Investors scramble for bite of Burger King India IPO with US$9.5b of bids

[NEW DELHI] Burger King India's initial public offering drew bids of US$9.5 billion, or more than 150 times the shares on offer, signalling investors were upbeat about the country's food service sector despite a slowdown inflicted by the Covid-19 pandemic.

The Indian company, which runs the franchise of Restaurant Brands International's US chain Burger King, competes with likes of McDonald's and Domino's Pizza in the local US$56.5 billion restaurant and dining market.

The IPO, which closed on Friday, aimed to raise US$110 million. After an initial allotment to institutional investors, the remaining issue of US$60.5 million attracted bids worth US$9.5 billion, stock exchange data showed.

The reserved portion of US$11 million for small-ticket retail investors was more than 65 times over-subscribed.

Burger King India plans to use the IPO proceeds to open new stores and reduce debt. It currently has 261 outlets in the country. Domino's, the market leader, has 1,354 outlets and McDonald's has 481.

The burger chain, which says it is one of the fastest growing international chains in the quick-service restaurant (QSR) segment in India over the last five years, wants to have at least 700 restaurants in the country by 2026.

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"Everybody is looking at the Domino's play again. It's a bet on the sector," Ankur Bisen, head of consumer and retail at consultancy Technopak Advisors, said about the response to the Burger King IPO. "It's an appreciation for a global trend in India." Such brands have managed to rapidly grow their presence in India thanks to a young and affluent population which increasingly favours burgers and pizzas offered by international restaurants over small-scale local food outlets.

The interest in Burger King India's IPO came despite the Covid-19 pandemic pushing same-store sales down by 57 per cent during six months to Sept 2020, with the company saying the pandemic had "slowed significantly" its expansion plans.

"We are seeing demand gradually recover for the QSR industry...and Burger King's aggressive expansion plans make them well placed to capitalise on this recovery," said Anindita Chaudhury, an analyst at Anand Rathi Financial Services.

Data from Refinitiv shows India has so far seen 41 stock market IPOs this year, the lowest over the same period since 2013.

REUTERS