The company intends to utilise the fresh proceeds to finance the roll-out of new company-owned Burger King
Restaurants and to meet the general corporate purposes.
BKIL, analysts say, is a play on organised QSR space, which is pegged to grow at annualized rate 19 per cent to Rs 82,500 crore over the next five years. Some peg the growth rate to be even higher for organised players as the unorganized sector has been badly hit by the pandemic.
"The sustained improvement in the gross margins which stood at around 64 per cent in FY2020 and negative working capital aiding operating cash flows to improve over FY2018-20. FY2021 will be the year of disruption for the QSR industry as Q1FY2021 performance was disrupted by shut down of stores during the lockdown period in India. Strong franchisee model, negative working capital, market share gains from standalone players, and strong store expansion plans would help in improving growth prospects in the coming years," analysts at Sharekhan said in IPO note.
Should you book profit?
After the stock's stellar debut, analysts suggest investors to take profits off the table as the company is a loss-incurring unit and may continue to remain in the red over the next few years.
"An over 90 per cent premium is an impressive listing gain. However, the company holds only 5 per cent market share and has been incurring losses for a while. And even though they have huge expansion plans to open 700 restaurants by Dec'2026, one would need profits to execute it. Moreover, if they do expand, they are likely to widen their losses... Therefore, we believe, the company is unlikely to make profits over the next two years.. Therefore, one should book their listing gains and exit," says AK Prabhakar, head of research at IDBI Capital.
India reported losses in FY18, FY19, FY20 and H1FY21 leading to negative retained earnings of Rs 462 in H1FY21. This has resulted in erosion of substantial portion of its other equity.
S Ranganathan, head of research at LKP Securities, too, opines that investors can book profits on half of their initial investment and hold the balance half for long term gains as the company may reap benefits of a fast-growing QSR space.
That said, Gaurang Shah, head investment strategist at Geojit Financial Services, says that while those investors who had invested in the IPO via borrowing should book profit and pay off their obligation, others could stay invested for long-term gains.