Barbeque Nation locked in upper circuit after weak debut, what should investors do?

The stock opened at Rs 492, down 1.6 percent from the issue price of Rs 500, but gained strength and was locked in the 20 percent upper circuit at 1035 hours.

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Barbeque Nation Hospitality’s share price was locked in the upper circuit after a weak market debut on April 7, supported by the rally in equity markets that followed the Reserve Bank of India’s decision to hold rates.

Those who invested in the initial public offering (IPO) for listing gains could exit the stock on April 7 but long-term investors should hold the stock as the hospitality business was expected to grow, experts said.

The stock opened at Rs 492, down 1.6 percent from the issue price of Rs 500 on the BSE, which was expected, but it immediately gained strength and extended gains to freeze in the 20 percent upper circuit at 1035 hours.

Ar around 2.30 pm, the stock was trading at Rs 590.40, up 20 percent from the issue price, and an 18.08 percent upside from the opening price, with volumes of 8.93 lakh equity shares.

“Investors interested only for listing gains may sell off their positions but investors who are in it for long term with appropriate risk appetite must hold their positions,” Vishal Balabhadruni, Senior Research Analyst at CapitalVia Global Research told Moneycontrol.

“The prospects of hospitality sector seem positive in in long term but in short term, one must be prepared for hostile tides in the market. Investors with higher risk appetite may consider acquiring these shares at a discount,” he said.

Prashanth Tapse, AVP Research, Mehta Equities, said investors should exit on the listing day. Those who want to buy on the listing day should look at its peers for better growth, he said.

Casual dining restaurant chain Barbeque Nation, which has steadily grown its network from a single restaurant in 2008 to 147 Barbeque Nation Restaurants (including opened, temporarily closed and under construction outlets) across 77 cities in India, posted revenue growth of 20 percent CAGR between FY18-FY20, but has been continuously incurring losses at PAT level despite topline growth.

“The COVID-19 pandemic too has had an adverse impact on the operations of the company, hence we expect profits will remain under pressure over the medium term,” said Jyoti Roy-DVP-Equity Strategist at Angel Broking.

Barbeque Nation raised Rs 453 crore from the public issue. The net proceeds from its Rs 180-crore fresh issue would be used to repay debts and expansion & opening of new restaurants by the company.

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