The company has steadily grown its owned and operated Barbeque Nation Restaurant network from a single restaurant in 2008 to 164 restaurants end December 2020, which includes 147 Barbeque Nation Restaurants across 77 cities in India, 6 International Barbeque Nation Restaurants in 3 countries outside India and 11 casual dining Italian restaurant chains (of which 9 are operated under the brand name Toscano, one restaurant each under the brand names La Terrace and Collage). The company owns 61.35% of the equity share capital on a fully diluted basis of one of Subsidiaries, Red Apple, which owns and operates Italian restaurants chain.

In November 2018, the company launched UBQ by Barbeque Nation Restaurant to provide a la carte Indian cuisine in the value segment. At present, UBQ by Barbeque Nation Restaurant predominantly caters to the delivery segment. The company believes the value the company offers, the nature and quality of its food offerings and the ambience and service of restaurants create a one-of-a-kind overall customer experience. As of December 2020, the company was providing delivery in 77 cities in India of a la carte Indian cuisine under UBQ by Barbeque Nation from existing kitchen infrastructure.

Rahul Agrawal is the Whole-time Director and Chief Executive Officer of the company. He has been a Director of the company since December 2020. He joined the company on 24 July 2017.

Through Barbeque Nation Restaurants, the company pioneered the format of over the table barbeque concept in Indian restaurants. Live grills embedded in dining tables allow guests to grill their own barbeques. The company believes Barbeque Nation Restaurants, compared to other fixed price dining options, offer competitive attractions such as a wide range of vegetarian and non-vegetarian appetizers and main courses, a popular dessert menu, a pleasant and casual dining environment and prompt service thereby making it a popular destination for celebrations. The company also periodically runs popular food festivals at Barbeque Nation Restaurants offering guests a range of Indian, international, and fusion cuisines.

The Chain Casual Dining market in India has been flourishing over the last few years and represents the second largest share in the chain food services market in India after quick service restaurants. In FY2020, the size of the Chain Casual Dining market is estimated at Rs 13400 crore. The segment is expected to grow at a healthy CAGR of 18% to reach Rs 30200 crore by FY2025.

The company carefully chooses the locations of Barbeque Nation Restaurants with the objective of keeping rent to potential revenue ratio low. The company believes offering format positions it to capitalize on both the robust growth trend of the Chain Casual Dining market in India and the broader chain restaurant market within the food and services industry. The numbers of covers at Barbeque Nation Restaurants as well as the company's revenues have grown consistently as Barbeque Nation Restaurants have matured, particularly after being in operation for more than two years. The number of in-dining covers at Barbeque Nation Restaurants in India has grown from 6.86 million in FY2017 to 9.92 million in FY2020 at a CAGR of 13.08%.

Further, out of the 147 Barbeque Nation Restaurants, 24 have been opened since March 2019 and 71 have been opened since April 2017. The company is in a healthy position to monetize the benefits of expansion in the past few years and intends to leverage experience, together with that of the management team at Red Apple to expand Toscano Restaurants to other Metro and Tier I cities.

The core values are being customer-focused to provide excellent products and service and employee-focused by maintaining a superior quality work environment. The company places a strong emphasis on customer reviews and feedback and Barbeque Nation Restaurants use in-house call-centers to obtain customer feedback for Barbeque Nation Restaurants in accordance with internally devised and managed Guest Satisfaction Index (GSI).

Barbeque Nation Restaurants uses two cloud-based systems: Central Reservation System (CRS) and Central Feedback System (CFS). The company also accepts reservations for Barbeque Nation Restaurants through revamped smartphone application BBQ App, Facebook chat messenger, chat-bot, and other reservation platforms. The company has integrated business insights, in-house business intelligence software, which allows tracking restaurant wise data (operational and financial) for Barbeque Nation Restaurants at a granular level,and it has a direct interface with the enterprise resource planning system of the Barbeque Nation Restaurants.

There are 7,298 full-time employees in the company and its subsidiaries. They are organized, supported and incentivized to maximize productivity. Compensation for Barbeque Nation Restaurant managers is linked to GSI, sales and profitability of their restaurant, which the company believes promotes a culture of responsibility for customer service, revenue, and costs.

The company intends to increase same store sales growth, revenue per store and profitability as the vintage of Barbeque Nation Restaurants increases. The company believes that its strong presence in the Indian market positions well to capitalize on the anticipated growth in consumer spending from expected increases in the level of disposable income in India. The company intends to increase both revenues and profits by opening new Barbeque Nation Restaurants and new Toscano Restaurants in existing cities as well as in new cities in India and exploring additional opportunities for UBQ by Barbeque Nation. The company intends to continue to roll out primarily owned and operated restaurants and franchise owned (whether franchise or company operated) restaurants in select international cities in line with its carefully defined process for new restaurant openings. The company plans to continue pursuing brand diversification to capture additional market segments, take advantage of a wider range of market opportunities and ultimately increase overall market share by enlarging the customer base. The company believes that the food services industry has potential for significant further growth and the company plans to leverage market position and experience in the food services industry by introducing other international food service brands in India or through acquisition of an existing Indian brand.

The Offer and the Objects

The initial public offer comprises fresh issue of equity share of Rs 180 crore, aggregating to 36.14 lakh equity shares, at the lower price of Rs 498 and 36.00 lakh equity shares at the upper price band of Rs 500. The issue also comprises an offer for sale (OFS) of 54.57 lakh shares, aggregating to Rs 272 crore at the lower price of Rs 498 and Rs 273 crore at the upper price band of Rs 500.

The OFS of equity shares comprises OFS aggregating of equity shares up to 1,018,288 equity shares by Sayaji Housekeeping Services, 339,430 equity shares by Azhar Dhanani, 339,430 equity shares by Sadiya Dhanani, 339,430 equity shares by Sanya Dhanani, 3,323,106 equity shares by Tamara Private Limited (TPL), 71,186 equity shares by Aajv Investment Trust and 26,600 equity shares by Menu Private Limited aggregating up to 54.57 lakh equity shares.

Out of net proceeds from the fresh issue of Rs 180 crore, an amount of Rs 54.62 crore is proposed to be utilized for capital expenditure for expansion and opening of new restaurants by the Company and Rs 75 crore proposed to utilize for prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company on a consolidated basis and balance for general corporate purposes. The company proposes to add 20 new Barbeque Nation Restaurants in FY2022 and another 6 Barbeque Nation Restaurants in FY2023.

The company has completed a pre-IPO placement of Rs 149.97 crore, out of the above an amount of Rs 84.82 crore has been utilized for repayment of loans of the company and an amount of Rs 35.15 crore has been spent on general corporate purposes. Pending utilization, the balance funds have been parked in fixed deposits with scheduled commercial banks and will be utilized for repayment of debt of the company and its subsidiaries as applicable.

The post issue promoter shareholding in the company would decline to 37.8% from 47.8%.

The offer includes a reservation of equity shares aggregating up to Rs 2 crore, for subscription by eligible employees.

The issue, through the book-building process, will open on 24 March 2021 and will close on 26 March 2021.

The company expects that listing of the Equity Shares will enhance visibility and brand image and provide liquidity to the shareholders and will also provide a public market for the Equity Shares in India.

Strengths

Barbeque Nation is one of India's fastest growing and widely recognized restaurant brands in the rapidly growing Casual Dining Restaurant market. The restaurant location portfolio consists of sites located in popular business districts, neighbourhoods, and local markets. Almost half of Barbeque Nation Restaurants were located in Metro cities.

Average rating of Barbeque Nation Restaurants on an online food aggregator was 4.38 out of 5.00. The company also has a large social media following.

The company has experienced consistent cover growth in recent years with the number of in-dining covers served at Barbeque Nation Restaurants in India rising from 6.86 million in FY2017 to 9.92 million in FY2020 at a CAGR of 13.08%.

Barbeque Nation have higher proportion of the total revenues from weekday sales and lunch covers as compared to the industry average at 48.7% in FY2017, 48.4% in FY2018, 48.6% in FY2019 and 53.4% in FY2020 due to being a popular choice for corporate lunches during the week and families during the weekends.

The company continues to offer new menu options both vegetarian and non-vegetarian, largely based on Indian cuisine and use seasonal customer preferences to introduce new dishes with constant menu innovation and customer focus.

The company benefits from strong processes and systems that have been established over the past 14 years of the Company's operation. Restaurant locations are carefully chosen by a dedicated internal team. The company has been successful in opening Barbeque Nation Restaurants in popular business districts, neighbourhoods and local markets without typically paying high street premium rentals.

The company also conducts regular audits to check food quality and service standards.

Some Promoters have several years of experience in the Indian hospitality industry. A number of senior management teams have knowledge of and experience in the Indian hospitality industry, coming from well-known food and beverage and hospitality brands in India. The management teams experience provides the skills required to implement corporate practices and growth strategies.

The company believes it has the financial flexibility to fund growth and expansion and allow it to respond effectively to emerging opportunities in the Indian restaurant market.

Post covid impact on business, the company has significantly recovered business and 157 out of 164 restaurants are operational as of December 2020, while the company has also reached 84% of the revenues by November 2020.

Weaknesses

The outbreak of the coronavirus pandemic and measures to reduce its spread had a substantial impact on restaurant operations and the timing of how long the COVID- 19 pandemic and the related GoI measures will last is still uncertain.

Demand for food delivery services through delivery aggregators online and through mobile applications has witnessed an increase in recent years across the restaurant industry and competition has increased with other restaurant brands and new food service platforms, such as cloud kitchens.

Cloud kitchens do not offer in-restaurant services and only serve food through third party delivery aggregators, requires less capital expenditure to offer food services. If food delivery through third party delivery aggregators continues to increase, it is possible that footfalls in restaurants could decrease unless the company adapts a business model to account for this change in consumer preference.

The company currently also depends on third party delivery aggregators for a substantial portion of food delivery services and that could increase in the future. It is possible that the negotiating leverage of third party delivery aggregators with respect to agreements with them could increase as their businesses grow, which means the company may have to pay higher fees for their services.

The company may have to sufficiently develop own food delivery services or find alternative means to serve the increasing number of customers who choose to order their food online or through mobile applications.

Any outbreak of an epidemic or disease affecting supply chains for poultry, fish products or other perishable food items could significantly affect ability to purchase such commodities, its operations and costs of doing business.

The company had consolidated contingent liabilities of Rs 58.96 crore (indirect tax matters of Rs 16.92 crore and direct tax matters of Rs 42.04 crore).

The company has to regularly offer new dishes on the menu and respond to changes in consumer tastes and preferences in a timely manner.

The premises of the Registered and Corporate Office and all restaurants are either leased or licensed. If the company fails to renew these leases / licenses and on competitive terms, it would affect business.

Barbeque Nation Restaurants in Delhi NCR, Mumbai and Bengaluru together contributed more than 38% of total revenue from operations in FY2020.

One of the promoters, Kayum Dhanani has pledged 333,400 Equity Shares with RBL Bank to secure loan facilities aggregating to Rs 33.61 crore, amounting to 0.98% of the pre offer capital. Sayaji Housekeeping services holding 37.2% stake pre-offer and 30.9% post offer in the company is entirely owned by Sayaji Hotels. Promoters and Promoter Group of Sayaji Hotels have pledged 45.06% of their holdings in Sayaji Hotels.

Valuation

The consolidated total revenue and EBITDA of the company has increased from Rs 590.45 crore and Rs 140.37 crore in FY2018 to Rs 850.79 crore and Rs 168.04 crore in FY2020 at a CAGR of 20.04% and 9.41%. In the eight months ended November 2020, total consolidated revenues were Rs 236.61 crore and consolidated EBITDA stood at Rs 12.59 crore.

The company has issued equity shares in pre-IPO placement at a significantly lower price than the offer price. Between December 2020 and January 2021, the company has allotted 59.51 lakh shares at a price of Rs 252 per share. Of which, 36.51 lakh equity shares (forming 10.8% stake in the company) were allotted to Jubilant FoodWorks at price of Rs 252 in January 2021.

At the upper band of offer price of Rs 500, the EV/sales of the company stands at 2.3 times and EV/EBITDA at 11.6 times its FY20 sales and EBITDA. EV is calculated on post issue equity, while adjusting net debt reduction for Rs 84.82 crore from proceeds of pre-IPO placement and Rs 75 crore to be utilized for debt reduction from net proceeds of IPO offer.

In comparison, the EV/Sales of its nearest listed peer, Specialty Restaurants is at 0.6 times and EV/EBITDA stands at 5.0 times.

The company is planning substantial reduction in its debt through the proceeds from pre-IPO placement and net proceeds of IPO, while it is well positioned to monetize the benefits of expansion in the past few years as the vintage of Barbeque Nation Restaurants increases. The company also intends to leverage its experience to further expand restaurants chain. However, the high capex, long gestation period, competition from online platforms and dependence on consumer tastes and preferences in the business are major growth hurdles.

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