, head of equity strategy, broking and distribution, Motilal Oswal Financial Services.