Barbeque Nation Hospitality LTD

Nuvama Wealth Research
Barbeque-Nation Hospitality Ltd
Kapil Jagasia HimanshuPalash

Yadav Kawale
Research Analyst ResearchResearch
Analyst Analyst
Kapil.jagasia@nuvama.com himanshu.yadav@edelweissfin.com
Kawale.palash @nuvama.com Date: January 26, 2023
Long Term Recommendation
Barbeque Nation Hospitality Ltd.
Grilled for appetizing growth ahead!!!
Barbeque Nation Hospitality Ltd. (BNHL) is India’s most successful casual-dining-restaurant (CDR) Kapil Jagasia, CFA
brand, as it quadrupled its overall restaurant count (~22% CAGR over FY15–22) to 205 restaurants Research Analyst
(as on Q2FY23). BNHL’s restaurant chain is dominated by the flagship Barbeque Nation (BBQN) Kapil.jagasia@nuvama.com
restaurants by store network and revenue pie (~90%). The company also operates 13 Italian cuisine
fine-dine restaurants (FDRs) under the brand Toscano. During the pandemic, the company ventured Palash Kawale
into the online delivery segment (23% revenue contribution in FY22) under UBQ and Barbeque-in- Research Analyst
Kawale.palash@nuvama.com
a-Box brands. We expect BNHL to continue the growth momentum going forward (~19% restaurant
opening run rate over FY22–25E). With aggressive restaurant expansion, improvement in table
turns and maturity of existing restaurants, we expect Revenue and EBITDA CAGR of 30% and 45%, CMP INR: 880
respectively, over FY22–25E. We initiate coverage on BNHL with a target price of INR1,275 per share
Rating: BUY
based on a 15x FY24E EV/EBITDA.
Target Price INR: 1,275
Strong execution led by highly scalable business model
Upside: 45%
The CDR market is tough to scale due to a high number of SKUs compared with a quick-service
restaurant (QSR), which makes standardisation difficult in this industry. However, BNHL is an outlier Date: January 26, 2022
in this segment, as it scaled up its restaurant network relatively faster compared with peers, and a
majority of its restaurants are profitable with superior store-level economics. BNHL’s growth is also
supported by developing standardised food packets for its dishes and maintaining long-term contracts
Bloomberg: BARBEQUE:IN
with dedicated vendors for sourcing raw materials. Most importantly, BNHL focuses on only two
brands – BBQN (UBQ and Barbeque-in-a-Box revolve around the core brand BBQN) and Toscano, 52-week
879/ 1,524
which makes developing and maintaining SOPs relatively easier. range (INR):
Restaurant additions to remain aggressive Share in issue (crore): 3.9

BNHL increased its restaurant count at ~22% CAGR over FY15–22 and currently has 205 restaurants
(incl. 186 BBQN restaurants in 84 cities in India). BNHL has been successful as it pioneered the concept M-cap (INR cr): 3,443
of (a) ‘over the table barbeque’ live grills embedded in dining tables – allowing guests to grill their
Promoter holding (%) 33.81
own barbecues right at their tables and (b) ‘all you can eat dining option’ at a fixed price. We expect
the company to spearhead its restaurant addition momentum, as it targets 500 BBQN and 100
Toscano restaurants over the medium-to-long term. We forecast the company to add 40 restaurants
annually over FY22–25E to reach 300+ restaurants.
Most efficient player in the CDR segment

CDRs register high weekend sales (70–80%) and high dinner sales (~60%), which implies low utilisation
for the industry over the week, thereby resulting in low asset turns. However, BNHL enjoys almost
equal proportion of the total revenues from weekday and weekend sales and a 45:55 mix between
lunch vs. dinner covers, as its buffet spread is a popular choice for corporate lunches during
weekdays and families during weekends. This results in high-capacity utilisation throughout the
week for the company. Moreover, most BNHL restaurants are strategically located near corporate
offices, which results in large gatherings during weekdays and lunch time. This enables BNHL to
register high table turns, which stands at 1.8–1.9x, much higher than the industry average of ~1.3x.
Outlook and valuation: A strong re-rating candidate; initiating with a ‘Buy’ rating
BNHL is one of the most popular, fastest growing and efficient CDR players in India. With the
company’s sharp focus on (a) maintaining the restaurant opening run rate, (b) continuing with the
cluster approach for its expansion plans and (c) emphasis on building core brands, we expect BNHL’s
restaurant opening run rate and revenue CAGR of 19% and 30% CAGR over FY22–25E, with 600 bps
expansion in operating margins to ~22% over the same period. BNHL would turn profitable in FY23E
and is expected to record a PAT CAGR of ~74% over FY23E-FY25E. With high table turns, improving
cost structure and expanding delivery vertical, BNHL’s return ratios would reach ~20% by FY25E. With
BNHL’s best-in-class business model, growth opportunities, execution capabilities, lean balance sheet
and management quality, we initiate our coverage on the company with a target price of INR1,275
based on 15x FY24E EV/EBITDA.
(INR Cr) FY21 FY22 FY23E FY24E FY25E

Revenue 507 861 1,259 1,568 1,900
EBITDA 46 134 250 323 411
EBITDA Margin (%) 9% 16% 20% 21% 22%
Net Profit -92 -25 36 69 108
EPS (INR) -31.5 -6.5 9.2 17.8 27.7
EPS Growth (%) NA -79% -242% 93% 56%
EV/EBITDA NA 36.1 13.4 10.3 8.0
P/E (x) NA -190.3 95.5 49.4 3.7
ROE (%) -75.2% -8.2% 8.1% 15.3% 19.9%
ROCE (%) -10.9% 0.8% 11.9% 15.9% 20.1%
Nuvama Group has two independent equity research groups: Institutional Equities and Professional Clients Group. This report h as been prepared by the Professional Clients Group. 1
Table of Contents
Business Structure ................................................................................................................................................... 3
Focus Charts ............................................................................................................................................................ 4
Investment Rationale
I. Top-notch execution in a tough-to-scale sector ................................................................................................... 6
II. Fastest-growing CDR player ................................................................................................................................ 8
III. Most efficient player in the CDR segment ......................................................................................................... 10
IV. Focus on delivery to aid revenue growth ........................................................................................................... 11
V. Better cost structure led by zero royalty and low ad spends .............................................................................. 13
VI. Improvement in margin profile ........................................................................................................................... 14
VII. Strong back-end processes in place to ensure smooth operations ................................................................. 15
Peer Analysis ............................................................................................................................................................ 16
Risks ......................................................................................................................................................................... 18
Financial Analysis ..................................................................................................................................................... 19
Valuation and Outlook ............................................................................................................................................. 23
Company Description ............................................................................................................................................... 24
Management Profile ................................................................................................................................................ 26
Appendix .................................................................................................................................................................. 27
Financials.................................................................................................................................................................. 31
Business Structure
Barbeque Nation Hospitality is one of the largest CDR The company’s flagship brand BBQN is known for its value-
chains in India in terms of restaurant count. The company for-money offerings and outstanding service and experience
has scaled up its presence from its first Barbeque Nation – making it a favoured choice for large groups. The brand sold
(BBQN) restaurant launched in 2008 to 186 restaurants ~1cr covers in FY20. The company intends to maintain its
across 84 cities in India and six international BBQN average restaurant opening run rate (~20%) over the
restaurants in three countries as at the end of Q2FY23. The medium term, which would help maintain the growth
BBQN brand is known for pioneering the ‘on-the-table- momentum. We expect BNHL to clock ~30% revenue CAGR
live-grill’ concept in India. BNHL owns 75.16% of the equity (average SSSG of ~12%) over FY22–25E. The company’s store
share capital (on a fully diluted basis) of one of its economics is slated to improve with its average revenue per
subsidiaries, Red Apple, which owns and operates 13 store exceeding INR6.5cr by FY25, while return ratios would
restaurants under the brand Toscano (~6% revenue surpass 20% levels over the same period.
contribution), a fine-dining Italian restaurant chain.
INR cr FY22 FY23E FY24E FY25E INR cr FY22 FY23E FY24E FY25E EV/EBITDA FY24E CMP/Target
Revenue 861 1,259 1,568 1,900 RoCE (%) 0.8 11.9 15.9 20.1 EV/EBITDA 15 1,275
EBITDA 134 250 323 411 RoE (%) -8.2 8.1 15.3 19.9
EBITDA
margin 15.5 19.9 20.6 21.7
(%)
PAT
margin (2.9) 2.8 4.4 5.7
(%)
Over FY22–25E, Barbeque is expected to

We forecast Barbeque’s operating
clock 30% revenue CAGR, led by (a) a
margins to reach 20% in FY23E with We also expect Barbeque to turn
strong revival of dine-in channel
significant margin expansion (~600 bps) profitable in FY23E and record ~74% PAT
revenue, (b) an aggressive store opening
over FY22–25E, supported by a strong CAGR over FY23–25E. We expect Barbeque
run rate, (c) superior store-level
recovery in the dine-in business (after to improve table turns, enhancing RoCE
economics and (d) the expansion of
COVID-19), cost-saving initiatives and and RoE to ~20% each by FY25E.
alternate channels and business
operating leverage kicking in.
segments.
At target price, FY25E EV/EBITDA is

At CMP, FY25E EV/EBITDA is 8x + FY25E RoCE of 20% + 12x
Upside: 45%
Focus Charts
Exhibit 1: Aggressive restaurant openings Exhibit 2: aided by addition of delivery segment revenue
285
311
267 220
225 198
185 170
164 164
INR cr
133
104 77 81
31 40 42 44 26
24 29 21
0
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY20 FY21 FY22 FY23E FY24E FY25E
Number of Restaunants Restaurant Additions Delivery Revenue H1FY23
*FY21 – nil restaurant openings due to the pandemic
Exhibit 3: would drive overall revenue CAGR of 30% Exhibit 4: and EBITDA margin expansion of ~600 bps over
FY22–25
1,900
1,568
23%
1,259 22%
20% 21%
20% 19%
847 861
739 16%
586 13%
507 12%
9%
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Exhibit 5: resulting in PAT turning black Exhibit 6: with high double-digit return ratios
25
PAT (INR cr)
150
20
100 15
50 10
INR cr
0 5
0
(50)
FY18 FY19 FY22 FY23E FY24E FY25E
-5
(100)
-10
(150)
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E ROAE (%) ROACE (%)
*FY20 & FY21 were affected by the pandemic, hence excluded

Source: Nuvama Wealth Research
Investment Rationale
I. Top-notch execution in a tough-to-scale sector

Barbeque Nation operates in the high-growing CDR sector; wherein the chain CDR market grew ~19% over FY15–20, and the
growth rate is expected to be maintained (~18% CAGR over FY20–25E) (Source: Technopak). However, this is a tough-to-scale
sector as the number of SKUs are high, so standardising the operating procedures, which is paramount for scaling up, is difficult.
For example, the BBQN format has 75–80 SKUs and Toscano has 25–30 SKUs.
With high focus on

The CDR sector is dine-in focused due to the experiential dining USP of restaurants (the size
craftsmanship and fresh
of a CDR is ~3x of QSRs) and high focus on lunch/dinner. Therefore, scaling up a CDR is more
produce, chain CDRs limit the
use of standardised ready-to- challenging than a QSR, given its (i) larger ticket size, (ii) larger format store, and (iii) lack of an
cook/eat food products, which all-day dining menu. However, BNHL’s focus on standard operating procedures (SOPs) enable
restricts fast scalability. it to scale up rapidly. BBQN restaurant count in India stood at 186 as on Sep’22, whereas other
However, using SOPs with a prominent food chains in the casual dining space in India were merely at half or less than half
strong training and monitoring of this count, which highlights the success of the format in which BBQN operates in addition
system helped BNHL to expand to the brand loyalty enjoyed by it over the years.
rapidly at the pan-India level.
What is BNHL’s secret recipe for success?
(1) Adoption of emerging trends

The Indian food services market reported some key emerging trends over the last few years:
• High focus on value meals: Even as eating-out and ordering-in frequency grows, Indian consumers remain cost-conscious and
continue to prefer value-for-money concepts.
• Unlimited food at a limited price and DIY: Fixed-price menu concepts have emerged in recent years, especially in the CDR and
Fine-Dining Restaurant (FDR) formats. Restaurants now offer a fixed-menu buffet range with a medium-to-large spread of
options in various meal courses at a fixed price. These formats increase consumer engagement via ‘do it yourself (DIY)’
concepts, where brands place ‘over the table barbeques’ for consumers to cook their own food.
• Contemporisation of Indian cuisine: Restaurants are increasingly offering traditional and regional specialities of Indian cuisine,
prepared using differentiated techniques and new-world presentations.
All these emerging trends have worked in BNHL’s favour as it pioneered the ‘over the table barbeque’ concept in India, allowing
guests to grill their own barbeques over live grills embedded in dining tables. BBQN restaurants offer a fixed-price dining option,
which typically includes pre-cooked appetisers, an all-you-can-eat main course buffet and a selection of desserts. BBQN
restaurants also offer new menu options, largely based on Indian cuisine, and use seasonal customer preferences to introduce
new dishes.
(2) Value proposition

BBQN restaurants offer value compared with other dining options due to DIY and cook-at-the-table features, which help create
dishes according to each diner’s individual tastes and preferences. Moreover, fixed-price dining is popular amongst large groups
due to customers’ perception of value for money and certainty over the bill amount irrespective of varying individual
consumption.
(3) Long-term contracts for sourcing requirements

Barbeque Nation has dedicated vendors for its meat requirements (fish and chicken accounts for more than 50% of BNHL’s
material cost). The company source ingredients from various suppliers and, in some cases, import them from outside India (fish
is imported from Vietnam). This allows BNHL to maintain the quality of food over its chain of restaurants. The company has signed
long-term contracts with vendors, minimising the effect of raw material inflation.
(4) Food standardisation

BNHL has developed standard food packets for most dishes offered on its menu. As a result, chefs at BBQN restaurants only mix
the contents of a food packet with a gravy and follow SOPs. This brings consistency and efficiency in the operations. For example,
BNHL has only two core brands (BBQN and Toscano; the rest three brand offerings are delivery based and centre around the core
offerings), while its competitors Speciality Restaurants (SRL) and Lite Bite Foods have ~20 brands each, making it difficult for them
to develop SOPs and scale up rapidly.
BBQN restaurants are standardised in terms of offerings, even as it allows individual restaurant-level business managers
reasonable autonomy in daily operations. Restaurant menus are also largely standard, albeit may vary in some respects, based
on the city in which the restaurant is located to cater to local tastes.
Exhibit 7: Brand offerings
Source: Company, Nuvama Wealth Research
II. Fastest-growing CDR player

Barbeque Nation started its operations in 2006, and it has been one of the fastest growing CDR brands in the country. Barbeque
has expanded the overall store count by 22% CAGR over FY15-22. As of Sep’22, the company operated 205 restaurants across
store formats and geographies. The key factor for this swift expansion has been the selection of suitable locations at appropriate
lease rentals. The company deliberately keeps most BBQN restaurants away from premium locations (premium shopping malls
or other high-street areas in metro cities), where lease rentals are high.
Exhibit 8: BNHL restaurant footprint
Number of Restaurants
300 26
10
21
8
225 16
7
11
150 6 11 6
275
238
202
75 151 147 168
133
104
66 80
45
0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
BBQ India BBQ International Toscano
BNHL – much ahead of competition w.r.t. restaurant footprint
Exhibit 9: BNHL vs SRL restaurant count
205
185
164 164
133 128 140

123 123 123 128 121
117
104
80
66
FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23
Barbeque SRL
(1) BNHL restaurant count is 2x compared with its nearest competitor.

(2) Even competitors that are in existence for a longer time than BNHL, have not been able to surpass a three-figure mark yet.
Going forward, we expect the company to maintain a healthy restaurant opening run rate of ~20%. In addition to scaling up its
mainstream BBQN restaurants in India, BNHL is cautiously entering into other brands. In FY20, BNHL acquired a 61.35% stake in
Red Apple Kitchen Consultancy Pvt. Ltd. (which operates Italian casual-dining chain Toscano) for INR67.5cr, and later increased
its stake to 75.2% in Aug’22 for an additional INR24.65cr. We expect Toscano to add 4–5 restaurants each year until FY25E. BNHL
also ventured into the international territory in 2016, and as of Sep’22 operated six restaurants in international markets – two in
Dubai, two in Abu Dhabi, one in Kuala Lumpur and one in Muscat. Revenue per store and margins for the international business
are superior to that for the India business. We expect the company to add 1–2 international restaurants each year until FY25E.
According to the management, BNHL does not plan to grow aggressively, as its competitors grew in the past. The company
focuses primarily on expanding its domestic business, followed by the expansion of Toscano restaurants. Also, the restaurant
additions would be funded via internal accruals.
Exhibit 10: Financial snapshot of BNHL brands

Particulars (FY22) BBQ India BBQ International Toscano
Store size (sq. ft.) 4,500-5,000 4,500-5,000 2,000
Capex per store (INR cr) 2.5-2.7 4.0 2.5-2.7
Revenue (INR cr) 761 54 47
Rev per store (INR cr) 4.8 9.0 4.2
APC (INR) 850-900 1,600 600-650
Gross margins % 65% 70% 75%
Store level EBITDA margins % 21% 30% 21%
BNHL is the only pan India CDR player, which has expanded across geographies effortlessly. Currently, 70% of its stores are located
in metros and 30% in Tier I/II cities; the company expects to maintain the same ratio going forward, as it believes it is still
underpenetrated in the metros. We believe incremental restaurant additions to be concentrated in existing geographies
(cluster-based expansion) to leverage benefits of cost-efficiency.
Exhibit 11: Brand-wise CDR restaurant footprint in India
III. Most efficient player in the CDR segment
The CDR industry registers higher sales during weekends (Friday–Sunday) compared with weekdays. The number is as large as
70–80% of sales generated during weekends. Likewise, the salience of lunch sales is lower than dinner sales across most CDR
formats. The share of lunch sales for the industry also stands at ~40 (37–39% during weekdays and 42–44% during weekends).
Hence, the CDR industry suffers from low utilisation, resulting in low asset turns.
Barbeque Nation remains an outlier in this industry, as it enjoys almost equal proportion of the total revenues from weekday
and weekend sales and a 45:55 mix between lunch vs. dinner covers. This is because BBQN is a popular choice for corporate
lunches during weekdays and families during weekends. This results in a high capacity utilisation throughout the week for the
company, thereby helping it efficiently manage its costs.
Exhibit 12: BNHL lunch vs. dinner Exhibit 13: BNHL weekend vs. weekday mix
120%
100%
100%
80%
48% 49% 48% 49% 48% 49%
80%
58% 56% 55% 55% 54% 54% 60%
60%
40%
40%
52% 51% 52% 51% 52% 51%
20%
20% 42% 44% 45% 45% 46% 46%
0%
0%
FY15 FY16 FY17 FY18 FY19 FY20
FY15 FY16 FY17 FY18 FY19 FY20
Lunch cover Dinner cover Weekend cover Weekday cover
Table reservations resulting into better planning: Lately, it has become a norm for casual- and fine-dining restaurants to offer
table reservations to their customers. With this service, outlets can
(a) estimate demand accurately,
(b) improve sourcing & staffing and
(c) manage costs efficiently.
As mentioned earlier, most BBQN restaurants are strategically placed near corporate offices, which results in large gatherings
during weekdays and lunch time. This enables BBQN to register high table turns, which stands at 1.8–1.9x, much higher than the
industry average of ~1.3x. This then results in double-digit return ratios for the company. Despite being the fastest growing CDR
player, BNHL remains the most efficient player in the segment.
Exhibit 14: High table turns improving gross fixed asset turnover
GFATO (x)
2.5 2.2
1.9 1.9 2.0 2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.0
FY19 FY20 FY21 FY22 FY23E FY24E FY25E

BNHL’s table turns are still ~10% lower than the pre-pandemic levels as corporates are not fully back to offices (especially IT
companies).
IV. Focus on delivery to aid revenue growth
Unlike the BBQN format, UBQ With dine-in focused restaurants coming to a complete halt in FY21 due to COVID-19
(launched in Nov’18) is à la restrictions in major cities, BNHL repositioned UBQ and introduced a unique concept
carte catering to the value ‘Barbeque-in-a-Box’ in Jun’20 to ramp up the delivery side of the business. Barbeque-in-a-
segment, exclusively via the Box includes an assortment of starters, main course and desserts, with an attempt to
delivery channel. replicate the buffet experience, as much as possible. The company also introduced low-price
variants such as ‘Grills in a Box’, with a few offerings. This concept is a huge success among
consumers and constitutes ~70% of the company’s delivery business. Recently, the company
also introduced ‘Dumsafar’ biryani brand, which would predominantly cater to the delivery
segment via UBQ.
Barbeque-in-a-Box comprises
~1.8 kg of food sufficient for
With the delivery segment registering a decent quarterly revenue run rate of INR45–50cr on
two people, priced at
average, BNHL opened 15 extension kitchens to meet the growing delivery orders in major
~INR950–1,250 (six starters,
three gravies, biryani, raita and metros. BNHL incurs a capex of INR15 lakh for an extension kitchen, whereas it generates
three desserts) revenues of INR25 lakh and operating margins of 15–16%. The extension kitchen geography
mix is the same as BBQN at 70:30 for metros and non-metros.
With such focused efforts, the salience of the delivery business increased from ~3% of sales
before COVID-19 to 15% of sales currently. However, this was partially driven by the impact
on dine-in operations over FY21 and FY22, as some cities continued to restrict dine-in
services. We expect delivery segment’s revenue salience to remain at ~15% of the overall
revenues, aided by several initiatives taken by the company.
Exhibit 15: Growth trajectory of delivery segment’s revenue

285
300
250 220
198
200 170
INR cr
150
100 77 81
50 26
0
Delivery Revenue H1FY23
*FY22 delivery revenue inflated on account of COVID-19 tailwinds

Delivery has now become a focus area for the company and would be an additional growth driver, as delivery revenue per store
is expected to add ~INR0.75–1cr to the dine-in revenue per store of INR6cr. We expect delivery business’ revenue to grow at
~13% CAGR over FY22–FY25E and 30% over FY23E-25E (excluding the high base effect of FY22, which was positively impacted on
COVID-19 tailwinds). BNHL’s same store sales growth (SSSG) averaged ~6% in the past, and going forward, we expect SSSG of
~25%, 6% and 5% in FY23E, FY24E and FY25E, respectively, well supported by revenues from the delivery segment and strong
pent-up demand in the dine-in segment.
We believe the delivery business compliments BNHL’s business model as the company can utilise its existing restaurant
infrastructure for delivery, rather than incurring large capex renovation/resizing of existing stores. However, BNHL needs to hire
additional labour to manage its delivery business. Despite this additional cost item, store-level EBITDA margins of the delivery
segment are comparable with the dine-in business.
Exhibit 16: Barbeque Nation dine-in vs. delivery cost break-up

Barbeque Nation Dine-in Delivery
Material costs 35% 40%
Gross margins 65% 60%
Commissions and delivery - 30%
Rental costs 10–11% -
Staffing and other costs 16–17% 8–9%
Store-level EBITDA margins 20–22% 21–22%
Strengthening digital assets: The company expects to drive last-mile delivery via food aggregators/third parties as it is more
economical than delivering using own fleet. Online delivery is available from all BBQN offline stores and 15 extended kitchens
across 84 cities. BBQN launched delivery on BBQ App in Mar’21 and updated the same recently. This updated BBQ App includes
(i) an option to make dine-in reservations, (ii) online ordering for delivery products and (iii) exclusive offers through digital
coupons. The app also provides a payment option for dine-in customers.
• The share of digital assets (BBQ App, website and chat bots) as a percentage of the total reservations has grown to ~30% over
the last three years.
• BBQN recently introduced its Smiles Loyalty program, where it provides 5% of the bill value (subject to certain terms and
conditions) to customers as Smiles points, which can be redeemed within a defined timeline during the customer’s next dine-
in visit or delivery orders from BBQ App or website.
V. Better cost structure led by zero royalty and low ad spends
QSR players spend 5–7% of their total revenue on advertisement spends through traditional and digital media. However, for
BNHL, ad spends stand at a mere 1–2% of the total revenue, as the company advertises more through low-cost billboards and
banners (over and above digital marketing) as compared to high-cost TV and print ads used by QSR players. The company
advertises close to its stores to target customers. Moreover, BNHL does not pay royalty fees, unlike QSR players, who shell out
3–6% of revenue to their franchisee owners.
Exhibit 17: BNHL enjoys lower ad spends and nil royalty payments compared with QSR players
7.0%
6.7%
5.5%
5.1% 5.3% 5.2%
4.5% 4.5%
4.0%
3.5%
1.2% 1.2%
0.0% 0.0%
JFL Sapphire Devyani Westlife BurgerKing BBQ Specialty
A&P spend Royalty spend
The dual benefits on operating costs allow BNHL to operate at comparable margins with other QSR players despite incurring
higher employee spends and material costs (as BNHL is a CDR player, employee costs as % of sales are almost double than that
of QSR players due to high training costs).
Exhibit 18: BNHL vs. QSR players EBITDA margins Exhibit 19: NHL EBITDA margins to continue moving up
H1FY3 EBITDA Margins (%)
30.0% 23%
25.0% 22%
20% 21%
20% 19%
20.0%
15.0% 16%
10.0% 13%
12%
5.0%
9%
0.0%
Westlife
JFL
BNHL
BurgerKing
Sapphire
Devyani
We expect operational margins for BNHL to improve going forward, led by the economies of scale and further improvement in
operational efficiencies.
VI. Improvement in margin profile
We expect BNHL to deliver double-digit return ratios on high table turns and operating margins. Moreover, return ratios should
improve going forward, led by operating leverage playing out via low corporate overheads (as % of sales) and an increase in
revenue per store on improved product mix and the expansion of the delivery channel.
Exhibit 20: Return ratios to improve on margin improvement

25
20
15
10
-5
-10
ROAE (%) ROACE (%)
*FY20 & FY21 were affected by the pandemic; hence, return ratios for this period were excluded
The company’s sharp focus and ability to operate on SOPs (as mentioned above) allow it to generate better store-level economics
in the CDR industry. With industry-leading table turns, BNHL generates ample cash to support its restaurant additions. Also, high
table turns allow the company to have better payback period than its competitors in the CDR space.
Although the QSR industry has larger addressable target audience than the CDR industry (as QSRs attract the youth, which forms
~35% of India’s population), BNHL’s store-level economics are still comparable to QSR players on most operating metrics.
Exhibit 21: Barbeque Nation store-level economics

Store-level economics Year 1 Year 2 Year 3 Year 4 Year 5
Revenue (INR cr) 4.0 5.0 6.0 6.5 7.0
Gross margin % 65.0% 65.5% 66.0% 66.0% 66.0%
EBITDA margin % 10.0% 15.0% 20.0% 22.0% 23.0%
EBIT margin % -1.0% 4.0% 9.0% 11.0% 12.0%
Asset turn (x) 1.0 1.6 1.8 1.9 2.1
RoCE % -4% 7% 20% 26% 31%
BNHL’s each outlet requires a capex of INR2.5–2.75cr. Average revenue per mature store is ~INR7cr as against average revenue
per store of INR6cr, which is diluted due to the impact of new stores. Gross margin stands at 65–66%.
As most footfalls are on a reservation basis, the company’s outlets need not be in high-traffic areas.
The rent-to-revenue ratio for the company is lower (at ~10%) compared with other CDR chains. Employee cost forms 20% of
sales and other expenses form 10–12%, resulting in a store-level EBITDA margin of 20–22% at maturity. Depending on store
location, breakeven happens within 12 months. The payback period at the restaurant level is ~3 years.
VII. Strong back-end processes in place to ensure smooth operations
The company has developed a strong back-end network over the past 16 years. BNHL focuses on customer reviews and feedback
and uses two cloud-based systems, i.e. the Central Reservation System (CRS) and the Central Feedback System (CFS), to collect
essential customer data. Barbeque Nation restaurants use an in-house call center to obtain customer feedback and initiate a
quick response based on the data collected.
CRS is connected to its CRS agents, smartphone application, web-based app and in-restaurant
Business Insights has a direct POS reservation system. This synchronised system allows the company to track all
interface with their enterprise reservations for BBQN restaurants centrally, with all interconnected booking systems feeding
resource planning system for the central cloud database. CFS allows quick customer response from multiple media at any
Barbeque Nation restaurants,
time of the day. It has integrated ‘Business Insights’ (in-house business intelligence software),
which is designed to handle
which allows it to track restaurant-wise data (operational and financial) for Barbeque Nation
and streamline the complex
restaurants at a granular level.
workings of their financials,
inventory, warehousing, sales,
A strong feedback system, MIS, that monitors store-level profitability on a daily basis and a
purchases and manufacturing
remuneration system strongly linked to performance have not only resulted in improved
and enhance the ability to
brand equity but also an attractive return profile. The performance of each restaurant is
predict trends and business
data through advanced
reviewed using various KPIs, including customers served per day, average per cover, table
detailed reporting. turns, covers, raw material costs, staff costs and customer feedback. The financial
performance is also reviewed based on gross margins, restaurant-level profitability and
corporate-level profitability. The operational indicators of best-performing restaurants are
analysed, and the best practices are shared with other restaurants.
BNHL also places a strong emphasis on customer reviews and feedback. It has a in-house department to gather feedback daily
across multiple satisfaction parameters for its internal Guest Satisfaction Index (GSI). The results determined by GSI play an
important role in the management and staff incentive schemes. Based on the management’s several years of experience and
regular customer feedback, it carefully designs and adjust its menus. It aims to inculcate a service-oriented mindset in all its staff
and train them to be attentive to customer needs.
BNHL’s strong back-end systems help in selecting restaurant locations, as they are carefully chosen by a dedicated internal
team. The company has been successful in opening BBQN restaurants in popular business districts, neighbourhoods and local
markets without typically paying high-street premium rentals. BBQN restaurant locations are chosen with the objective of
keeping their rent to potential revenue ratio low (at ~10% vs. industry average of 15%, as per our internal estimates).
Peer Analysis
Exhibit 22: Listed CDR companies peer set
Speciality
Barbeque Nation FY19 FY20 FY21 FY22 H1FY23 FY19 FY20 FY21 FY22 H1FY23
Restaurant
No. of Restaurants 133 164 164 185 205 No. of Restaurants 128 140 117 117 121
Store additions 29 31 0 21 20 Store additions 0 12 -23 0 4
Revenue (cr) 739 847 507 861 625 Revenue (cr) 346 358 150 253 184
Growth (%) 26.0 14.6 -40.1 69.7 Growth (%) 16.7 3.3 -58.0 68.5
Gross Margin (%) 66.5 65.5 64.8 64.6 66.4 Gross Margin (%) 68.6 68.3 69.9 70.1 70.1
EBITDA (cr) 146 164 46 134 129 EBITDA (cr) 12 15 -2 36 38
EBITDA Margin (%) 19.7 19.4 9.1 15.5 20.6 EBITDA Margin (%) 3.6 4.1 -1.1 14.4 20.7
PAT (cr) -4 -33 -92 -25 22 PAT (cr) -8 -38 -29 8 26
RoE (%) 4.5 -71.7 -75.2 -8.2 9.5 RoE (%) -3.5 -19.8 -19.6 5.8 25.4
RoCE (%) 9.8 4.9 -10.9 0.8 9.8 RoCE (%) -7.3 -17.4 -12.3 3.2 12.0
Debt (cr) 125 207 153 22 16 Debt (cr) 0 0 21 24 0
Revenue per store Revenue per store
6.2 5.7 3.1 4.9 6.2 3.1 3.0 1.5 2.9 4.1
(cr) (cr)
EBITDA per store
EBITDA per store (cr) 1.2 1.1 0.3 0.8 1.3 0.1 0.1 0.0 0.3 0.3
(cr)
Exhibit 23: SRL - Number of brands over the years Exhibit 24: Store additions: Barbeque vs. SRL
SRL Brands SRL Stores 250
FY13 10 96 205
185
FY14 12 106 200
164 164
FY15 11 115 133
150
FY16 11 123
FY17 11 123 123 140
100 123 123 128 128 121
FY18 14 128 104 117
80
FY19 17 128 50 66
FY20 22 140
FY21 20 117 0
FY22 20 117 FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23
Barbeque SRL
*Speciality Restaurants include brands such as Mainland China, Oh! Calcutta, Sigree, Asia Kitchen, etc. and confectionaries such as Sweet Bengal and Dariole
across India, Doha, UAE and London.
(1) SRL has doubled its brand count over FY13-22, but store count addition has been lacklustre (closed loss-making stores during
the pandemic). However, BNHL offers only two core brands, and its store count has increased ~3x over the same period on
account of strong focus on the core offerings, developing SOPs and simultaneously finding considerable scope on the scalability
of these brands. Conversely, SRL could not scale up as it manages around 20 brands simultaneously (closed several restaurants
of its core brands – Mainland China and Sigree – over the last five years).
(2) In addition, BNHL’s per store metrics are far superior than its competitor, which would result in much better margins and
return ratios in the future.
Exhibit 25: CDR sector restaurant footprint in India

250
200
150
100
50
Mainland China
Oh! Calcutta
Sagar Ratna
Moti Mahal
BNHL
Absolute Barbeques
Pind Balluchi
Shiv Sagar
Saravana Bhavan
Rajdhani
Sigree brands
Farzi Café
Annapoorna
Nirula’s

(1) BNHL remains much ahead of its peers in terms of restaurant count (2x compared with its nearest competitor).
(2) Rather, most of its competitors that are in existence for a longer time than BNHL have not been able to surpass a three-figure
mark yet.
Exhibit 26: Comparison with other restaurant chains

The Great
BNHL Speciality Jubilant Westlife Devyani Sapphire Burger King Subway Chilli's Kebab
Factory
Format CDR CDR QSR QSR QSR QSR QSR QSR CDR FDR
No. of stores 205 121 1,804 337 1,096 658 334 540 21 23
Store size
4,500–5,000 4,000–6,000 1,400–1,600 2,600–3,200 1,500–1,700 1,500–1,700 1,300–1,400 750–1,000 3,700–4,300 4,500–5,000
(sq. ft.)
APC (INR) 850–900 650–700 200–225 225–250 275–300 275–300 200–225 175–200 600–700 1,250–1,500
Capex per
2.5–2.75 2.5–3 1.4 2.5–3 1.4 1.4 2 0.4–0.5 3–3.5 4–5
store (INR cr)
ADS (INR lacs) 1.5–1.6 0.6–0.8 0.8–0.9 1.6–1.8 0.85–0.95 1.0–1.1 1.25 0.3–0.35 1.4–1.5 1.9–2.1
Rev per store
6.2 4.1 3.0 6.7 2.9 3.5 4.3 - - -
(INR cr)
Gross
66% 70% 78% 65% 71% 67% 66% 67% 71% 69%
margin %
EBITDA % 21% 21% 24% 16% 23% 19% 11% 22% 21% 18%
EBITDA per
1.3 0.3 0.7 1.1 0.6 0.6 0.5 NA NA NA
store (INR cr)
Payback
3 8 2 3 3 3 5 NA NA NA
period (years)
RoE % 10% 25% 23% 19% 37% 14% -6.4% NA NA NA
RoCE % 10% 12% 19% 12% 18% 10% -1.0% NA NA NA
GFATO (x) 2.0 2.0 2.5 1.9 2.3 1.7 1.4 NA NA NA
(1) Despite a smaller addressable market than QSRs, BNHL has been able to scale up swiftly with ~20% store additions annually.
BNHL’s revenue per store and ADS are much superior to competition, as the company follows a cluster policy to concentrate on
major metros for store openings (currently, ~80% of its stores are mature).
(2) BNHL’s revenue per store and ADS are in the top tier in the industry due to its strong focus on the dine-in format and strong
brand loyalty enjoyed over the years.
(3) Despite lower gross margins than most of the competition in the organised restaurant space, BNHL’s operating margins are
comparable to its competition on lower rental and nil royalty costs.
(4) Despite a higher store size and capex per store than most QSRs, BNHL has comparable store-level economics such as EBITDA
per store, GFATO, payback period and return ratios.
Risks
Over expansion into new formats may cause significant cash burn
Only a few operators have been able to scale up in the CDR sector as standardisation is difficult due to numerous SKUs.
Historically, restaurant operators in this segment increased the number of brands to increase the restaurant count. The
businesses have not fared well for most operators as they could not figure out a profitable business model. BNHL is also
expanding into Toscano and international operations, which may cause cash burn and capital misallocation if these relatively
new businesses/verticals do not perform well.
Commodity inflation
BNHL faces significant inflation across key ingredients, such as (a) 25% YoY inflation in chicken and (b) 35–40% YoY inflation in
edible oil. To mitigate the inflationary pressure, BNHL hiked prices by 7–8% over the last year. While the food services industry
is relatively better placed vs. other discretionary categories, a slowdown in discretionary spend due to the inflationary
environment would eventually result in slow discretionary spending and a cut in SSSG expectations.
Resurgence of COVID-19 lockdowns

COVID-19 disrupted the dine-in restaurant industry severely over FY20–22. Though delivery gained significance over this period
with several initiatives taken by the restaurant industry to revive lost volumes, the overall restaurant business remained
impacted. With increase in COVID-19 cases in some parts of the world, some lockdown restrictions might again be possible. We
believe any such disruption would be detrimental for the industry, impacting business strategies, new store openings and
eventually the financial performance of the underlying companies in the sector.
Increase in attrition rates would increase costs and would be time consuming
The Indian restaurant industry was constrained by high levels of attrition in the past. Rising competition and low affinity with the
workplace, especially at the lower levels, have caused a war on talent in the industry. Skill building and upskilling, which are
critical for the industry, are time consuming and costly but essential, especially for chain restaurants in which food and service
standardisation is the key. High levels of attrition are a big challenge for the restaurant industry, as replacing quality workforce
requires significant training.
Lack of robust supply chain

The other major challenge faced by the industry is a lack of robust supply chain infrastructure, including cold chain, which pushes
up costs. A robust supply chain is critical, especially for large restaurant chains operating in multiple locations, for ensuring quality
and cost standardisation and adding a sense of reliability.
Financial Analysis
Exhibit 27: Restaurant footprint
350
311
300
267
250 225
200 185
164 164
150 133
104
100
50
0
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
BNHL plans to open ~40 stores annually over the near-to-medium term. Incremental store additions would be concentrated in
existing geographies (cluster-based expansion).
Exhibit 28: Restaurant mix
Number of Restaurants
300 26
10
21
8
225
16
7
11
150 11 6
6
275
238
202
75 151 168
133 147
104
66 80
45
0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
BBQ India BBQ International Toscano
(1) BBQN format to continue to contribute ~90% of the overall restaurant network.
(2) The company plans to double its Toscano store presence over FY22–25E.
Exhibit 29: Revenue growth trend

2,000 80%
1,800 70%
60%
1,600
46%
1,400 40%
1,200 25% 26% 25% 21% 20%

16% 15%
1,000
0%
800
600 -20%
400
-40% -40%
200
0 -60%
Revenue (INR Cr) Revenue Growth (%)
We expect BNHL’s consolidated revenue to expand at 30% CAGR over FY22–25E, driven by aggressive store openings (19% CAGR),
average SSSG of ~12% and ramp up of its delivery vertical.
Exhibit 30: Margin trend

68% 25%
67%
20%
66%
65%
15%
64%
10%
63%
62%
5%
61%
60% 0%
Gross Margins(%) - LHS EBITDA margins(%) - RHS
Exhibit 31: PAT trend
PAT (INR cr)

150
108
100
69
50 36
19
INR cr
0
FY18 FY19
(4) FY20 FY21 FY22 FY23E FY24E FY25E
(25)
(50) (33)
(100)
(92)
(150)
We expect BNHL to turn black in FY23E (after the impact of the pandemic) driven by recovery in the business and post a healthy
growth of 74% over FY23E-25E.
Exhibit 32: Return ratios to improve on margin expansion
Return Ratios (%)

25.0
20 20
19
20.0 18
15 16
15.0 12 12
9 10
10.0 8
5
5.0
1
0.0
-5.0
-10.0 -8
ROAE (%) ROACE (%)

Return ratios are likely to reach high double digits in the coming years, led by positive operating leverage.
Exhibit 33: Balance sheet to remain net debt free on healthy cash flows
300 277
234
250
207
185
200
153 146
150 128 125 125
100 83
62 51
37 34 40
50 24 22 19 18 19
0
Borrowings (INR cr) Cash & cash equivalents (INR cr)
Exhibit 34: Healthy operating cash flows supported by a negative working capital cycle
350 0
300 (18) (16)
(23) (22) (20)
(27) (26) (24) (24)
250
200 (41) (40)
150 (60)
100
(80)
50 (89)
0 (100)
Operating Cash Flows (INR cr) Working Capital Cycle (days)
(1) Barbeque Nation has been continuously growing its store count over the years and will continue to do so in coming years.
Despite expanding its store count aggressively, we expect the company to generate strong operating cash flows and maintain a
negative working capital cycle.
(2) Operating cash flows are likely to be used for its aggressive store expansion, and the company would remain debt-free going
forward.
Exhibit 35: GFATO to continue to improve with a higher average revenue per restaurant
GFATO (x)
2.5
2.2
1.9 2.0 2.0
2.0 1.9
1.5
1.5
1.0
1.0
0.5
0.0
Valuation and Outlook

We are optimistic about the ~INR17,000cr chain CDR industry, given its huge market size, changing consumer eating habits and
expansion plans of restaurant operators in big cities, where the appetite for dining out is accelerating. Though competition has
further intensified in this sector after the pandemic, we believe this industry is still in early growth phase and restaurant-
penetration levels continue to be low, providing immense growth opportunities for all industry participants over the long term.
Barbeque Nation is one of the largest players in the chain CDR market, and it is the sole operator in the industry that has been
able to scale up profitably and is way ahead of its peers in terms of restaurant count and store-level economics. We like Barbeque
Nation because of its (a) ability to operate under strong SOPs across all its restaurants; (b) sharp focus on store expansion
along with maintaining superior store economics; (c) focus on the delivery vertical, which would aid revenue growth; (d) better
table turns, resulting into a high fixed-asset turnover; and (e) better cost structure, resulting in better margins and higher
return ratios.
We believe the company would grow at a revenue CAGR of 30% over FY22–25E, outperforming the CDR industry, supported by
a store expansion CAGR of 19% and strong SSSG. BNHL’s operational profitability would improve in FY23E on a strong recovery
in dine-in sales after COVID-19 and operating leverage kicking in. We expect healthy growth in the dine-in channel to continue
going forward. We also expect BNHL’s EBITDA margins to expand >600 bps over FY22–25E.
BNHL currently trades at an attractive valuation of ~10x/8x EV/EBITDA for FY24E and FY25E, ~50% below the QSR industry
average of 21x FY24E EV/EBITDA. Moreover, its earnings growth potential is higher than QSR companies. However, scaling up
casual dining as a format vs. QSR is challenging, given its (i) larger ticket sizes, (ii) lower table turns, (iii) smaller target audience
and (iv) lack of an all-day dining menu. We, therefore, believe that BNHL would trade at a 25–30% discount to the average QSR
industry multiple and value it at 15x EV/EBITDA with a target price of INR 1,275/share.
Exhibit 36: Valuation matrix

Companies Mcap CMP P/S (x) EV/EBITDA (INR)
(INR crore) Price (INR) FY20 FY21 FY22 FY23E FY24E FY20 FY21 FY22 FY23E FY24E
Barbeque Nation 3,424 880 NA NA 5.7 3.4 2.7 NA NA 36.1 13.4 10.3
Speciality Rest. 1,231 262 0.6 2.8 4.3 NA NA 15.5 -270.4 30.2 NA NA
Sapphire 8,210 1,292 4.5 6.0 4.8 3.6 2.9 32.9 49.1 30.5 19.3 14.3
Devyani 19,095 159 4.0 5.4 9.2 6.4 5.0 25.8 27.7 44.7 28.7 21.1
JFL 32,890 498 5.4 12.2 7.5 6.0 5.3 25.4 53.8 29.3 22.6 19.5
WDL 11,109 713 3.2 3.2 7.3 7.0 5.0 22.8 85.0 40.4 30.4 25.1
BK 5,538 112 7.2 12.3 5.3 3.6 2.7 65.8 431.1 61.3 34.4 23.1
Exhibit 37: EV/EBITDA Band (x) – BNHL

8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23
EV 12x 14x 16x 18x 20x
Company Description
Barbeque Nation was started in 2006 by one of the promoters, Late Sajit Dhanani, who was the brother of the current Managing
Director of the company, Kayum Dhanani. The first BBQN restaurant was opened in Pali Hills in Mumbai. BBQN restaurants offer
fixed-price ‘over the table barbeque’ to its customers, which includes live grills embedded in dining tables, allowing guests to grill
their own barbeques.
BNHL also owns and operates Toscano (Italian cuisine), You and Barbeque (‘UBQ’) and ‘Barbeque-in-a-Box’ by BBQN. As on
Sep’22, BNHL operated 186 BBQN outlets (in 84 cities) and 13 Italian restaurant outlets (in three cities) in India through two
commissaries (Delhi NCR and Mumbai). Moreover, it has six Barbeque Nation outlets in UAE and one each in Oman and Malaysia.
At present, UBQ and Barbeque-in-a-Box predominantly operate via the delivery channel.
Exhibit 38: FY22 store mix Exhibit 39: FY22 revenue mix
5.4%
6.3%
BBQ India
BBQ International
Toscano
88.3%
Exhibit 40: Barbeque Nation financials snapshot

FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23
Barbeque Nation
No. of restaurants 66 80 104 133 164 164 185 205
Store additions 14 24 29 31 0 21 20
Revenue (cr) 403 503 586 739 847 507 861 625
Growth (%) 24.9% 16.5% 26.0% 14.6% -40.1% 69.7% 93.7%
SSSG (%) 20% 960% 184% 43% 6% NA
Gross margin (%) 63.0% 64.3% 66.3% 66.5% 65.5% 64.8% 64.6% 66.4%
EBITDA (cr) 49 66 136 146 164 46 134 129
EBITDA margin (%) 12.1% 13.0% 23.2% 19.7% 19.4% 9.1% 15.5% 20.6%
PAT (cr) 6 12 19 -4 -33 -92 -25 22
RoE (%) 9.6 9.4 11.5 4.5 -71.7 -75.2 -8.2 5.6
RoCE (%) 29.4 18.8 17.5 9.8 4.9 -10.9 0.8 14.1
Debt (cr) 37.3 61.7 127.7 125.0 206.5 152.8 21.8 16.0
Revenue per store (cr) 6.1 6.3 5.6 5.6 5.2 3.1 4.7 6.1
EBITDA per store (cr) 0.7 0.8 1.3 1.1 1.0 0.3 0.7 1.3
Timeline
Management Profile
Name and Designation Profile
Mr. T Narayanan Unni holds a Bachelor’s degree in Commerce from Vikram University, Ujjain, and a
Bachelor’s degree in Law from the University of Indore. He is a member of the Institute of Chartered
Accountants of India and has been a practicing chartered accountant since 1 July 1975. He has been a
T Narayanan Unni – Director of Barbeque Nation since 9 February 2009.
Chairman, Non-Executive
Director & Independent
Director
Mr. Kayum Dhanani holds a Diploma in Sole-making from the Central Leather Research Institute, Chennai.
Since 2005, he has been associated with Sara Suole Private Limited, which is engaged in the business of
manufacturing, processing and selling leather goods, including soles, shoes and other leather accessories.
He has been a Director of Barbeque Nation since 30 November 2012.
Kayum Dhanani - Managing Director
Mr. Rahul Agrawal holds a Bachelor’s degree in Commerce (Hons) from Shri Ram College of Commerce,
University of Delhi, and a Post Graduate Diploma in Management from the Indian Institute of Management,
Bengaluru.
Prior to joining Barbeque Nation, he was associated with Ernst & Young and Beacon BVM Advisors. He was
also associated with CX Advisors LLP from October 2009 to July 2017. He joined Barbeque Nation on 24
July 2017 and has been a Director since 31 December 2020.
Rahul Agrawal - Whole Time Director &
CEO
Mr. Faiz Azim has 16 years of experience across consulting, industry, entrepreneurship and e-commerce.
He has worked with Myntra, A.T. Kearney, Walmart and Jubilant Retail. He also set up and managed Brown
Apron, India’s first online meat and seafood e-commerce business; and Atom Data Labs, a tech start-up
focused on location analytics. He holds a Post Graduate Diploma in Management from the Indian Institute
of Management, Bengaluru.
Faiz Azim - Chief Operating Officer
Mr. Nakul Gupta holds a Bachelor’s degree in Commerce from Shri Ram College of Commerce and has a
Master of Business Administration degree from Xavier School of Management. Prior to joining Barbeque-
Nation, he worked with Tata Motors for 16 years and served as Head of its marketing division. He has also
worked as management trainee with Tata Administrative Services.
Nakul Gupta - Chief Marketing Officer
% of
Key Management Personnel Shareholder's name
holding
Person Position Promoter group 33.9%
Rahul Agrawal CEO DII’s 27.5%
UTI Flexi Cap Fund 6.4%
T Narayanan Unni Chairman
ICICI Pru Small Cap Fund 5.9%
Kayum Dhanani MD Motilal Oswal Midcap 30 Fund 2.9%
Faiz Azim COO Aditya Birla Sun Life Insurance 2.2%
Anurag Mittal CFO Public 22.7%
Jubilant Foodworks 9.4%
Aashish Kacholia 1.1%
FII’s 15.8%
MIT 3.3%
Kuwait Investment Authority 3.1%
Nomura Trust & Banking 1.1%
Appendix
Industry Overview
CDR Market Overview
Casual dining is a blend of fine and fast-food dining, which serves moderately priced food in a
The chain casual-dining segment
caters to the various needs of more casual and friendly atmosphere. The key difference between fine and casual dining is
consumers by offering different the ambience. Casual dining serves in a friendlier and informal way, whereas fine dining entails
service styles, cuisines, ambiance a more elegant and formal atmosphere.
and price points; for example,
Sagar Ratna and UBQ by Barbeque
The chain casual dining market in India has been flourishing over the last few years. The chain
Nation with an APC of INR200–300
cater to value seeking consumers, CDR segment represents the second largest share in the chain food services market in India
whereas Barbeque Nation and after QSR. Following an evolution of sorts over the years, there are currently a few players
Mainland China with APC of generating revenue of more than INR500cr in this category. Exhaustive menus, quality food,
INR775–800 cater to experiential high focus on presentation and the presence of specific cuisines or themes are all features of
consumers, who like to enjoy a the CDR segment. The size of the chain casual dining market was INR 134bn in FY20, which is
sumptuous meal with great
expected to grow at a healthy CAGR of 18% to INR 302bn by FY25 (contribution to the overall
ambience. Outlets like Farzi Café
(APC of INR 1,100–1,250) cater to chain food services market to remain at ~30%). The share of the overall CDR market in the
consumers looking to experiment food services sector is expected to be INR 976bn as of 2022 and the segment is expected grow
with Indian food in a lively and at a healthy CAGR of 16% to INR 1,607bn by FY25.
eclectic environment.
Exhibit 41: Chain CDR Market Size in ₹ billion
302
251
209
174
134
118
98
81
56 67 55
47
2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Within the eating-out space, the CDR segment is best placed in the overall chain segment based on pricing, wholesome offer, and
involvement of the entire family. Apart from convenience and quick bites, consumers are looking at experiential format due to
higher disposable income and changing eating-out habits. CDRs continue to be a popular format in Tier I and Tier II cities along
with the mega and mini metros.
Key Players
The CDR market is mainly dominated by domestic players and since the chain CDR sector has
As per an estimate, the chain witnessed high growth, quite a few new players have entered the market. As a result, the
CDR segment had ~4,700–
existing players are innovating on a larger scale than before. Moreover, many successful
5,200 outlets across India in
FY20, which was ~1,800–2,000 domestic players like Moti Mahal, Barbeque Nation and Sagar Ratna have turned their
in FY14. attention to the national and international arena.
Competition in the chain CDR space is based on factors such as price, type of cuisine, quality
of food, quality of customer service, value, brand recognition and location of restaurants.
Competitors
Speciality Restaurants
Incorporated in 1992 by Anjan Chatterjee, Speciality Restaurants Ltd (SRL) owns multiple chains of fine and casual dining
restaurants in India and overseas markets. In 1992, the company started its first restaurant, ‘Only Fish’, in Mumbai. In 1994, the
company introduced two new brands, ‘Oh! Calcutta’ and ‘Mainland China’, in Mumbai. As of Sep'22, the company had 83
restaurants and 38 confectionary stores across 25 cities in India and a few in Dhaka (Bangladesh), Dar-es-Salaam (Tanzania),
Colombo (Sri Lanka) and recently in Dubai (UAE). The company also operates a restaurant under the brand name ‘Chourangi’ in
London under a joint venture.
SRL’s flagship brands, Mainland China and Mainland China-Asia Kitchen, serve Chinese regional cuisines and dishes from across
Asia. The other key brands include Oh! Calcutta, which serves flavours from Kolkata; Sigree and Sigree Global Grill, which bring
grilled flavours from across the world; and Sweet Bengal, a confectionary chain of Bengali sweets.
Restaurant count FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23
Mainland China and Asia Kitchen by Mainland China 47 53 53 52 48 48 47 45 32 31
Oh! Calcutta 9 8 9 9 9 9 9 9 8 8
Sigree & Sigree Global Grill 7 12 16 17 18 17 14 14 6 7
Haka, Haka Express and Haka - Asia Bowl 3 2 2 2 2 2 2 6 6 5
Machaan 6 5 3 2 2 3 2 2 1 1 83
Flame & Grill 7 5 3 3 3 3 3 2 2 2
Café Mezzuna 0 2 2 4 4 2 2 2 2 2
Hoppipola 0 2 5 10 13 13 13 14 6 5
Cloud Kitchen 0 0 0 0 0 0 0 1 4 11
Other brands* 3 3 4 6 6 9 12 14 9 7
Dariole 0 0 0 0 0 1 2 3 3 8 8
Sweet Bengal 14 14 18 18 18 21 22 28 38 30 30
Total 96 106 115 123 123 128 128 140 117 117 121
* Other brands include Kix, Episode One, Riyasat, BARissh, Zoodles, Gong, POH, Hay, Urban Deccan Pub, Calcutta Canteen, Jungle Safari, Spicery and Kaazi
restaurants
Notes:
(1) SRL aims to open 12-15 restaurants over the next 24 months
(2) The company plans to raise INR 127cr through equity warrants (at INR 212.05/share) for new restaurant additions
(3) Mainland China (including Asia Kitchen) restaurants account for 50-60% of the company’s total revenues
(4) SRL became profitable in FY22 on closure of loss-making stores and higher salience from delivery channel
(5) Delivery channel contributed 25-27% to SRL’s revenue as of Sep’22
(6) SRL opened cloud kitchens to improve presence, thereby aiding the delivery channel. Cloud kitchen contributes ~30% to delivery revenues
Absolute Barbecues
Absolute Barbecues (AB's) is a Hyderabad-based casual dining barbeque restaurant chain with 60 restaurants across 23 cities in
India. The company runs two restaurants in Dubai and one in Qatar. Restaurateur Prosenjit Roy Choudhury started the first
restaurant in the chain in Vadodara in 2013. Mr. Prosenjit Roy Choudhury started his career with Sayaji Hotels as a Management
Trainee in 1995. He worked in different sub verticals within F&B and became its head in 1999. The company plans to reach around
100 outlets over the next two years. The company's current turnover is INR430cr.
The company’s delivery arm AB's Express offers customised options such as Genie's Buffet Box, Meal-for-One, Starters Box, and
festival special lunch/dinner offerings carrying AB's signature taste and flavour.
2020 2021 2022

AB’s restaurant count 29 42 60
Geographical break-up of buffet-focused restaurants:

Geographical break-up % BNHL Sigree AB's
South 34% 29% 58%
West 26% 43% 19%
North 25% 0% 10%
East 15% 29% 14%
Financials
Income statement (INR crs)
Year to March FY21 FY22 FY23E FY24E FY25E
Income from operations 507 861 1,259 1,568 1,900
Direct costs 178 305 427 525 627
Employee costs 135 189 274 337 404
Other expenses 147 233 308 383 458
Total operating expenses 461 727 1,009 1,245 1,489
EBITDA 46 134 250 323 411
Depreciation and amortisation 121 127 142 171 205
EBIT -75 6 108 152 206
Interest expenses 85 65 75 71 75
Other income 46 26 11 12 13
Profit before tax -114 -33 43 92 144
Provision for tax -20 -7 11 23 36
Core profit -94 -26 33 69 108
Extraordinary items 2 0 3 0 0
Profit after tax -92 -25 36 69 108
Minority Interest 0 0 0 0 0
Share from associates 0 0 0 0 0
Adjusted net profit -92 -25 36 69 108
Equity shares outstanding (Cr) 2.9 3.9 3.9 3.9 3.9
EPS (INR) basic -31.5 -6.5 9.2 17.8 27.7
Diluted shares (Cr) 2.9 3.9 3.9 3.9 3.9
EPS (INR) fully diluted (31.5) (6.5) 9.2 17.8 27.7
Dividend per share 0 0 0 0 0
Dividend payout (%) 0 0 0 0 0
Common size metrics- as % of net revenues

Operating expenses 90.9 84.5 80.2 79.4 78.4
Depreciation 23.9 14.8 11.3 10.9 10.8
Interest expenditure 16.7 7.6 6.0 4.5 3.9
EBITDA margins 9.1 15.5 19.9 20.6 21.7
Net profit margins (18.1) (2.9) 2.8 4.4 5.7
Growth metrics (%)

Revenues (40.1) 69.7 46.3 24.6 21.2
EBITDA (71.8) 188.3 86.8 29.3 27.4
PBT 173.6 (71.3) (233.4) 112.8 55.7
Net profit 90.5 (72.7) (226.8) 112.8 55.7
EPS 167.6 (79.4) (242.2) 93.4 55.7
Balance sheet (INR cr)

As on 31st March FY21 FY22 FY23E FY24E FY25E
Equity share capital 17 19 19 19 19
Preference Share Capital 0 0 0 0 0
Reserves & surplus 227 367 399 468 576
Shareholders funds 244 386 419 488 596
Secured loans 99 14 12 10 10
Unsecured loans 54 7 6 7 8
Borrowings 153 22 19 18 19
Lease Liabilities 397 529 529 529 509
Minority interest 4 9 9 9 9
Sources of funds 798 947 976 1,044 1,133
Gross block 531 593 728 878 1,053
Depreciation 239 285 427 598 803
Net block 292 308 301 280 249
Capital work in progress 6 21 31 41 51
Total fixed assets 298 329 332 321 301
Right of Use Assets 362 488 513 563 613
Goodwill 72 72 72 72 72
Intangible Assets 5 4 4 4 4
Investments 32 39 54 69 84
Inventories 20 36 48 56 62
Sundry debtors 3 6 7 9 10
Cash and equivalents 245 85 91 116 150
Loans and advances 0 0 0 0 0
Other current assets 48 22 32 42 52
Total current assets 317 148 178 222 274
Sundry creditors and others 325 178 227 262 297
Provisions 6 6 6 6 6
Total CL & provisions 331 184 233 269 303
Net current assets -15 -36 -55 -47 -29
Net Deferred tax 47 54 54 54 74
Misc expenditure -4 -5 1 7 13
Uses of funds 798 947 976 1,044 1,133
Book value per share (INR) NA 99 108 125 153
0.0 0.0 0.0 0.0 0.0
Cash flow statement (INR crs)
Net profit -110 -35 29 69 108
Add: Depreciation 121 127 142 171 205
Add: Misc expenses written off/Other Assets 33 36 -6 -6 -6
Add: Deferred tax 0 0 0 0 -20
Add: Others 0 0 0 0 0
Gross cash flow 44 128 165 234 287
Less: Changes in W. C. -24 69 -25 -16 -16
Operating cash flow 68 60 191 251 303
Less: Capex 14 93 135 150 175
Free cash flow 54 -33 56 101 128
Ratios
ROAE (%) -75.2 -8.2 8.1 15.3 19.9
ROACE (%) -10.9 0.8 11.9 15.9 20.1
Debtors (days) 2 2 2 2 2
Current ratio 1 1 1 1 1
Debt/Equity 0.6 0.1 0.0 0.0 0.0
Inventory (days) 15 15 14 13 12
Payable (days) 106 42 40 38 36
Cash conversion cycle (days) -89 -24 -24 -23 -22
Debt/EBITDA 3 0 0 0 0
Adjusted debt/Equity (0.4) (0.2) (0.2) (0.2) (0.2)
Valuation parameters
Diluted EPS (INR) (31.5) (6.5) 9.2 17.8 27.7
Y-o-Y growth (%) 167.6 (79.4) (242.2) 93.4 55.7
CEPS (INR) 9.3 26.1 44.9 61.8 80.5
Diluted P/E (x) NA (190.3) 96.6 49.9 32.1
Price/BV(x) NA 2.8 8.3 7.1 5.8
EV/Sales (x) NA 5.6 2.7 2.1 1.8
EV/EBITDA (x) NA 36.1 13.6 10.4 8.1
Diluted shares O/S 2.9 3.9 3.9 3.9 3.9
Basic EPS (31.5) (6.5) 9.2 17.8 27.7
Basic PE (x) NA (190.3) 96.6 49.9 32.1
Dividend yield (%) - 0.0 0.0 0.0 0.0
Nuvama Wealth and Investment Limited, Edelweiss House, Windsor Ln, Kolivery Village, MMRDA Area, Kalina, Santacruz East,
Mumbai, Maharashtra 400098
Sandeep Raina
Head of Fundamental
Sandeep.raina@nuvama.com
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Nuvama Wealth Research

Barbeque-Nation Hospitality Ltd

Kapil Jagasia HimanshuPalash

Restaurant additions to remain aggressive Share in issue (crore): 3.9

Most efficient player in the CDR segment

(INR Cr) FY21 FY22 FY23E FY24E FY25E

Business Structure ................................................................................................................................................... 3

Focus Charts ............................................................................................................................................................ 4

I. Top-notch execution in a tough-to-scale sector ................................................................................................... 6

II. Fastest-growing CDR player ................................................................................................................................ 8

III. Most efficient player in the CDR segment ......................................................................................................... 10

IV. Focus on delivery to aid revenue growth ........................................................................................................... 11

VI. Improvement in margin profile ........................................................................................................................... 14

VII. Strong back-end processes in place to ensure smooth operations ................................................................. 15

Peer Analysis ............................................................................................................................................................ 16

Financial Analysis ..................................................................................................................................................... 19

Valuation and Outlook ............................................................................................................................................. 23

Company Description ............................................................................................................................................... 24

Management Profile ................................................................................................................................................ 26

Over FY22–25E, Barbeque is expected to

At target price, FY25E EV/EBITDA is

Number of Restaunants Restaurant Additions Delivery Revenue H1FY23

*FY21 – nil restaurant openings due to the pandemic

FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

*FY20 & FY21 were affected by the pandemic, hence excluded

I. Top-notch execution in a tough-to-scale sector

With high focus on

What is BNHL’s secret recipe for success?

(1) Adoption of emerging trends

(2) Value proposition

(3) Long-term contracts for sourcing requirements

(4) Food standardisation

Exhibit 7: Brand offerings

Source: Company, Nuvama Wealth Research

II. Fastest-growing CDR player

Exhibit 8: BNHL restaurant footprint

BBQ India BBQ International Toscano

Source: Company, Nuvama Wealth Research

BNHL – much ahead of competition w.r.t. restaurant footprint

Exhibit 9: BNHL vs SRL restaurant count

133 128 140

FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23

Source: Company, Nuvama Wealth Research

(1) BNHL restaurant count is 2x compared with its nearest competitor.

Exhibit 10: Financial snapshot of BNHL brands

Exhibit 11: Brand-wise CDR restaurant footprint in India

Source: Company, Nuvama Wealth Research

III. Most efficient player in the CDR segment

Source: Company, Nuvama Wealth Research

Source: Company, Nuvama Wealth Research

IV. Focus on delivery to aid revenue growth

Exhibit 15: Growth trajectory of delivery segment’s revenue

Delivery Revenue H1FY23

*FY22 delivery revenue inflated on account of COVID-19 tailwinds

Exhibit 16: Barbeque Nation dine-in vs. delivery cost break-up

V. Better cost structure led by zero royalty and low ad spends

JFL Sapphire Devyani Westlife BurgerKing BBQ Specialty

A&P spend Royalty spend

Source: Company, Nuvama Wealth Research