Barbeque-Nation shares hit 20% upper circuit limit after tepid listing

Shares of Barbeque-Nation Hospitality staged a smart comeback after a weak market debut and were locked in the upper circuit of 20 per cent at Rs 590.40 on the BSE in Wednesday's session.

The stock of Barbeque Nation Hospitality, which owns and operates the popular chain of Barbeque Nation Restaurants, had opened at Rs 492, 1.6 per cent lower against its issue price of Rs 500 per share on the BSE.

On the National Stock Exchange (NSE), the stock was frozen in the 20 per cent limit at Rs 587.80, after opening at Rs 489.85. Till 11:21 am, a combined 6.23 million equity shares had changing hands on the counter, while there were pending buy orders for 870,000 shares on the NSE and BSE.

The Rs 453-crore initial public offering (IPO) had received a healthy response from investors. The retail investors' portion of the issue was subscribed 13 times, while that of the qualified institutional buyers by 5 times and of non-institutional investors' 3 times, data show.

Proceeds of the fresh issue will be utilised to fund the company's capital expenditure for expansion, besides prepayment or repayment of certain borrowings and expenses related to general corporate purposes. As of December 2020, Barbeque Nation Hospitality operated 147 outlets across India and six outlets across three countries -- UAE, Oman and Malaysia.

The promoters hold a 60.24 per cent stake, CX Partners owns 33.79 per cent and Rakesh Jhunjhunwala's investment firm Alchemy Capital has a 2.05 per cent holding in the company.

While the company has posted revenue growth of 20 per cent CAGR between FY18-FY20, it has been continuously incurring losses at PAT (profit after tax) level despite topline growth. The Covid-19 pandemic too has had an adverse impact on the operations of the company. Hence we expect profits will remain under pressure over the medium-term, analysts at Angel Broking said in an IPO note.

The strong presence in the Indian market positions the company well to capitalise on the growth in consumer spending from expected increases in the level of disposable income in India. The company would be spending around Rs 90 crore in the next two years to expand its restaurant (both ‘Barbeque Nation’ & ‘Toscano’) base in existing cities, ICICI Securities said.

The chain Casual Dining Restaurant (CDR) industry is expected to grow at a faster pace over the next five years. However, the brokerage believes the bigger size restaurants and limitation in scaling up delivery sales can impact the growth of the company. Moreover, the brokerage said it awaits clarity on a full recovery from Covid-19 before assigning any recommendation.