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Home >Markets >Mark To Market >Barbeque Nation IPO opens today: Company aiming for growth after survival battle

Barbeque Nation Hospitality Ltd’s journey to its initial public offering (IPO) has been an eventful one. About three years ago, in January 2018, the company had received a nod from the Securities and Exchange Board of India (Sebi) for its IPO. It raised 80 crore in a pre-IPO round, selling shares at as high as 832 per share. The company was then valued at 2,250 crore pre-money.

But the IPO plans were deferred, with mid and small cap stocks being battered on the Street. The wait since then has been painful. The pandemic wreaked havoc on the restaurant business, with people staying indoors.

For other listed food businesses, a high proportion of revenues are derived from customers who order in. But for Barbeque Nation, the majority came from consumption at its restaurants.

Recovering appetite
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Recovering appetite

In fact, the impact on its business was so severe that its survival was at stake. This time around, when the company raised money in a pre-IPO round, it was at a valuation of just 252 per share, which valued the firm at 700 crore pre-money. This was close to a 70% drop compared with the previous pre-IPO round three years ago.

In the IPO itself, which comes just a few months after the pre-IPO round, the company is selling shares at double these valuations or around 500 per share. Investments bankers to the issue laboured to explain to the investors and analysts that the low valuation in the pre-IPO round was because it was essentially survival capital.

“That capital, then, was required for survival of the business and there was no visibility of the IPO then, and hence it was done at a significantly lower valuation. Saving the business at that point of time was more important to management than anything else," Vivek Toshniwal, executive director, Axis Capital Ltd said in an analysts’ call.

Rahul Agrawal, chief executive officer, Barbeque Nation, said on the call that the firm had a liquidity squeeze and that it could have been in a really difficult spot without the fundraise.

With the company raising a capital of 330 crore through the pre-IPO and IPO funding, liquidity should not be a problem for some time. In fact, it can focus again on growth. Over FY17-FY20, the company’s revenues had grown at a decent pace of about 20% annually.

Also, in FY21, Barbeque Nation has seen a consistent improvement in monthly sales. Revenue in November stood at 84% of year-ago levels, with the share of food ordered home rising to around 15% of the total.

But given its recent troubles, and the doubling of valuations compared to the pre-IPO round, investors are likely to be cautious. What’s more, the most recent listing — Easy Trip Planners Ltd — is trading below its issue price, which is also causing worry among IPO investors.

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