2 min read.Updated: 02 Aug 2021, 03:08 PM ISTLivemint
Devyani International IPO consists of a fresh issue of ₹440 crore and an offer for sale (OFS) of upto 155.33 million shares by shareholders and promoters
Food and beverages major and the largest franchisee of Pizza Hut, KFC, and Costa Coffee, Devyani International's initial public offering (IPO) will open for subscription next week on August 4. The issue, which will close on August 6, has has fixed the price band of its initial share sale at ₹86-90 per share, and the firm will raise about ₹1,838 crore.
As per market observers, Devyani International shares are available at a premium (GMP) of ₹58 in the grey market today. The grey market is an unofficial platform, wherein trading starts after the announcement of IPO price band till the listing of IPO shares.
The quick service restaurant (QSR) company's IPO consists of a fresh issue of ₹440 crore and an offer for sale (OFS) of upto 155.33 million shares by shareholders and promoters. Under the offer-for-sale, Dunearn Investments (Mauritius) Pte Ltd, a wholly-owned subsidiary of Temasek Holdings, will offload 6,53,33,330 shares and promoter RJ Corp will sell 9 crore shares.
''As far as the peer comparison is concerned, the post-issue FY2021 EV/Sales works out -9.9x to (at the upper end of the issue price band), which is low compared to peers (Jubilant Foodworks-15.4x, Burger King India -14.8x, Westlife Development – 10x). Further, Devyani International has a better operating margin compared to Westlife Development & Burger king. We believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue,'' said Amarjeet Maurya of Angel Broking.
The offer includes a reservation of up to 5.50 lakh equity shares for the company's employees. Also, 75% of the issue size has been reserved for qualified institutional buyers (QIBs), 15% for non-institutional buyers and the remaining 10% for retail investors. Investors can bid for minimum 165 equity shares and in multiples of 165 equity shares thereafter.
Kotak Mahindra Capital Company Ltd, CLSA India Pvt Ltd, Edelweiss Financial Services Ltd, Motilal Oswal Investment Advisors Ltd are the investment bankers to the issue. The proceeds from the issue will be used for repayment of certain or full borrowings of its firm.
Devyani International Limited (DIL) is the largest franchisee of Yum Brands in India, which operates QSR brands like Pizza Hut and KFC. The firm currently operates 297 Pizza Hut stores, 264 KFC stores and 44 Costa Coffee as on March 31, 2021 in India. It opened around 109 stores across its core brand business in the last 6 months amid pandemic.
The company earned around 94% of its revenue from core brands business (KFC, Pizza Hut and Costa Coffee), together with international business in FY21. Between March 2019-2021 the core brand stores saw a CAGR (Compound annual growth rate) growth of 13.58% from 469 stores to 605 stores and the company attributes its success and continuous growth effort to its 9,356 employees.