PE-owned Burger King India pursues $110m IPO

The company will sell 135 million shares for INR59-60 apiece, according to disclosures by Edelweiss, one of the underwriters. This includes 60 million shares held by Everstone, which means the GP will realize proceeds of INR3.6 billion if the IPO prices at the top end of the range. Its stake will fall from 99% to 60.1%. Burger King India is scheduled to begin trading on December 15.

Launching Burger King in a country where beef eaters are in the minority represented a step into the unknown for Everstone in 2014. It decided on a buy-and-build strategy after concluding that all existing attractive quick service restaurant (QSR) brands in India were too richly valued. The team identified US brands that were scalable, had international franchise partners but were not yet in India, and had a cuisine and format that were suited to the country. Burger King was the top choice.

“We invest for five years, maybe eight for a platform deal, but with a greenfield rollout you spend the first three to four years building and then scaling up. The question was how could we build a scaled business and make it a profitable investment,” Amit Manocha, a managing director at Everstone, told AVCJ last year. “It was important they [Restaurant Brands International, RBI] were comfortable with us making all the decisions on marketing, menus, supply chains and pricing.”

A joint venture structure was put in place – a model seldom used by RBI whereby it takes a stake in the franchisor entity – and Everstone recruited a management team. Rajeev Varman, an Indian-born executive who had spent the previous 13 years with Burger King in different markets, came in as CEO. They also built a cold chain system, persuading a smaller local operator to invest in capacity by pledging volume based on the projected store rollout, and devised unique menus.

Half the burgers are vegetarian, and India is the only market globally able to tamper with the Whopper; it is served with a chicken, lamb or vegetarian patty. Pricing strategy was equally important. Burger King meals are cheaper in India than in the US because it is a value-focused market, but the menu price range is also laddered. Manocha said this had helped support a higher average per capita spend than competing QSR chains.

As of September, Burger King India had 261 restaurants – of which all but eight are centrally controlled – across 57 cities. Only 13 were added in the first nine months of the year, compared to 53 in 2019, because of COVID-19. Most outlets were open for dine-in guests and to support food delivery, but the company warned that dine-in capacity might be limited based on local regulations.

“Although the COVID-19 crisis has adversely affected our ability to open new restaurants and expand our restaurant network temporarily, we continue to evaluate the pace and quantity of new restaurant openings and the expansion of our restaurant network and aim to increase the pace of our growth when the COVID-19 crisis subsides and more of our restaurants become operational again,” the prospectus states.

The bulk of the IPO net proceeds will go towards rolling out more restaurant locations. The goal is to reach 300 outlets by the end of the 2021 financial year and 450 by 2023. The agreement with RBI required Burger King India to have 700 outlets by the end of 2025, but this has been extended by 12 months in response to COVID-19.

Revenue came to INR8.47 billion for the 12 months ended March 2020, up from INR6.44 billion the previous year. Over the same period, the company’s net loss widened from INR382.8 million to INR765.7 million. Revenue plunged 64% year-on-year to INR1.52 billion in the six months ended September 2020, while the net loss grew 571% to INR1.17 billion.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Consumer
• IPO
• India
• Everstone Capital