GMP, issue price, other details. Should you subscribe?
Food and beverages major and the largest franchisee of Pizza Hut, KFC, and Costa Coffee, Devyani International’s initial public offering (IPO) has opened for subscription today. The issue will close on August 6 and the price band of the initial share sale has been fixed at ₹86-90 per share. The issue was fully subscribed on the first day of the bidding, led by strong demand from retail investors.
On the second day, the retail portion has been fully subscribed at 16.77 times as of 12:45 pm. The overall issue is subscribed 4.07 times with the non-institutional investors (NII) category booked 2.22 times and QIBs (qualified institutional buyers) 0.78 times whereas employees portion was booked 1.85 times as of now, BSE data showed.
Devyani International shares are available at a premium (GMP) of ₹70 in the gray market, market observers noted. The shares of the company will be listed on the BSE and NSE.
” In terms of valuations, 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, ” Angel Broking said in a note.
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.
” Devyani is well placed to benefit from growing industry trends as it has a strong portfolio of highly recognized global brands which cater to a range of customer preferences. The financial performance has been tepid for the company which has further got impacted in FY21 due to the pandemic. However, the company intends to improve its unit performance which would aid better margins. Considering the current market sentiments, investors may subscribe for listing earnings, ” Religare Broking said.
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 (DIL) is the largest franchisee of Yum Brands in India and is among the largest chain operators of quick service restaurants (QSR) in India on a non-exclusive basis, and operates 696 stores across 166 cities in India, as of June 30, 2021. Yum! Brands Inc. operates brands such as KFC, Pizza Hut and Taco Bell and has a presence globally with more than 50,000 restaurants in over 150 countries, as of December 31, 2020.
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