In the subsequent days, the stock nearly quadrupled from its IPO price to hit a high of Rs 214. Those rapid gains changed the narrative around Burger King’s IPO, as the stock went from being the poster child of the bull market to a symbol of the euphoria among investors.
Domestic mutual funds, who had invested in the company’s anchor issue, perhaps thought the same way, as they dumped a large number of shares of the company once their lock-in period ended in January. Seven out of the eight mutual funds, which had participated in Burger King’s anchor issue, sold a large portion of their allotted shares in January.
Among them, SBI Mutual Fund, HDFC Mutual Fund, Nippon India Mutual Fund, Aditya Birla Sunlife Mutual Fund sold up to 79 per cent of the shares allotted to them, data compiled by ETMarkets.com and East India Securities showed.
ICICI Prudential Mutual Fund, which had picked up 4.33 million shares in the anchor issue, sold around 79 per cent of its allotted shares in January. Similarly, the country’s largest fund house SBI MF sold 62 per cent of its total allotment, and Nippon India MF 77 per cent.
Sundaram Mutual Fund, which had told ETNow in December that it expects a sharp revival in the quick-service restaurant sector and that was the reason it became an anchor investor in Burger King’s IPO, felt compelled to sell 25 per cent of the anchor allotment after the rapid runup in the stock.
In January, shares of the company tanked 22 per cent, likely because of the selling intensity by domestic mutual funds. However, the stock has recouped some ground with a 9 per cent rise so far in February.
The quantum of selling by anchor investors in Burger King IPO does not help the long-term investment case for the company, as anchor investors are largely institutional investors and are presumed to hold a long-term view on a stock.
The saving grace for the stock, however, is that most of the foreign institutional investors that participated in the anchor allotment did not appear to have sold too many shares since listing. The only FII that has sold a large chunk of its allotted shares was Singapore-based East Spring Investments, which has offloaded 64 per cent of the 4.3 million shares allotted to it.
The December quarter did little to strengthen the optimism for the company, as the earnings reflected lingering pain for the business from the Covid-19 disruption. The company’s net loss for the quarter widened year on year, while revenues plummeted 28 per cent.
What will trouble investors more and raise concerns over the stock’s still elevated valuations is the sluggish recovery that Burger King is witnessing compared with its peer Jubilant Foodworks. Burger King said its topline recovered to 86 per cent in January compared with the same month in 2020, which was still weak compared with Domino’s 100 per cent sales recovery from pre-Covid levels in December itself.
While Burger King has made plenty of money for its IPO subscribers, analysts feel it will take time for the stock to reach the heights of its initial listing days.
