Barbeque Nation IPO: All You Need To Know

Barbeque Nation Hospitality Ltd. will launch a Rs 452.87-crore maiden offer starting Wednesday, deriving optimism from last year’s IPO rush that extended into 2021.

The restaurant chain that grills chicken tikka to potatoes on the table will sell the shares at Rs 498-500 apiece in its initial public offer. It comprises a fresh issue of Rs 180 crore and an offer-for-sale by Sayaji Housekeeping Services Ltd., Azhar Dhanani, Sadiya Dhanani, Sanya Dhanani, Tamara Pvt., AAJV investment Trust and Menu Pvt. worth Rs 272.85 crore, according to a red herring prospectus.

The pricing of the issue is at a significant premium to a pre-IPO placement at Rs 252 apiece made to investors, including Jubilant Foodworks Ltd., in January this year.

• Issue date: March 24-26.
• Face value: Rs 5 apiece.
• Fresh Issue: 36 lakh shares
• Offer-for-sale: 54.57 lakh shares
• Minimum lot size: 30 shares.
• Listing on: National stock Exchange, BSE.
• Book-running lead managers: IIFL Securities Ltd., Axis Capital Ltd., Ambit Capital Pvt. and SBI Capital Markets Ltd.

Use Of Proceeds

Barbeque Nation will use Rs 54.6 crore as capital expenditure to expand and open new restaurants, and Rs 75 crore towards prepayment or repayment of all or a portion of certain outstanding borrowings of the company on a consolidated basis.

Before the IPO, Barbeque Nation has raised Rs 202 crore by allocating 40.58 lakh equity shares at Rs 500 apiece to 15 anchor investors.

Business Profile

Barbeque Nation has a network of 147 namesake restaurants, including opened, temporarily closed and under construction outlets, across 77 cities in India, and six international outlets in three countries — four in the U.A.E. and one each in Oman and Malaysia — as on Dec. 31, 2020.

It also owns 61.35% of the equity share capital on a fully diluted basis in one of its subsidiaries, Red Apple, which owns and operates nine restaurants under the brand name “Toscano”— a casual dining Italian restaurant chain—and one each under “La Terrace” and “Collage”. It has 11 Toscano restaurants in Karnataka, Tamil Nadu and Maharashtra.

The company’s delivery business has grown from Rs 26.09 crore in fiscal ended March 2020 to Rs 37.89 crore during the eight months ended Nov. 30.

“We have increased the share of delivery to 15% in November,” Rahul Agarwal, chief executive officer at Barbeque Nation Hospitality, said in an interview with BloombergQuint.

Shareholding Pattern

Promoter shareholding in Barbeque Nation will decline from 47.8% pre-issue to 38.1% after the IPO.

Financials

The company’s business has recovered to 84.2% of the pre-pandemic level at the end of November 2020. It, however, suffered a Rs 100-crore loss during the period.

Footprint

Casual Dining Landscape

In a casual dining restaurant, food is typically priced at Rs 250-1,000, excluding taxes, with table services and some restaurants offering eclectic high-quality interiors. These bridge the gap between quick-service and fine dining restaurants.

The casual dining segment—comprising restaurants such Moti Mahal, Barbeque Nation, Toscano, Café Zoe, Flavours of Italy, Rajdhani, Pizza Hut and Sarvana Bhavan—had 4,700-5,200 outlets in FY20 across India compared with 1800-2000 in FY14. Newer formats such as Chilli’s, Farzi Café, Carl’s Jr. and Soda Bottle Openerwala, too, have taken a share of the pie.

Competition

Barbeque Nation competes with listed peers such as Speciality Restaurants in the dining segment, while some of its quick-servicing rivals are Westlife Development Ltd., Jubilant Foodworks Ltd. and Burger King.

Risk Factors

• The Covid-19 pandemic as well as the government’s measures to reduce the spread of virus have had a substantial impact on the restaurant operations and the timing of how long the pandemic and the related government measures will last is still uncertain.
• Deterioration in the performance of, or its relationships with, third-party delivery aggregators (online restaurant aggregators), may adversely affect the business, results of operations and financial condition.
• Unable to implement its growth strategy successfully, including in relation to selecting cities and locations for new restaurants.
• If it is unable to continue to build the Barbeque Nation brand or the Toscano brand.