Avoid to Barbeque Nation Hospitality: Ajcon Global

Ajcon Global has come out with its report on Barbeque Nation Hospitality. The research firm has recommended to ”Avoid” the ipo in its research report as on March 25, 2021.

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Ajcon Global IPO report on Barbeque Nation Hospitality

Barbeque Nation Hospitality Limited was incorporated on October 13, 2006. The company owns and operates Barbeque Nation Restaurants, one of India’s leading casual dining restaurant chains and International Barbeque Nation Restaurants. They also own and operate Toscano Restaurants and You and Barbeque (“UBQ”) by Barbeque Nation. The first Barbeque Nation Restaurant was launched in 2006 by Sayaji Hotels Ltd. (“SHL”), one of their promoters. The Company launched its first Barbeque Nation Restaurant in 2008, and subsequently acquired five Barbeque Nation Restaurants owned by SHL in 2012. As of December 31, 2020, the company has 164 restaurants owned and operated by them which includes 147 Barbeque Nation Restaurants across 77 cities in India, 6 International Barbeque Nation Restaurants across 4 cities outside India and 11 Italian Restaurants across 3 metro cities in India of which 9 are operated under the brand name “Toscano” and 1 each under the brand names “La Terrace” and “Collage”, respectively. International Barbeque Nation Restaurants are as 2 in Dubai, 2 in Abu Dhabi, 1 each in Kuala Lumpur and in Muscat. The company has integrated digital ecosystem of app, reservation system, delivery & loyalty program. They have managed risks due to Covid19 with consistent recovery. The company places a strong emphasis on customer reviews and feedback and use to obtain customer feedback in accordance with their internally devised and managed Guest Satisfaction Index (“GSI”)

Valuation and Outlook

At the upper end of the price band of Rs. 500, the Company’s IPO is valued at 2.5x at FY20 EV/Sales. We believe the issue is priced aggressively considering the tough times faced by Hospitality players in COVID?19 era. We recommend to “AVOID” the issue due to the following factors: a) COVID?19 era would continue to put pressure on business operations considering the recent spike in COVID?19 cases leading to localised restrictions, b) Company is loss making in 8MFY21 and last 3 years since FY18 which dents confidence on future earnings, c) no doubt the Pre?IPO placement and issue proceeds from IPO will help to meet the liquidity requirements; however, COVID?19 era is uncertain and there can be no assurance that additional liquidity from other sources will be available to the Company on favourable terms, or at all, especially the longer the COVID?19 pandemic lasts or if it were to worsen.

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