Thread by @aditya_kondawar

Something that you all were waiting for :)

Barbeque Nation IPO - A Thread + All the concerns

Let's start 👇

#IPOwithJST #BarbequeNation

Business Model -

Owned + operated Barbeque Nation Restaurant network

from a single restaurant in 2008 to 147 Restaurants as of Dec 31, 2020

Weekdays Lower Pricing, Weekends Higher Pricing

Veg/Non-Veg Differential Pricing

Unlimited Food Buffet with Food festivals sometimes

IPO Details - 453 Cr

OFS - 273 Cr
Fresh issue - 180 Cr

Fresh Issue Proceeds use -

55 cr CAPEX for new restaurants (20 new in Fiscal 2022 and 6 in Fiscal 2023) + 75 cr repayment of loans

Cost of a new restaurant - 2.1 Cr

Also given burger king cost - 2.7 Cr (interesting)

Let's talk about concerns (Images attached)

- High contingent liabilities
- National Anti-Profiteering Authority (GST) Notice
- SEBI Proceedings in relation to certain non-compliances under securities-related laws.

Concerns continued (images attached)

- SHL and Directors engaged in a similar line of business
- Criminal proceeding against a Promoter and Directors, Raoof Dhanani (Matter pending currently)
- Johnny rockets closure
- In Aug 2017 company couldn't meet the criteria to list

Concerns continued (images attached)

- Income Tax Raid (please read RHP to know more details, can't summarize it as its legal language)
- Pledge (quite small but still) with RBL Bank
- Geographical concentration
- Red Apple acquisition wherein lender has not provided consent

Concerns continued (images attached) -

- Certain instances of discrepancies / non-compliances by them in relation to certain filings and disclosures made to the RBI and the RoC under applicable law

- Ratings downgrade

Ok, quite a lot of concerns are there.

One more - the Capital Structure

We see BBQ has been continuously raising capital one after the other and that tells us a lot

They need to keep raising cash, investing/burning it to stay relevant and clock growth

I will be blunt/truthful here - They have no moat

They have to keep reinventing, re-imagining, re-investing in themselves to clock growth/stay relevant

Preferences change rapidly

Look at cloud kitchens and rebel foods

https://twitter.com/aditya_kondawar/status/1334319965118164992

https://twitter.com/aditya_kondawar/status/1194889223981035523

One more thing from the capital structure -

575,000 equity shares of Rs. 5 each were issued to Alchemy India Long-term Fund Ltd (Mr. Rakesh Jhunjhunwala) at a premium of Rs. 827 per share on March 29, 2018. (cost price is Rs 832, FV was 5, premium was Rs 827)

IPO price is 500

Let's look at financials now -

-Balance Sheet (Lots of debt, negative equity)

-Profit & Loss (Nothing worth mentioning, Net loss all years, EBITDA profit. But net profit matters)

-Cash Flows (CFO grew and FCF was also there)

One more concern that I wrote this mrng -

https://twitter.com/aditya_kondawar/status/1373121581946335236

Before I go to Valuation & Conclusion, let's sum up

- No Moat
- Loss-making for quite some time
- Cash burning nature of business
- Lot of other concerns
- Competition (BBQ like restaurants which are priced lower + Cloud kitchens)
- Very High Debt

Valuation -

NAV is (5.33) (negative 5.33) as of Nov 30, 2020

RoE for Nov 30, 2020 is (556.59)% (negative 556.59%)

Diluted EPS for Nov 30, 2020 is (28.50) (negative 28.50)

Can't really Value

Conclusion -

I believe this is quite clear

Many concerns + Extremely competitive industry (talk to restaurant owners and u will know what a task it is to run one and make money, I have spoken to a few and they all say the same )

Better businesses to look at in the markets!

End of thread.

I thank you for reading till the end. Do share and make your fellow Twitter friends aware of this company!

A detailed article will be up on our site in a day or two which will talk more about the industry. This will help our readers to learn more!

#IPOwithJST