The Pros and Cons of Investing in the Barbeque Nation IPO

Barbeque Nation, a rapidly growing restaurant chain in India, is set to open its Initial Public Offering (IPO) in March 2021. This move comes after a series of strong revenue growth years, yet the company has been battling losses for the past three years and eight months. Investing in the IPO of Barbeque Nation can be both risky and rewarding. Let's delve into the details to see if this investment can be a wise choice for high-risk investors.

Financial Performance and IPO Details

The most recent financial records for Barbeque Nation show positive revenue trends, but they have also been incurring losses. This period of growth followed a significant dip in revenues in 2020. The IPO price has not been validated, and it may be challenging to determine whether the current price is under or overpriced due to the negative earnings per share (EPS).

The IPO will be open from March 24th to March 26th, 2021, with an issue price of Rs 498 to 500 per share. The market lot size is set at 30 shares, covering an issue size of Eq Shares of 5 aggregating up to Rs 452.87 crore. The book-running lead managers for the IPO are IIFL Securities Ltd., Axis Capital Ltd., Ambit Capital Pvt., and SBI Capital Markets Ltd.

Objects of the Issue: The proceeds from the fresh issue will be used for the following purposes:

To make prepayment/repayment of all or a part of the company's outstanding borrowings on a consolidated basis To meet general corporate purposes

Overview of the Company

Barbeque Nation was established in 2008, and as of November 30th, 2019, it operated 138 Barbeque Nation Restaurants in 73 cities within India and 7 international locations in three countries. The company has recently expanded its offerings to include delivery services under UBQ and a new product line called 'Barbeque-in-a-Box.'

Currently, the IPO is fully subscribed, but the number of takes on the first day is somewhat low. Due to this, it is uncertain what kind of debut the shares will have. However, the IPO is expected to have a healthy debut given the current market conditions and the backing of Rakesh Jhunjhunwala's investment firm, Alchemy Capital.

Competitive Strengths and Risks

While Barbeque Nation is one of India's fastest-growing restaurant brands, investors must consider both its strengths and risks:

Strengths

Diversified offerings: The company caters to both vegetarian and non-vegetarian customers, offering a wide range of items. Experienced team: Rakesh Jhunjhunwala, a notable investor, has overseen the growth, bringing a wealth of experience. Financial position: The company has shown a proven track record of revenue growth, indicating strong business performance.

Risks

Historical losses: The company has struggled with consistent losses, which may continue despite current growth trends. Dependent on market trends: The success of the IPO and the subsequent stock performance will heavily depend on the overall market conditions. Risk of delisting: If the company's financial health is not sustainable, it may face delisting risks.

Conclusion

The decision to invest in Barbeque Nation IPO should be carefully considered. For high-risk investors who can stomach potential losses, this IPO presents an opportunity to capitalize on the company's growth. However, it also carries significant risks, especially given its history of losses.

As of now, it may be wise to give the IPO a miss unless you are comfortable with the potential risks involved. It is advisable to conduct thorough due diligence and consider market conditions before making a final investment decision.

Risk Disclosure: This article is merely for informational purposes and does not constitute investment advice. Investors are encouraged to conduct their due diligence and consult financial advisors before making any investment decisions.