Article

Barbeque Nation IPO Note

05 Apr 2021 Nikita Bhoota

Barbeque-Nation Hospitality Ltd IPO

Issue Opens: March 24, 2021
Issue Closes: March 26, 2021
Price Band: ₹498-500#
Issue Size: ~₹453cr
Bid lot: 30 Equity shares
Issue Type: 100% Book building


Share Holding

Pre IPO (%)

Promoter and Promoter Group

47.8

Public

52.2

Source: RHP


Company Background

Barbeque-Nation Hospitality Ltd. (BHL) owns and operates, Barbeque Nation Restaurants, one of India’s leading casual dining restaurant (CDR) chains (in terms of outlet count as of September 30, 2020) according to the Technopak Report. According to the Technopak Report, BHL through Barbeque Nation Restaurants, has pioneered the ‘over the table barbeque’ concept in Indian restaurants. BHL has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 147 (including opened, temporarily closed and under construction outlets) across 77 Indian cities as of December 31, 2020. Further, it owns and operates six International Barbeque Nation Restaurants in three countries outside of India as of December 31, 2020. BHL diversified in to another brand post acquisition of 61.35% of the equity share capital on a fully diluted basis of Red Apple, which owns and operates nine restaurants under the brand name, “Toscano”, and one restaurant each under the brand names “La Terrace” and “Collage” across three cities in India as of December 31, 2020. In November 2018, BHL launched UBQ by Barbeque Nation Restaurant to provide a la carte Indian cuisine in the value segment. At present, UBQ by Barbeque Nation Restaurant predominantly caters to the delivery segment.

Offer Details:
The net offer comprises of a Fresh Issue (₹180 cr) and an Offer for Sale (₹273 cr at upper end of the price band) aggregating to ₹453 cr (at upper end of the price band). Proceeds from the fresh issue are proposed to be utilized towards 1) ~₹55 cr for capital expenditure for expansion and opening of new restaurants, 2) ₹75 cr for prepayment or repayment of all or a portion of certain outstanding borrowings obtained by BHL on consolidated basis and 3) balance for general corporate purposes. BHL will not receive any proceeds from the Offer for Sale.

Financials

Particulars

FY18

FY19

FY20

8MFY21

Revenue from Operations (₹Cr)

586

739

847

201

EBITDAM (%)

23.8

20.1

19.8

5.3

Adjusted EBITDAM (%)

14.0

10.5

9.2

-22.1

Diluted EPS ()

2.1

-8.3

-11.8

-36.0

Net Debt to Equity (x)

0.6

1.1

38.9

-16.0

Net Debt to EBIDTA(x)

0.6

1.0

1.4

19.0*

Source: RHP; *not annualized

Strengths
  • One of India’s fastest growing and widely recognised brands in the rapidly growing CDR market
    BHL has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 147 Barbeque Nation Restaurants (including opened, temporarily closed and under construction outlets) across 77 cities in India and six International Barbeque Nation Restaurants in three countries outside India as of December 31, 2020 with almost half of the Barbeque Nation Restaurants being located in Metro cities as at December 31, 2020.

    According to the Technopak Report, BHL through Barbeque Nation Restaurants, has pioneered the format of ‘over the table barbeque’ concept in Indian restaurants. The numbers of covers at Barbeque Nation Restaurants as well as BHL’s revenues have grown consistently as its Barbeque Nation Restaurants have matured, particularly after being in operation for more than two years. For example, the number of in-dining covers at its Barbeque Nation Restaurants in India has grown from 68.6 lks in FY17 to 99.2 lks in FY20 at a CAGR of 13.08%. Further, out of the total number of Barbeque Nation Restaurants owned and operated by the company as of December 31, 2020, 24 Barbeque Nation Restaurants were opened between March 31, 2019 and December 31, 2020 and 71 Barbeque Nation Restaurants have been opened since April 1, 2017. According to Technopak, BHL falls under the chain CDR market and the chain CDR market grew at a CAGR of 19.00% between FY15 and FY20 and is expected to further grow at a CAGR of approximately 18.00% from FY20 to FY25. Its consolidated total revenue has grown at CAGR of 20.04% over FY18-20.


  • Strong business processes and back-end systems leading to efficient operations
    BHL believes that it benefits from strong processes and systems that have been established over the past 14 years of its Company’s operation. Its restaurant locations are carefully chosen by a dedicated internal team and the company believes that they have been successful in opening Barbeque Nation Restaurants in popular business districts, neighbourhoods and local markets without typically paying high street premium rentals. As of December 31, 2020, BHL also had two commissaries, one each in Delhi NCR and Mumbai, which serve a number of nearby Barbeque Nation Restaurants by preparing dishes on a volume basis and further realising economies of scale.

    Its Central Reservation System (CRS) is connected to CRS agents, smartphone application, web-based app and in-restaurant POS reservation system which allows them to track all reservations for Barbeque Nation Restaurants centrally, with all interconnected booking systems feeding the central cloud database. The company also has an in-house business intelligence software, which allows them to track restaurant wise data (operational and financial) for Barbeque Nation Restaurants at a granular level. BHL has significant online presence and have witnessed increased reservations through its online platforms. In FY20 and the 8MFY21, over 46.7% and 60.8% of total reservations at Barbeque Nation Restaurants were made online. Also, as of December 31, 2020, our BBQ App had registered over 2.2 million downloads.

  • Experienced staff and value-oriented business culture led by some of the Promoters and senior management team bringing experience from well-known hospitality brands
    Some of the company’s Promoters have several years of experience in the Indian hospitality industry. A number of its senior management team have knowledge of and experience in the Indian hospitality industry, coming from well-known food and beverage and hospitality brands in India. The company believes that management team’s experience provides them with the skills required to implement its corporate practices and growth strategies. When the company opens new restaurants, they generally transfer some staff from existing restaurants to the new restaurants to ensure easier initial launch and set up. The company believes that the experience of the Promoters and the senior management team will also be pivotal in expansion of Toscano Restaurants to Metro and Tier I cities.

Key Risks:
  • The outbreak COVID-19, as well as GoI measures to reduce the spread of COVID-19, have had a substantial impact on its restaurant operations and the timing of how long the COVID- 19 pandemic and the related GoI measures will last is still uncertain.

  • Deterioration in the performance of, or its relationships with, third-party delivery aggregators, may adversely affect the business, results of operations and financial condition especially given that demand for food delivery services through delivery aggregators online and through mobile applications has witnessed an increase in recent years across the restaurant industry.
  • The company has been issued a notice from the National Anti-Profiteering Authority under the Central Goods and Services Tax Act, 2017. However, the company has filed a writ petition before the High Court of Karnataka challenging the order and has been granted interim relief. The company may get adversely impacted if the order is passed against it.
Watch this video to know more about Barbeque Nation IPO

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Barbeque Nation IPO Note

05 Apr 2021 Nikita Bhoota

Barbeque-Nation Hospitality Ltd IPO

Issue Opens: March 24, 2021
Issue Closes: March 26, 2021
Price Band: ₹498-500#
Issue Size: ~₹453cr
Bid lot: 30 Equity shares
Issue Type: 100% Book building


Share Holding

Pre IPO (%)

Promoter and Promoter Group

47.8

Public

52.2

Source: RHP


Company Background

Barbeque-Nation Hospitality Ltd. (BHL) owns and operates, Barbeque Nation Restaurants, one of India’s leading casual dining restaurant (CDR) chains (in terms of outlet count as of September 30, 2020) according to the Technopak Report. According to the Technopak Report, BHL through Barbeque Nation Restaurants, has pioneered the ‘over the table barbeque’ concept in Indian restaurants. BHL has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 147 (including opened, temporarily closed and under construction outlets) across 77 Indian cities as of December 31, 2020. Further, it owns and operates six International Barbeque Nation Restaurants in three countries outside of India as of December 31, 2020. BHL diversified in to another brand post acquisition of 61.35% of the equity share capital on a fully diluted basis of Red Apple, which owns and operates nine restaurants under the brand name, “Toscano”, and one restaurant each under the brand names “La Terrace” and “Collage” across three cities in India as of December 31, 2020. In November 2018, BHL launched UBQ by Barbeque Nation Restaurant to provide a la carte Indian cuisine in the value segment. At present, UBQ by Barbeque Nation Restaurant predominantly caters to the delivery segment.

Offer Details:
The net offer comprises of a Fresh Issue (₹180 cr) and an Offer for Sale (₹273 cr at upper end of the price band) aggregating to ₹453 cr (at upper end of the price band). Proceeds from the fresh issue are proposed to be utilized towards 1) ~₹55 cr for capital expenditure for expansion and opening of new restaurants, 2) ₹75 cr for prepayment or repayment of all or a portion of certain outstanding borrowings obtained by BHL on consolidated basis and 3) balance for general corporate purposes. BHL will not receive any proceeds from the Offer for Sale.

Financials

Particulars

FY18

FY19

FY20

8MFY21

Revenue from Operations (₹Cr)

586

739

847

201

EBITDAM (%)

23.8

20.1

19.8

5.3

Adjusted EBITDAM (%)

14.0

10.5

9.2

-22.1

Diluted EPS ()

2.1

-8.3

-11.8

-36.0

Net Debt to Equity (x)

0.6

1.1

38.9

-16.0

Net Debt to EBIDTA(x)

0.6

1.0

1.4

19.0*

Source: RHP; *not annualized

Strengths
  • One of India’s fastest growing and widely recognised brands in the rapidly growing CDR market
    BHL has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 147 Barbeque Nation Restaurants (including opened, temporarily closed and under construction outlets) across 77 cities in India and six International Barbeque Nation Restaurants in three countries outside India as of December 31, 2020 with almost half of the Barbeque Nation Restaurants being located in Metro cities as at December 31, 2020.

    According to the Technopak Report, BHL through Barbeque Nation Restaurants, has pioneered the format of ‘over the table barbeque’ concept in Indian restaurants. The numbers of covers at Barbeque Nation Restaurants as well as BHL’s revenues have grown consistently as its Barbeque Nation Restaurants have matured, particularly after being in operation for more than two years. For example, the number of in-dining covers at its Barbeque Nation Restaurants in India has grown from 68.6 lks in FY17 to 99.2 lks in FY20 at a CAGR of 13.08%. Further, out of the total number of Barbeque Nation Restaurants owned and operated by the company as of December 31, 2020, 24 Barbeque Nation Restaurants were opened between March 31, 2019 and December 31, 2020 and 71 Barbeque Nation Restaurants have been opened since April 1, 2017. According to Technopak, BHL falls under the chain CDR market and the chain CDR market grew at a CAGR of 19.00% between FY15 and FY20 and is expected to further grow at a CAGR of approximately 18.00% from FY20 to FY25. Its consolidated total revenue has grown at CAGR of 20.04% over FY18-20.


  • Strong business processes and back-end systems leading to efficient operations
    BHL believes that it benefits from strong processes and systems that have been established over the past 14 years of its Company’s operation. Its restaurant locations are carefully chosen by a dedicated internal team and the company believes that they have been successful in opening Barbeque Nation Restaurants in popular business districts, neighbourhoods and local markets without typically paying high street premium rentals. As of December 31, 2020, BHL also had two commissaries, one each in Delhi NCR and Mumbai, which serve a number of nearby Barbeque Nation Restaurants by preparing dishes on a volume basis and further realising economies of scale.

    Its Central Reservation System (CRS) is connected to CRS agents, smartphone application, web-based app and in-restaurant POS reservation system which allows them to track all reservations for Barbeque Nation Restaurants centrally, with all interconnected booking systems feeding the central cloud database. The company also has an in-house business intelligence software, which allows them to track restaurant wise data (operational and financial) for Barbeque Nation Restaurants at a granular level. BHL has significant online presence and have witnessed increased reservations through its online platforms. In FY20 and the 8MFY21, over 46.7% and 60.8% of total reservations at Barbeque Nation Restaurants were made online. Also, as of December 31, 2020, our BBQ App had registered over 2.2 million downloads.

  • Experienced staff and value-oriented business culture led by some of the Promoters and senior management team bringing experience from well-known hospitality brands
    Some of the company’s Promoters have several years of experience in the Indian hospitality industry. A number of its senior management team have knowledge of and experience in the Indian hospitality industry, coming from well-known food and beverage and hospitality brands in India. The company believes that management team’s experience provides them with the skills required to implement its corporate practices and growth strategies. When the company opens new restaurants, they generally transfer some staff from existing restaurants to the new restaurants to ensure easier initial launch and set up. The company believes that the experience of the Promoters and the senior management team will also be pivotal in expansion of Toscano Restaurants to Metro and Tier I cities.

Key Risks:
  • The outbreak COVID-19, as well as GoI measures to reduce the spread of COVID-19, have had a substantial impact on its restaurant operations and the timing of how long the COVID- 19 pandemic and the related GoI measures will last is still uncertain.

  • Deterioration in the performance of, or its relationships with, third-party delivery aggregators, may adversely affect the business, results of operations and financial condition especially given that demand for food delivery services through delivery aggregators online and through mobile applications has witnessed an increase in recent years across the restaurant industry.
  • The company has been issued a notice from the National Anti-Profiteering Authority under the Central Goods and Services Tax Act, 2017. However, the company has filed a writ petition before the High Court of Karnataka challenging the order and has been granted interim relief. The company may get adversely impacted if the order is passed against it.
Watch this video to know more about Barbeque Nation IPO