Devyani International Limited is opening its initial public offering (IPO) on August 4, 2021. The quick-service restaurants (QSR) chain operator is eyeing an issue size of Rs 1,838.00 crore through its IPO. The company was incorporated in 1991. It has the brand strength of being one of the largest franchisees in India. It is the largest franchisee of YUM Brands and has many popular brands under it such as Pizza Hut, KFC, and Taco Bell. Devyani International has 655 stores across 155 cities in India. It even has a significant international presence with over 50,000 restaurants in 150 countries. With this highly-anticipated IPO hitting the market on Wednesday, here is what you need to know before jumping in and subscribing to the issue.
1) Devyani International Limited IPO Price Band, Issue Size
The Devyani International IPO has an issue size of Rs 1,838 crore. The issue is made up of a fresh issue and an offer for sale (OFS). The Fresh Issue stands at Rs 440 crore with 48,888,888 shares, while the OFS stands at Rs 1,398 crore with around 155,333,330 equity shares that carry a face value of Rs 1 per equity share. The IPO itself will open on August 4 and close on August 6. Any anchor bookings that took place would have happened on August 3. The price band for the issue was Rs 86 to Rs 90 per equity share for the issue.
2) Devyani International IPO Grey Market Premium (GMP)
The GMP was Rs 55 on August 4 at around 08:20 IST. This indicates that the issue was trading premiums on the unlisted market at roughly Rs 141 to Rs 145 per equity share against the listed price band.
3) Devyani International IPO Lot Size
The company has a minimum lot size of 165 shares with an application amount of Rs 14,850 for the lower end of the lot. The upper limit of the lot size was listed at 2,145 shares that carried a minimum application amount of Rs 193,050. Retail investors are allowed to apply for up to 13 lots at the upper limit, which stands at 2,145 shares.
4) Reserved Portion for Investors in the Public Issue and Subscriptions
The company has three categories of investors – qualified institutional buyers (QIBs), non-institutional investors (NIIs) and retail investors. Out of all three categories, the QIBs have the highest reserved portion with a 75 per cent allocation. The NIIs have an allocation of 15 per cent and the retail segment have a reservation of 10 per cent.
The IPO was subscribed a total of 0.81 times on August 4 at approximately 12:10 IST. The retail investors subscribed 4.13 times. The QIB and NII categories subscribed 0.00 times and 0.09 times respectively. There were also subscriptions from the employee category that stood at 0.23 times during the same time.
5) Devyani International IPO Objective
The company is possibly looking to just stabilise the operations and its financials as the object of the issue was listed as using the funds for repayment and pre-payment for company borrowings. This is either fully or partially. The other portion of the funds is likely to go towards expenditure on general corporate purposes.
6) Important Post-IPO Dates
The IPO will close on August 6, Friday. After this is when investors need to keep an ear to the ground. The basis of allotment will likely be on August 11. The refunds to unlucky bidders and the accreditation to the successful investors will probably happen on August 12 and 13 respectively. The listing date for the issue on the NSE and the BSE will likely take place on August 16, which remains to be confirmed.
7) Promoter Group and IPO Leads
The group of promoters for the issue consists of Ravi Kant Jaipuria, Varun Jaipuria, and RJ Corp Limited. The global coordinators and book running lead managers for the issue are Kotak Mahindra Capital Company Limited, CLSA India Private Limited, Motilal Oswal Investment Advisors Limited and Edelweiss Financial Services Limited.
8) Devyani International Limited Company Overview
The company was incorporated in 1991. It has big-brand verticals driving its stature in the industry. The three main verticals of the franchisee’s chain are the core brands which are made up of KFC, Pizza Hut and Costa Coffee in India. The second vertical is the international presence in Nepal and Nigeria. The third vertical consists of other brands such as Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar. What started as a single Pizza Hut store in Jaipur, expanded to KFC as well. Not the company operates 264 KFC stores, 297 Pizza Huts, and 44 Costa Coffee outlets in India alone.
9) Company Financials
Devyani International managed to bring down its losses in FY21 to Rs 62.98 crore from Rs 121.42 crore in FY20 when the pandemic was at an all-time high. The revenue for the same time frame went down as well to Rs 1,134.84 crore from Rs 1,516.4 crore. The company saw a slow recovery between 2020 and 2021, however, it did recover. The recovery of the company aside, the industry has also seen significant growth. Speaking on the growth of the QSR chain industry Ajit Mishra the VP of Research from Religare Broking said, “The value sales of quick-service restaurants grew by a CAGR of 5.5% and amounted to Rs. 2,854.8 billion in 2020 from Rs. 2,189.2 billion in 2015. The number of outlets increased by 2% while the number of transactions increased by 3.8% over the same period.”
10) Should You Subscribe to the IPO? Analyst Outlooks
Mishra said in a Religare Broking note, “Devyani is well placed to benefit from growing industry trends as it has a strong portfolio of highly recognized global brands which cater to a range of customer preferences. Its close association with Yum together with its technical, marketing and operational expertise has enabled them to establish itself as a comprehensive player in the QSR industry in India. It has a strong presence in key consumption markets. Moreover, the company has been able to leverage substantial operating synergies across the brands in which it operates.”
He added that the company is looking to expand its store network for its core brands and is eyeing a delivery-oriented approach with a focus on digital capabilities. Mishra noted that the company has made a decent recovery all things considered and that improving its unit performance will aid in better margins down the line.
“The financial performance has been tepid for the company which has further got impacted in FY21 due to the pandemic. However, the company intends to improve its unit performance which would aid better margins. Considering the current market sentiments, investors may subscribe for listing gains,” said Mishra.
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