Barbeque Nation IPO: Information Analysis

Barbeque Nation Hospitality operates 164 casual-dining restaurants under brand names, including Barbeque Nation, Toscano, La Terrace and Collage. Barbeque Nation is the primary brand of the company under which it owns and operates 153 restaurants (147 national and six international) across 77 cities in India. The brand serves North Indian cuisine under the concept of over-the-table barbeque. Also, the company has acquired a 61.35 per cent stake in Red Apple through which, it operates 11 Italian restaurants. The Rs 4,236 Bn food-service market (in FY20) of India is fairly cluttered with a substantial presence of unorganised players. Since the opening of the first Barbeque Nation restaurant in 2006, the company has grown the number of restaurants slowly, with as many as 71 restaurants being added to the chain during FY17-20. While casual-dining restaurants attract customers mainly during weekends, Barbeque served 9.92 Mn customers in FY20, with major sales (53.4 per cent) during weekdays and lunch covering at a healthy 44.4 per cent. COVID-19 has had a negative impact on the hospitality business. The closure of restaurants, coupled with a growing tendency to avoid crowded places, led to falling footfall. Even though the economy has now opened, the company did not recover to the pre-COVID level as of November, 2020, as it operated 156 restaurants out of 164, while monthly sales only improved to 84.2 per cent compared to the year-ago period. In a bid to drive growth, the company focused more on the delivery business. In line with this, it launched UBQ by Barbeque Nation brand for food delivery and relaunched its app BBQ (2.2 Mn downloads as of December 2020). Its delivery business scaled up quickly, accounting for around 16 per cent of eight-month sales till November 2020. In a pre-IPO placement, the company has recently raised around Rs 150 crore at a price of Rs 252 (compared to the Rs 500 issue price). Out of the net proceeds of Rs 130 crore from the IPO, the company intends to use Rs 75 crore to repay debt, with the remaining for opening 26 new restaurants in FY 22-23. Although the company has been loss-making for the last couple of years, the management expects that the reduction of the outstanding debt post IPO, along with lowering depreciation costs (as its restaurants mature), would yield profitability sooner than later. Strengths Over the years, the company has been able to build a steady network of 147 Barbeque Nation restaurants across 77 cities in India. Good coverage and the maintenance of quality experience have translated into a strong brand recall. Unlike other casual-dining restaurants which derive a majority of their revenues over weekends, the company derives more than 50 per cent of its sales during weekdays and around 45 per cent of it comes from lunch. In FY20, the company served around 9.92 Mn customers, with the average bill size at Rs 762. The company doesn't follow a franchise model and intends to run all its outlets by itsel