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Burger King India to hit the market with Rs 810-crore IPO next week

It has been among the fastest expanding quick service restaurant chains in India


Burger King India, the master franchise of American burger chain Burger King, is launching its initial public offering next week. The IPO has been priced in the Rs 59-60 a share range and the company aims to raise around Rs 810 crore at the upper end of the price band.

The IPO consists of a fresh issue of Rs 450 crore, apart from an offer for sale of 6 crore shares by its promoter QSR Asia Pte.

The Burger King IPO will open for subscription on December 2 and close on December 4. Kotak Investment Banking, CLSA, Edelweiss and JM Financial are the booking running lead managers to the issue.

The funds raised through the public issue will be used by Burger King India to repay existing borrowings as well as incurring capital expenditure to open new company-owned restaurants.

Burger King set shop in India in November 2014 and has been among the fastest expanding quick service restaurant chains in the country since, touching 260 restaurants at the end of March 2020.

The COVID-19 pandemic has had a huge impact on Burger King India as has been on the wider restaurant industry in the country. India imposed a nationwide lockdown between April and June to curb the spread of the pandemic. While the country began unlocking from June,  shopping malls and restaurants were locked in for a longer period. Almost 55 per cent of Burger King’s outlets are in malls.

How has the company navigated the pandemic?

“It was important to maintain liquidity at the right level. In May, we did a rights issue through which promoter QSR Asia put in Rs 58 crore into the business. We also got another Rs 92 crore in pre-IPO preferential allotment through Amansa (Investments). We also had to ensure we manage costs efficiently. We negotiated rentals with landlords for the COVID-impact period; for the first part of the six months, we have seen a reduction in rental costs by around Rs 21-odd crore. We renegotiated terms with other service providers as well,” said Sumit Zaveri, the company’s chief financial officer.

Burger King India has also developed a whole new line of premium products, which will be rolled out into its stores in the coming weeks, in a bid to attract more customers.

However, in the wake of the COVID-19 challenges, the company has had to redraw its expansion plans and now plans to touch 700 outlets by 2026, which is a year later than planned.

“Our (master franchise and development) agreement in the past was to open 700 outlets by 2025. Because of COVID-19, we obviously slowed down the growth this year. Parallely, we worked with the franchiser, came into agreement and pushed the date from 2025 to 2026,” Rajeev Varman, CEO of the company said on Friday.

What also must be noted is that the fast pace of expansion for Burger King India has also come at a cost. It reported a loss of Rs 118 crore in the six months ended September 2020 due to the pandemic. It has also reported a loss in the last three financial years (Rs 77 crore in FY20, Rs 38 crore in FY19 and Rs 82 crore in FY18).

Hit by the pandemic, Burger King India’s revenue in the first half of the current financial year plunged 68 per cent from a year ago to Rs 135 crore. In the previous financial year, ended March 2020, its revenue rose 33 per cent to Rs 841 crore.

In India, Burger King competes with other quick service restaurant chains like Westlife Development, which operates the McDonald’s burger chain in west and south India, and Jubilant Foodworks, which runs the Domino’s Pizza chain. There will also be competition from other national and international fast food companies like KFC, Carl's Junior, Jumbo King, Pizza Hut, Subway, Taco Bell and Wow Momo.

Despite the presence of these various brands, India remains a vastly unorganised market in the food and restaurant business, although the organised brands are seeing a strong growth. According to Research and Markets, India’s QSR industry is expected to grow at a compounded annual growth rate of 18 per cent.

“The footprints of QSRs in India are either regional and the national players are very few. So, there is massive opportunity in the market. Majority of the market is unorganised, but rapidly moving towards the organised,” said Varman.  

 The eating out habits, which used to be very few times a month, is climbing up. In a country like China, eating out in a month is about 48-49 times. Here in India, it is a much smaller number, he added.

Companies like Burger King are hoping that in the wake of COVID-19, people eating out will focus on the brands and chains that offer high safety and sanitation standards, which should help them attract more people, over the unorganised players.

Millennials comprise 426 million or around 34 per cent of the country’s population and are likely to drive growth for restaurant chains.


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