Jhunjhunwala’s costly bet is bouncing after a tepid listing: Should you sell on rise?

New Delhi: Specialty restaurant chain Barbeque Nation Hospitality made a tepid debut on Dalal Street on Wednesday, listing at a 2 per cent discount. But the scrip has surged about 48 per cent post listing.

On Thursday, the stock hit the upper circuit, surging 20 per cent to Rs 708.45. It had hit the 20 per cent upper circuit on the day of listing as well. The scrip was listed at Rs 492 on BSE against the issue price of Rs 500.

Barbeque Nation Hospitality owns and operates casual dining restaurant chain Barbeque Nation Restaurants and International Barbeque Nation Restaurants. It also owns and operates Toscano Restaurants and You and Barbeque.

Vishal Balabhadruni, Senior Research Analyst at CapitalVia Global Research, said the stock hit the upper circuit limit after a discounted listing, as Dalal Street was skeptical on the prospects of the stock, but it staged a bounce back to everyone’s surprise.

"Fundamentals of the company are fair with a steady top line, but with a pressured bottom line. Profits are expected to be under pressure over the medium term. Proceeds from the issue are meant for use to fund capital expansion plans. Hence, the positive sentiment is justified," he said.

Dalal Street is neglecting the night curfews and partial curbs imposed in Maharashtra, Madhya Pradesh, Gujarat, Delhi and Punjab and Chhattisgarh. These restrictions are likely to have a negative impact on the ailing sector.

Some analysts are advising investors to exit after any dead-cat bounce. “The company has incurred losses in some of the recent years and is looking at the current Covid situation, there is no assurance that net profit will not decline in future. Investors of this IPO are advised to exit on every bounce,” said Saurabh Joshi, Research Analyst, Marwadi Shares and Finance.

Ace investor Rakesh Jhunjhunwala is one of the investors in Barbeque Nation Hospitality. Jhunjhunwala-led Alchemy India holds 1.69 per cent stake, which it had bought at Rs 827 per share in March 2018.

As of December 31, 2020, Barbeque Nation operated 147 Barbeque Nation restaurants (including opened, temporarily closed and under construction outlets) across 77 cities in India and six international Barbeque Nation restaurants across three countries namely UAE, Oman and Malaysia.