Barbeque Nation IPO Financial Analysis (Avoid)

Business Profile

Barbeque Nation Hospitality Limited (BBQ Hospitality) owns and operates Barbeque Nation Restaurants, casual dining restaurant chains. There are 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.

BBQ Hospitality owns 61.35% of the equity share capital on a fully diluted basis of its Subsidiaries, Red Apple, which owns and operates nine restaurants under the brand name, “Toscano”.

Barbeque Nation Financial Review

BBQ Hospitality posted total revenues of Rs 236 crore for the 8 months period ending 30th Nov 20. There were significant losses of Rs 100 crore for the same corresponding period. The losses have widened further because of the pandemic. The hotel and the hospitality sector is the worst-hit sector during the pandemic and it might continue to bear the brunt.

The company continues to suffer losses since FY18-FY20 though there is a marginal increase in its revenues. The losses continue to increase year after year due to increasing finance and depreciation cost. One can refer to the below table for financial performance. . The losses continue to increase year after year due to increasing finance and depreciation cost. One can refer to the below table for financial performance.

Table 1 - Financials and Ratios (Amount in INR Crore)
Title 30-Nov-20 FY20 FY19 FY18
Total Revenue 236.61 850.79 742.54 590.45
PAT -100.65 -32.93 -38.39 -5.80
EBITDA 12.59 168.04 149.39 140.37
Total Assets 908.59 955.46 819.09 723.16
EBITDA Margin 5.32% 19.75% 20.12% 23.77%
Net Margin -42.54% -3.87% -5.17% -0.98%

Valuation and Peer Comparison

BBQ Hospitality has a negative EPS of (35.96) per share and (11.77) per share for 8 month period (30th Nov 20) and FY20 respectively. NAV is also negative at Rs (5.33) for 8 month period ending 30th Nov 2020. Considering the weak numbers, the offer is highly overvalued at Rs 500 per share (Upper price band). Jubilant Food works, Westlife Development, Speciality Restaurants, and Burger king are shown as the listed peers as per the RHP.

Future Outlook and Conclusion

The chain Casual Dining market in India has been flourishing over the last few years. The Chain CDR segment represents the 2nd largest share in the chain food services market in India after QSR. However, the Pandemic has had a significant negative impact on the hospitality sector and the momentum of growth has been delayed.

Weak financial performance casts a red flag over the Issuer’s viability. The company suffered continuously and increasing losses after tax even before the pandemic for the last three fiscals. The future of BBQ Hospitality does not appear to be rosy due to the worst affected sector during pandemic and mounting losses year on year. BBQ Hospitality has completed Pre IPO round raising Rs 149.97 crore at Rs 252 per share. The offer price has just doubled which appears unjustified. Hence, one might avoid this IPO.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 18th Mar 2021

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.


FAQs

  1. 1. Should I subscribe to Barbeque Nation IPO?

    Barbeque nation should be subscribed or not? the decision must be taken upon its fundamentals means financial performance analysis. Here are the few important points to decide that whether the IPO is good or not?

    • Widening net losses after taxes amid the global outbreak of COVID-19.
    • Poor operating margin and negative net margin ratio.
    • High valuation as the IPO is priced at Rs. 500 per share with negative EPS.

     

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  2021-03-18T03:21:40+00:00






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