Pizza Hut, KFC operator Devyani International IPO fully subscribed on Day 1; retail quota booked over 6 times

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Riding the huge investors’ interest in the primary market, the initial public offering by Devyani International got fully subscribed on the first day of the initial share sale. So far the IPO has been subscribed 1.55 times, led by retail investors who have oversubscribed their portion of the issue. The public offer has received bids for 17,43,53,685 shares till 1.55 pm (IST) against 11,25,69,719 shares offered by the company.

The company has fixed a price band of Rs 86-90 a share for its IPO and at the upper end of the price band, the public issue is expected to fetch Rs 1,838 crore. The quota reserved for retail investors got subscribed over 6 times so far.

The largest franchisee of Pizza Hut, KFC and Costa Coffee in India on Wednesday said it has mobilized Rs 825 crore from anchor investors. The company has decided to allocate 9.16 crore equity shares to 41 anchor investors at Rs 90 apiece, aggregating to Rs 825 crore, according to a statement.

A total of 28 foreign portfolio investors (FPIs) participated in the anchor book on Tuesday. Some of them were Abu Dhabi Investment Authority, Fidelity, Goldman Sachs, Monetary Authority of Singapore, Abu Dhabi Investment Council, Government of Singapore, Jupiter Asset Management, Nomura and Macquarie.

The three-day initial share sale will conclude on August 6.

Should you subscribe?

Anand Rathi | Rating: Subscribe

Anand Rathi believes that the company remains well placed for long term growth considering the company’s portfolio of recognized global brands catering to a range of customer preferences, cross-brand synergies, expansion of store network and EBITDA (earnings before interest tax depreciation and amortisation) positive earnings.

The brokerage firm is of the opinion that at the upper end of the IPO price band, Devyani International is offered at 9.5x market capitalization/sales as per FY21 financial statement, compared to peers like Jubilant Foodworks Ltd. (15x), Westlife Development Ltd. (8.8x) and Burger King India Ltd. (14x).

Angel Broking | Rating: Subscribe

Devyani International the largest franchisee of Yum Brands in India has a portfolio of well recognized global brands across the spectrum. Its presence across key consumption markets with a cluster-based approach and experienced Board and senior management team augurs well for the company.

In terms of valuations, the post-issue FY2021 EV (enterprise value)/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 proving valuations to be at reasonable levels.

Marwadi Shares & Finance | Rating: Subscribe

Considering the FY-21 adjusted EBITDA (earnings before interest tax depreciation amortisation) of Rs 178.92 crore on the post-issue basis, the company is going to list at EV/EBITDA of 62.39 with a market cap of Rs 10,822.7 crore, while its peers namely Jubilant Food and Westlife Development are trading at EV/EBITDA of 66.02 and 206.11 respectively.

Marwadi Shares & Finance has assigned a ‘Subscribe’ rating to this IPO as the company is a multidimensional comprehensive QSR player with a portfolio of highly recognized global brands and is available at reasonable valuation as compared to its peers.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)