Everstone Capital Eyes Up To $100m IPO For Burger King India

Homegrown private equity firm Everstone Capital plans to launch a ₹500-700 crore initial share sale of its quick service restaurant (QSR) chain Burger King India, said two people aware of the development.

Everstone has recently started work on the draft prospectus for the initial public offering (IPO), which it aims to file with the markets regulator Securities and Exchange Board of India in the next two months, said one of the two people cited above, requesting anonymity as he is not authorized to talk to reporters.

“The IPO will include both primary and secondary share sales. The company will raise primary capital as it is a growing business and they need to invest in expanding their number of outlets,” the person said. “Everstone, on the other hand, would like to use the listing to take some money off the table. The exact proportions of the primary and secondary share sales are still being finalized.”

Everstone Capital owns a majority stake in Burger King India. The QSR chain’s filings with the Registrar of Companies (RoC) shows that the private equity firm invested ₹100 crore in the company in fiscal 2019.

Investment banks Kotak Mahindra Capital and JM Financial have been appointed to advise the company on the IPO, said the second person cited earlier, also requesting anonymity.

An email sent on Thursday to Everstone Capital did not elicit a response. JM Financial and Kotak Mahindra Capital too did not reply to emailed queries.

To be sure, with domestic stock markets volatile and Burger King posting losses according to its latest available financial results, it remains to be seen whether investors are keen for an IPO of the company.

Burger King India’s loss widened to ₹62 crore in the fiscal ended 31 March 2018 from ₹57 crore in the previous year, showed filings with RoC. Sales, however, surged 64% to ₹389 crore in fiscal 2018 from ₹234 crore a year earlier, underscoring India’s growing food service industry.

While domestic consumption growth has seen headwinds in recent months, as evidenced by the slowdown in the sales of big-ticket items such as cars, restaurants and QSR chains have seen decent growth in revenue.

For the quarter ended 30 June, Jubilant Foodworks Ltd, which runs the Domino’s Pizza chain, reported a 9.9% growth in revenue to ₹940.1 crore.

In the same quarter, Hardcastle Restaurants Pvt. Ltd, which runs McDonald’s in west and south India, reported an 11.8% growth in revenue to ₹381.8 crore.

CARE Ratings said in a May report that the restaurant and food service industry is expected to grow at a CAGR of 10.4% over five years through 2022 to reach ₹5.5 trillion.

“The growth will be supported by long-term healthy demand outlook backed by higher disposable income, favourable demographics and rising aspirations of the burgeoning middle class, increasing internet penetration, increasing number of women joining the workforce, increasing focus on health and wellness, technological advancements, and growing urbanization,” it said. “With the surge in investments in the online food ordering business, the industry is expected to witness substantial growth.”

Burger King had 129 outlets in India for the year ended 31 March 2018 in more than 30 cities, including Delhi-NCR, Mumbai, Pune, Chennai, Hyderabad, Bengaluru, Chandigarh, Ludhiana, Amritsar and Kochi.

Everstone runs Burger King restaurants in India and Indonesia as part of its F&B Asia Ventures platform. The investment firm opened its first Burger King outlet in India in November 2014.

F&B Asia Ventures is an investment holding company, a pan-Asian food and beverage platform with assets across multiple cuisines, geographies and formats. It owns and operates several brands such as Burger King (India and Indonesia), Domino’s (Indonesia), Singapore-based bar and dining chain Harry’s and London-based Duck and Rice.

Several firms of Everstone’s portfolio have gone public in the last couple of years.

Last May, Everstone-backed non-banking financial company IndoStar Capital Finance Ltd raised ₹1,844 crore through an IPO. In 2017, the PE firm’s education sector-focused publishing company S. Chand and Co. got listed in a ₹728.5 crore IPO.

This article was first published on livemint.com.