By 1 pm, the issue received bids for 11,50,95,915 shares against the issue size of 11,25,69,719 shares.
The IPO is being sold in the Rs 86-90 price band. Last heard, the unlisted stock was commanding a grey market premium of Rs 63-65.
Since the largest franchisee of KFC, Pizza Hut, and Costa Coffee is a loss-making firm, analysts are valuing it on metrics such as EV/Ebitda and EV/sales, and largely have a subscribe rating on the issue. Some of them even suggest subscribing for listing gains.
BP Wealth said that even as the company has been a loss-making one, it is on a footprint expansion mode with strong industry triggers. “On the valuation front, based on upper price band and diluted equity shares the company is valued at 9.54 times Price/Sales which is reasonably priced when compared to its listed industry peers . Considering the expected improvement in financial performance and future growth drivers, we give a “subscribe” rating for the long term,” it said.
Antique Stock Broking finds Devyani’s valuation in-line with Westlife and at 30-35 per cent discount to Burger King and Jubilant FoodWorks. “We recommend Subscribe as valuation is justified due to increase in consumer preference for branded QSRs, value/unique proposition (fried chicken for KFC), and improving profitability with higher focus on delivery model and smaller store formats,” it said.
The IPO is valued at 62.8 times FY21 EV/Ebitda that Reliance Securities said looks reasonable compared to its listed QSR peers and Westlife Development (McDonald’s) and Burger King.
The fast-food culture under QSR is expected to flourish in India due to an increase in the working-class population and continued urbanisation, it said.
“We note that the business model of QSR is quite impressive, as each restaurant franchise starts generating significant RoE at restaurant level once it reaches utilization level of over 90 per cent that bodes well for long-term investors. Additionally, the superior cash flow generation ability of the business offers comfort. Hence, we recommend subscribing to the issue,” it said.
Devyani has opened 40-50 stores across its brands in the last 2-3 quarters and expects to sustain this momentum. For the next 2-3 years, it wants to follow a small store format for Pizza Hut. The company managed to open 43 stores in June quarter while it opened 109 stores across core brands in the second half of FY21.
