Whopper of An Opportunity: Burger King India

Company
16 Julyname
2021
Initiating Coverage | Sector: Retail
Burger King India

hfy
Whopper of an Opportunity
Dhairya Dhruv – Research analyst (Dhairya.Dhruv@motilaloswal.com)
Research analyst: Krishnan Sambamoorthy (Krishnan.Sambamoorthy@MotilalOswal.com) / Kaiwan Jal Olia (Kaiwan.O@MotilalOswal.com)
10 December 2010
Investors 1
are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Burger King India:
01 02
Page #3 Page #7
Summary Huge opportunity in Indian FSI
03 04
Page #10 Page #12
Recently-launched “barbell” BK Café likely to be a game changer
product strategy to drive
volumes and SSSG
05 06
Page #14 Page #17
Rapid network expansion to Capped royalty rate and agreement
drive high system sales growth till 2039 offers comfort
07 08
Page #20 Page #24
Peer comparison: BURGERKI Financial assumptions – Strong
to outperform on growth SSSG, rapid margin expansion
09 10
Page #27 Page #28
Risks to our investment case Bull and Bear Case
11 12
Page #29 Page #32
Management profiles Annexure
Initiating Coverage | Sector: Retail
Burger King India
Burger King India

BSE SENSEX S&P CNX
53,159 15,924 CMP: INR166 TP: INR210 (+26%) Buy
Motilal Oswal values your support in the Burger King India (BURGERKI) is one of the youngest and fastest growing players in
Asiamoney Brokers Poll 2021 for India India’s quick service restaurant (QSR) sector. It is focused on establishing and operating
Research, Sales, Corporate Access and
Burger King restaurants across India. The brand is globally popular for its signature
Trading team. We request your ballot.
product Whopper. BURGERKI offers its services via four channels – dine-in, takeaway,
delivery and drive-thrus. We initiate coverage with a Buy rating and a TP of INR210.
Big shift in business model, aggressive expansion – Initiate coverage with Buy
BURGERKI offers an exciting investment opportunity in the Indian QSR space on

account of the following factors:
 The large Indian Food Service Industry (FSI) is expected to deliver 9% CAGR over
the coming years, and QSRs are best placed to tap this opportunity. With their high
Stock Info
affordability, aspirational branding, higher convenience, scale benefits, and
Bloomberg BURGERKI IN
Equity Shares (m) 278 technological edge, QSRs are expected to grow at 19% CAGR over FY20-25E.
M.Cap.(INRb)/(USDb) 63.8 / 0.9  Given that the unorganized segment has been severely affected by COVID-19, QSRs
52-Week Range (INR) 219 / 108 can make further gains due to their better hygiene standards and well-positioned
1, 6, 12 Rel. Per (%) 2/7/- alternate channels, especially delivery.
12M Avg Val (INR M) 1113
 BURGERKI’s “barbell” product strategy with focus on premiumization at the top end
Free float (%) 47.4
and value products at the entry level makes it well-placed to drive SSSG and margin
Financials Snapshot (INR b)
expansion. The introduction of BK Café from 4QFY22 onwards will significantly elevate
Y/E Dec 2021 2022E 2023E
its SSSG and gross margin profile as seen in the case of WLDL’s McCafé.
Sales 4,945 9,013 14,468
 BURGERKI has an aggressive target of opening 700 stores by Dec’26 that will expand its
Sales Gr. (%) -41.2 82.3 60.5
network from the current 265 stores, thereby driving its system sales growth higher.
EBITDA 150 1,253 2,228
 We believe BURGERKI’s premium multiples are likely to sustain due to its strong
Margins (%) 3.0 13.9 15.4
growth profile. Initiate coverage with BUY rating and TP of INR210 (28x Sep’23
Adj. PAT -1,662 -601 29
Adj. EPS (INR) -4.3 -1.6 0.1 EV/EBITDA).
EPS Gr. (%) N/M N/M L/P
BV/Sh.(INR) 17.6 16.0 16.1 Huge opportunity in FSI for QSRs with established right-to-win
Ratios  The INR4.2t (USD58b) Indian FSI is expected to grow at ~9% CAGR over FY20-
RoE (%) -24.7 -9.8 0.5 25E. Within the FSI, the QSR segment valued at INR348b (USD4.7b) has
RoCE (%) -7.2 0.6 6.1 clocked the fastest growth but constitutes just 8% of the FSI and 22% of the
Valuations organized FSI. QSRs are expected to grow at 19% CAGR over FY20-25E.
P/E (x)
P/BV (x)
N/M
9.5
N/M 2,224.2
10.4 10.3
 The advantages for QSRs include: a) high affordability; b) globally well-known
and aspirational brands; c) different cuisines to cater to evolving taste of the
EV/EBITDA (x) 402.1 49.1 27.8
youth that have been adapted to Indian tastes; d) benefits of scale and
Shareholding pattern (%) better sourcing; e) convenience and quick service; and f) technological edge
As On Jun-21 Mar-21
over peers. Their products have high volume intensity and are amenable to
Promoter 52.6 52.7
DII 5.0 5.6
prompt delivery.
FII 17.2 14.7  In the post-COVID world, where 30-40% of restaurants are expected to shut
Others 25.3 27.0 down permanently, QSRs are well-placed to grab share from other FSI
FII Includes depository receipts segments as branded players command greater trust.
16 July 2021 3
Burger King India
Stock Performance (1-year) BURGERKI’s “barbell” product strategy to improve SSSG and gross margins
 With its “barbell” strategy, BURGEKI is focusing on premium products at one
end while raising the entry point at the other end (newly-announced Stunner
menu). Simultaneously, it has built a laddered product portfolio to push
consumers towards premiumization.
 BURGERKI’s signature Whopper range is priced upwards of ~INR140 which is
much higher than the high volume entry level product price of ~INR45. This
offers potential for premiumization-led topline growth and margins. BURGERKI’s
gross margins at 65-66% are already close to those of WLDL (~66-67%) despite
the absence of a coffee offering due to greater salience of its premium products.
 At the lower end, BURGERKI has recently introduced eight products under its
Stunner Menu at price points of INR50/70 (veg/non-veg). This has raised the
entry price point from INR45, making the products gross margin accretive. We
expect these value products to boost its SSSG significantly.
Complementary BK Café business to drive SSSG and margins

 BK Café products, which will complement the core business, will increase
volume throughput at the store level, thereby pushing the SSSG higher for
BURGERKI. Additionally, due to high gross margins, we expect BK Café to add
500-800bp to BURGERKI’s overall gross margins over the next 4-5 years, as seen
in the case of WLDL (up from 57% in FY14 to 65% in FY20).
 BK Café will be introduced from 4QFY22 onwards, and BURGERKI plans to have
75 BK Café outlets by Mar’23 (~20% of store network).
 The past experience of the company’s senior management in Tata Starbucks will
also prove valuable in this venture.
Rapid store network expansion to drive system sales growth

 BURGERKI is required to expand its store network to 700 by Dec’26 from the
current 265 which will drive its topline growth higher. BURGERKI’s network
expansion is much faster than that of JUBI and WLDL which are typically
expanding by ~8-10% every year.
 Its cluster-based approach towards expansion will further improve margins as
the company’s logistics costs decline.
Capped royalty rate at 5% of sales offers comfort

 JUBI has the lowest royalty rate of 3% while both KFC and Pizza Hut have a
royalty rate of 6.3% each. WLDL’s royalty rate is currently at 4%, but is set to see
a staggered increase to 8% in FY27 and maintain those levels thereafter. Its
looming high royalty rate remains a concern.
 BURGERKI’s capped royalty of 5% until 2039 offers comfort for margin
expansion unlike WLDL where the tremendous efforts being made by the
company to drive margin expansion will be offset by higher royalty.
Valuation and view

 We expect all listed Indian QSRs – BURGERKI, WLDL and JUBI – to be significant
beneficiaries of the strengthening tailwinds (led by COVID-19) in favor of QSR
players. Among these, JUBI will remain the most profitable and efficient player
over the next few years.
16 July 2021 4
Burger King India
 However, BURGERKI will enjoy an attractive opportunity for both topline and
margin expansion. This will be led by a big shift in its business model through
introduction of barbell product strategy and BK Café. In addition, aggressive store
network expansion and capped royalty rate will also be key drivers of EPS growth.
 We expect BURGERKI to register sales/EBITDA CAGR of 71%/286% over FY21-
23E (on a soft base) v/s 32%/38% for JUBI. Over FY21-26E, BURGERKI’s
sales/EBITDA CAGR is expected to stand at 43%/110%.
 We believe BURGERKI’s premium multiples are likely to sustain on account of its
strong growth profile. Initiate coverage with Buy rating and TP of INR210 (28x
Sep’25 EV/EBITDA). Based on a three-year perspective, we arrive at a TP of
INR365 per share (30% CAGR), assuming 25x multiple.
Exhibit 1: Target valuation

One year Three year
Target multiple (x) 28 25
Target enterprise value (INR b) 77.4 135.7
Implied market capitalization (INR b) 79.2 138.9
Current m-cap (INR b) 63.7 63.7
Upside/(downside) (%) 24 118
Target price 210 365
Expected CAGR (%) 26 30
Source: Company, MOFSL
Exhibit 2: Comparative valuation

CMP Target Price Mkt Cap CAGR FY21-24E (%) EV/Sales (x) EV/EBITDA (x)
Company Reco
(INR) (INR) Upside (INR B) Sales EBITDA FY21 FY22E FY23E FY21 FY22E FY23E
BURGERKI Buy 166 210 26% 64 56.5 180.2 12.2 6.8 4.3 402.1 49.1 27.8
JUBI Neutral 3,105 2,970 -4% 417 28.7 33.1 12.5 9.3 7.1 53.9 36.9 27.8
WLDL Neutral 535 470 -12% 85 32.9 102.8 8.7 6.3 4.6 181.1 48.2 28.8
Source: Companies, MOFSL
16 July 2021 5
Burger King India
Story in charts
Poised for strong growth
Exhibit 3: SSSG to see strong recovery in FY22E… Exhibit 4: …led by recovery in ADS*
ADS (INR '000) YoY growth (%)
SSSG (%)
63.6
69.8 32.3
51.2 14.9 8.1
29.2 3.8 -6.0
23.9
12.2
-0.3 -50.0
-39.3 92.0 95.5 109.7 103.1 51.6 84.4 111.7 120.7

FY20
FY17
FY18
FY19
FY21
FY22E
FY23E
FY24E
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
Source: Company, MOFSL Source: Company, MOFSL
Exhibit 5: Rapid store network expansion to continue Exhibit 6: Expect ~56% Sales CAGR over FY21-24E
Stores YoY Addition (%) Sales (INR m) YoY growth (%)
470 82.3
79.6 64.4 67.3
4,945
390 60.5
265 320 33.0 31.0
46.6 45.0 39.0
14,468
20.8 21.9 20.5
FY24E 18,951
8,412
2,299
3,781
6,327
9,013
-41.2
88 129 187 260 1.9
FY20
FY20
FY17
FY18
FY19
FY21
FY22E
FY23E
FY24E
FY17
FY18
FY19
FY21
FY22E
FY23E
Exhibit 7: Expect Gross Margins to expand to 68% in FY24E Exhibit 8: Expect sharp expansion in EBITDA margins
Gross Margins (%) EBITDA Margins (%)
67.0 68.0
66.0 15.4 17.4
63.6 64.2 64.5 12.5 12.4 13.9
62.0
59.9 3.0
-1.7 2.1
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY20
FY22E
FY23E
FY24E
FY17
FY18
FY19
FY21

Exhibit 9: 180% EBITDA CAGR over FY21-24E on a soft base Exhibit 10: Strong OCF but negative FCF due to high capex
EBITDA (INR m) YoY growth (%) OCF (INR m) FCF (INR m)
3,297
872.0
2,228
1,040
735.9
150
1,127
1,139
1,025
2,542
3,630
305
865
789
31.7 77.9 48.0

-85.6
1,253
790
-39
81
-33
-966
-561
-789
-886
-399
-1,148
-1,527
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
FY24E
FY20
FY22E
FY23E
FY24E
FY17
FY18
FY19
FY21

*Average Daily Sales per Store
16 July 2021 6
Burger King India
Huge opportunity in Indian FSI

 According to industry estimates, the Indian Food Service Industry (FSI) was
valued at INR4.2t in FY20 and is expected to touch INR6.5t by FY25 (9% CAGR).
 The organized sector of the Indian FSI consists of players that possess three
characteristics: a) accounting transparency, b) organized operations with quality
15% control and sourcing norms, and c) outlet penetration. The organized sector has
been growing faster than the industry and has seen its contribution increase to 38%
Organized FSI CAGR
over FY20-25E in FY20 from 29% in FY15. It is expected to deliver 15.4% CAGR over FY20-25E.
Consequently, its share is expected to increase further to 50% by FY25E.
 However, these estimates were arrived at prior to the COVID-19 outbreak.
Following the initial blip due to temporary store closure and a gradual recovery
in dine-in, we expect the market scenario for the organized sector to improve
further in the post-COVID world due to: a) its faster growth rates v/s
unorganized players, and b) permanent shutting down of weaker FSI peers.
According to industry estimates, 30-40% of restaurants across India are likely to
shut down permanently in FY21.
 The key growth drivers for Indian FSI include (refer to Annexure for details):
a) Rising youth population
b) Higher income levels
c) Changing lifestyles with increased frequency of eating out
d) Wider internet penetration
e) Increasing availability of retail space
f) Growth of online food delivery and food tech
g) Urbanization and nuclear families
QSR sector enjoys an edge

 The QSR segment is focused on service speed, affordability and convenience. It
includes dine-in, takeaways, delivery, drive-thrus and on-the-go sub formats.
 The QSR segment is estimated to have clocked a 17% CAGR over FY15-20 to
reach INR348b and is expected to register a 19% CAGR over FY20-25E to reach
19% INR825b. However, these are pre-COVID estimates, and we believe these
growth rates to be sustainable as their competition is being significantly
QSR segment CAGR over impacted by the pandemic (Source: Technopak).
FY20-25E  The growth of chain QSRs is primarily driven by international brands such as
Domino’s Pizza, McDonald’s, Burger King, KFC, and Subway, which together
account for ~45% of the total chain outlets in India.
 Most QSR players have adapted themselves to cater to the unique attitudes and
needs of Indian consumers. This has helped them gain consumer acceptance
and thereby, achieve scale. Some of their initiatives include:
a) Addition of vegetarian menus
b) Opening vegetarian only restaurants in some parts of the country
c) No beef or pork items on their menus
d) Separation of vegetarian and non-vegetarian cooking areas
e) Introduction of local flavors in the menu
f) Offering home delivery for convenience
g) Affordable pricing and value propositions
h) Low entry pricing which remains competitive in the unorganized sector
16 July 2021 7
Burger King India
Competitive advantages for QSRs

In this fast growing industry, QSRs have established their right-to-win through their
competitive advantages which include:
a) Scale: Chain QSRs benefit from economies of scale on multiple fronts. As they
expand their geographical presence, awareness among consumers increases.
They have a better cost profile than smaller players on account of:
i) Direct sourcing, elimination of middlemen, creating a ‘farm-to-fork’ model,
ii) Increasing scale improving their bargaining power with suppliers,
iii) Concomitant growth of suppliers along with the fast growth of QSRs, leading
to further economies of scale across the value chain.
These advantages help them offer products at affordable prices, which in turn
helps drive volumes higher. India being a highly price-sensitive market, it is
Chain QSRs benefit critical to get the pricing right in this market. Higher volumes further drive
from economies of growth and market share expansion, thereby creating a virtuous loop.
scale which helps b) Aspirational positioning appeals to consumers.
them offer c) Offering new cuisines: Exposure to the Western lifestyle through the media
affordable products
and travelling has made Indian consumers more open to experimenting with
new cuisines and flavors.
d) On-the-go and in-transit consumption: Fast moving lifestyles have led to a rise
in on-the-go consumption, where consumers have their meals on their way to
work/home. QSRs can cater to this demand as they can dispense food faster
than casual dining restaurants (CDRs). They are also well-placed to capture in-
transit consumers at highways, airports, metros, etc. This offers a win-win
proposition for QSR players as well as consumers as: i) consumers are serviced
faster in-line with their need to spend less time on food/breaks during transit,
and ii) QSRs gain better visibility, particularly in the case of highways, as higher
visibility and brand awareness help penetrate smaller towns.
e) Higher trust: The questionable hygiene standards of unorganized players create
a much better trust proposition for QSRs among consumers.
f) The COVID situation has been extremely challenging for the Indian FSI as
consumers are avoiding dining out. According to industry estimates, as many as
30-40% of restaurants across India are likely to shut down. While the dine-in
channel for QSRs has also been affected temporarily, their delivery channel has
registered a strong growth momentum and is driving the recovery. The balance
sheet strength of QSRs is helping them survive in these tough times. A
combination of higher trust, less competition and fewer alternatives for
consumers to indulge in has lent an advantage to QSRs during COVID-19. In
addition, the shutting down of other restaurants is creating a higher supply of
real estate with attractive rental structures, which QSRs are lapping up to
expand their networks.
12% Delivery gets a boost due to COVID-19

Expected CAGR  The online delivery market significantly adds to consumer convenience, while
of India’s food providing better reach, visibility, and consumer engagement for restaurants.
delivery marker over  India’s overall food delivery market is pegged to grow at 12.2% CAGR to
FY20-25E
USD18.1b by FY25, led by a robust growth in platform-to-consumer. The
estimates got enhanced from 10% CAGR pre-COVID, due to consumers'
preference for food delivery over dine-in during this period of pandemic.
16 July 2021 8
Burger King India
Exhibit 11: Delivery market prospects enhanced due to COVID
Total delivery market post COVID-19
18.1
16.4
10.2
4.7
2016 2020 2025E
Source: MOFSL, Technopak
Competitive landscape
 Domino’s is the market leader among chain QSRs, both in terms of number of
outlets as well as revenue. In FY20, Domino’s market share by outlet count
stood at 19%, while its market share by revenue was higher at 21%.
 In terms of revenue, McDonald’s stood at second place with a market share of
11%, despite having a lower (7%) share by outlet count.
 Out of the INR188b chain QSR market in FY20, burgers and sandwiches
comprised INR58b (31% share), followed by pizza and chicken (fried chicken).
Exhibit 12: Chain QSR segment dominated by Domino’s… Exhibit 13: …both in terms of outlets and revenue
Market Share by Outlet Count (%) Market Share by Revenue (%)
Domino's 19 Domino's 21
Subway 8 McDonald's 11
McDonald's 7 KFC 10
KFC 6 Subway 6
Burger King 4 Burger King 5

Others 56 Others 48
Source: MOFSL, Technopak Source: MOFSL, Technopak
Exhibit 14: Burgers and sandwiches dominate chain QSRs… Exhibit 15: …with a market share of 31%
(INR b) FY15 FY20 FY20 Market share (%)
58 Burgers & Sandwiches 30.9

50
Pizza 26.6
27 28 28
24 24
16 Chicken 14.9
4 7
Indian Ethnic 14.9
Burgers & Pizza Chicken Indian Others Others 12.8

Sandwiches Ethnic
Only QSR does not include other formats like CDR Source: MOFSL, Technopak
16 July 2021 9
Burger King India
Recently-launched “barbell” product strategy to drive

volumes and SSSG
 BURGERKI has recently launched a two-pronged product strategy focusing on
premium products at one end and value products at the other.
 Notably, it also has a product portfolio with laddered pricing in the middle which
helps premiumize the consumer.
 Its newly-launched ‘Stunner Menu’ and innovations at the premium end are the key
components of its “barbell” strategy.
 We believe that its barbell strategy makes BURGERKI well-placed to drive volume
throughput and SSSG for its stores by increasing footfalls through the ‘Stunner
Menu’ and premiumization through laddering and premium product launches.
Exhibit 16: Laddered portfolio offers variety and helps premiumize consumer
339
Side Stunner Menu Burger Whopper Chicken Wings
299
249
249
239
209
199
199
199
199
189
179
179
179
169
169
159
149
149
149
139
129
119
119
119
109
109
109
105
99
99
99
99
85
80
79
79
75
70
70
70
70
55
50
50
50
50
50
49
29
Veg Non-veg
*delivery prices as of 30 Jun’21; list of products is indicative and not exhaustive Source: Company, MOFSL
Premium portfolio drives margins

 At the premium end, BURGERKI introduces limited time variants of its signature
product – Whopper – while retaining its core products (Veg, Chicken and
Mutton). These LTOs (limited time offerings) are refreshed at intervals of three
months.
 BURGERKI drives its ad campaigns around these products, triggering consumer
interest and engagement. At the same time, the variants also bring regular
freshness to the menu, thus preventing brand monotony.
 Priced prices upwards of ~INR140/150 (dine-in/delivery), these products are at a
significant premium to the high volume entry price product of ~INR45.
 BURGERKI has gross margins comparable to those of WLDL despite still lacking a
coffee offering like McCafé. We believe that this is due to a higher contribution
of Whopper and premium products.
Stunner Menu to become a strong growth engine

 Offering value products is at the core of the QSR business. All QSRs have an
affordably-priced product at the entry point which helps bring in mass
consumers. These products help shifting consumers from the unorganized
brands to the organized ones. In the case of burgers, both Burger King and
McDonald’s have an entry product priced at INR45/INR70 for veg/non-veg
offerings.
16 July 2021 10
Burger King India
 BURGERKI recently introduced its “Stunner Menu” with eight new products (five
veg and three non-veg) priced at INR50/INR70 (veg/non-veg). We believe that
Stunner menu would
help drive volumes the Stunner Menu will become a strong growth engine because:
at the mass end a) This significantly widens the entry level offerings
while being gross b) It raises the entry point from INR45 to INR50, making it gross margin
margin accretive accretive
 These products should help increase both (a) the restaurant level throughput
and consequently SSSG, and (b) gross margins.
Exhibit 17: Stunner Menu widens entry offerings while being gross margin accretive
16 July 2021 11
Burger King India
BK Café likely to be a game changer

 The Café market in India is valued at ~INR24b and is expected to grow at a CAGR
of 7% over FY18-23E.
 While the independent café business has been largely unsuccessful in India
(barring a few exceptions), coffee offering within QSR has been a successful
formula as demonstrated by McCafé from McDonald’s.
 Coffee offerings of BK Café would complement BURGERKI’s core products
similar to McCafé for WLDL. Its multiple benefits include:
 As a complementary product, coffee offering increases the volume throughput of
restaurants. In addition, their pricing is also at a premium to the core portfolio.
Thus, the SSSG receives a boost through volume growth and premiumization.
a) Beverages have significantly higher gross margins at ~75-80%, thus making them
highly gross margin accretive.
b) Coffee offering provides a consumption occasion during the day time as the core
Complementary
coffee offering portfolio is more aligned towards lunch and dinner while coffee consumption
would help improve takes place in the evening. This improves capacity utilization at the store level,
volume throughput, thus helping absorb fixed costs better.
SSSG, capacity c) Coffee offering has a positive rub off on the core portfolio as consumers may feel
utilization and gross tempted to indulge in impulsive consumption of core products and vice versa.
margins along with a
 In the case of WLDL, McCafé has helped improve its SSSG and gross margin
positive rub off on
profile after the company began adding McCafé kiosks in FY14. WLDL’s gross
the core portfolio
margins expanded from 57% in FY14 to 65% in FY20 mainly due to McCafé.
Exhibit 18: WLDL began adding McCafé to its store network… Exhibit 19: …which increased its gross margins…
McCafé stores % of total stores Gross margin (%)
69.9 73.4
64.2 65.2
53.8 64.7
62.6 63.5
43.0 60.0 60.6
31.8 57.4 58.4
17.7 54.7
2.7
5 37 75 111 149 190 223 224
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Exhibit 20: …and elevated its SSSG profile
SSS Growth (%)

25.1 24.1 25.7
20.7
14.5
8.4 8.7 8.4 9.2
3.4
6.5 5.1 5.6 6.7 7.0
0.5 (0.3) 1.7 3.1 1.0
(5.5) (9.0) (8.1) (5.1) (4.9)
(9.8)
(10.5)
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
16 July 2021 12
Burger King India
 BURGERKI recently unveiled plans to introduce BK Café from 4QFY22 onwards

and set up 75 BK Cafés by Mar’23. This would comprise ~20% of its store
Select hot and cold network. WLDL had 224 McCafés, as of Mar’21, comprising ~75% of its store
beverages in existing menu network.
 While BURGERKI presently already has some coffee offerings, BK Café is likely to
significantly expand its coffee portfolio. To put things in perspective, McCafé
currently offers 45+ hot & cold beverages under McCafé.
 The incremental capex for BK Café is likely to be ~INR2-2.5m per kiosk which is
quite low when compared with the incremental SSSG and gross margin
Coffee and Latte elevation that the successful launch of BK Café can bring in over the next few
years.
 Furthermore, although BK Café has had limited success globally, barring Turkey
and China, unlike McCafé, the high levels of autonomy on menu development
and pricing allowed by BURGERKI would enable it to refine its offerings in India.
The past experience of the senior management team in Starbucks (see page 29
for details) would also prove valuable.
Thick shakes
Gross margins poised to expand further from the already impressive levels
 In view of the compelling changes in BURGERKI’s business model due to the
addition of the Stunner Menu and BK Café, its gross margins are poised to
expand significantly from the current levels.
 The management has reiterated its confidence by recently raising its gross
Creamy shakes
margin guidance by 50bp/100bp for FY22/FY24 to 66%/68%. Importantly, the
guidance does not factor in the BK Café impact which means that there exists
potential for a further upside to its performance once BK Café gains penetration
within its store network.
 We note that BURGERKI’s gross margins are already similar to those of WLDL
even without BK Café. With BK Café coming in, its gross margins can expand by
Smoothies 500-800bp from the current levels over the next 4-5 years, especially since the
company will expand BK Café further from 20% of all outlets targeted by
4QFY23.
Exhibit 21: BURGERKI’s gross margins are comparable to WLDL and poised to expand
further
BURGERKI WLDL
68.0
67.0
67.0
66.4
66.0
65.6
65.2
64.7
64.5
64.2
63.6
63.5
62.6
62.0
60.6
59.9
FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E
16 July 2021 13
Burger King India
Rapid network expansion to drive high system sales

growth
 As per its Master Franchise Agreement (MFA), BURGERKI is required to open
700 stores by Dec’26. This means that from 265 stores as of Mar’21, BURGERKI’s
BURGERKI to see rapid store network is expected to expand at ~20% CAGR. This is lower than the
network expansion annual store additions it has undertaken in each of the pre-COVID years, albeit
significantly ahead of on a low base. However, this is notably higher than the pre-COVID CAGR over of
peers
9% (over FY15-20) for both JUBI and WLDL.
 Unlike its peers whose system sales will be largely driven by SSSG, the same for
BURGERKI will be led by a combination of rapid network expansion and SSSG.
We expect BURGERKI to register sales CAGR of 71%/43% over the period FY21
to FY23E/FY26E.
Exhibit 22: BURGERKI has been rapidly expanding its store network and will continue to outperform its peers
FY15-20
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E
CAGR (%)
No. of stores 12 49 88 129 187 260 265 320 390 85.0
Net stores added 37 39 41 58 73 5 55 70
Stores added (%) 308.3 79.6 46.6 45.0 39.0 1.9 20.8 21.9
No. of stores 209 236 258 277 296 319 305 330 355 8.8
Net stores added 27 22 19 19 23 -14 25 25
Stores added (%) 12.9 9.3 7.4 6.9 7.8 -4.4 8.2 7.6
No. of stores 876 1,026 1,117 1,134 1,227 1,335 1,360 1,500 1,650 8.8
Net stores added 150 91 17 93 108 25 140 150
Stores added (%) 17.1 8.9 1.5 8.2 8.8 1.9 10.3 10.0
*McDonald’s pertains to WLDL Source: Company, MOFSL
Vast market to absorb additional stores

 The potential number of stores for all QSR players is high due to the low density
of stores per million people. Additionally, the high affordability of their products
also ensures that the brands are accessible to a large section of the population.
 Importantly, in a post-COVID world, hygiene, trust in brands, and convenience of
delivery will become even more important growth drivers as compared to the pre-
COVID levels. This is being witnessed not just in the Indian market where most QSRs
are raising their store expansion guidance, but is also being seen globally.
 As indicated in our initiating coverage note on WLDL in Dec’20, the potential
number of stores for WLDL was 3x its store network of ~310 at that time.
Recently, JUBI raised its potential store network target to 3,000 from its
previous guidance of 2,000 stores.
 We believe the market is vast enough to absorb the stores of all branded QSR
players as the unorganized market still dominates the market.
Cluster approach towards expansion increases efficiency
 A cluster-based approach helps in managing the supply chain more efficiently. It
reduces logistics costs due to less distance travelled, thus aiding margin
improvement. The company also strives to add new suppliers closer to its store
locations, thereby further reducing these costs.
16 July 2021 14
Burger King India
Exhibit 23: BURGERKI’s store network is divided into six clusters
*as of 30 Sep’20 Source: Company, MOFSL
Change in geographic mix

 McDonald’s business in the North and East has suffered in the past several years
due to the long-standing dispute between McDonald’s Corp and Connaught
Plaza Restaurants (its franchisee for the region). The low competitive intensity
for BURGERKI in this market led to the company focusing strongly on the region
in the initial years. BURGERKI has more than 50% of its total stores in the North.
The number of McDonald’s stores in the North and East at 152 is also much
BURGERKI’s
lower than 304 in the West and South (as of Dec’21).
geographic mix to
incrementally shift  Following the change of hands of the North and East franchisee to Mr. Sanjeev
from North to South Agrawal-led MM Group, McDonald’s has seen a revival in that market. The MM
and East Group also owns Moon Beverages, a bottler for Coke in India. However, this is not a
concern for BURGERKI as the market is large enough to absorb two burger QSRs.
 BURGERKI’s geographic mix will increasingly shift towards the South and East,
going forward.
16 July 2021 15
Burger King India
Exhibit 24: Projected store distribution for CY26…
North West South East
Total 700
70
165
Total 265
165
9
56
63 300
137
FY21 CY26E
Exhibit 25: …to reduce salience of North
North West South East
3%
10%
21%
24%
24%
24%
52% 43%
FY21 CY26E
16 July 2021 16
Burger King India
Capped royalty rate and agreement till 2039 offers

comfort
 As per its MFA, BURGERKI has to pay a royalty rate ranging from 2.5% to 5% of
its sales to BK AsiaPac (parent). While the rate is staggered in the initial years to
aid the investment phase, it will gravitate towards 5% in the years ahead.
 The royalty rate is capped at 5% until 2039 when the MFA ends. This is lower
Capped royalty rate than that of most leading QSRs in India from the long-term point of view.
at 5% until 2039 Domino’s has the lowest royalty rate at 3% of sales. WLDL (McDonald’s) has a
offers visibility for
4% royalty rate for FY22 although it is gradually staggered upwards to 8% in
margin expansion
FY27 and remains constant thereafter (please refer to Annexure II on page 35
for WLDL’s detailed royalty schedule).
 WLDL’s increasing royalty rate will offset the tremendous efforts it has been making
to achieve margin expansion. Consequently, the looming high royalty rate remains a
concern. On the other hand, BURGERKI’s capped royalty rate offers better visibility
of margin improvement.
Exhibit 26: BURGERKI’s royalty rates are staggered but will Exhibit 27: BURGERKI’s long-term royalty rate is lower
be capped at 5% compared to most leading QSRs in India
Royalty rate (%)

Subway 8.0%
4.1
3.7 McDonald's^ 8.0%
3.0 3.2
Pizza Hut* 6.3%
KFC* 6.3%
Costa Coffee 6.0%
Burger King 5.0%
Domino's 3.0%
FY17 FY18 FY19 FY20
Source: Company, MOFSL *as reported by Devyani International; ^as reported by Westlife
Development Source: Company, MOFSL
Ad spends to build brand awareness and equity

 BURGERKI backs up its product innovations with marketing campaigns.
Significant marketing efforts are directed towards its signature product –
Whopper. Its campaigns are essentially directed towards its targeted
demographic of young consumers.
 BURGERKI’s peers enjoy much higher brand awareness and equity among
consumers on account of their long-standing presence of more than two
decades in the market. In comparison, BURGERKI is a much younger brand in the
market, thus necessitating investments in building its brand equity. Increasing
brand awareness will help BURGERKI in driving its footfalls and SSSG higher.
 As per the MFA, BURGERKI is required to spend 5% of its sales towards
advertising and marketing. However, in recent years, BURGERKI has spent much
higher amounts on advertising and marketing as % of its sales. On an absolute
basis, BURGERKI’s A&P spends are lower, though not significantly, than those of
its peers, which is understandable as its peers also have a higher topline. As
BURGERKI achieves scale, its A&P spends will fall in line with the required 5%
levels, thereby expanding its margins.
16 July 2021 17
Burger King India
Exhibit 28: Barring FY20, BURGERKI’s A&P spend as % of Exhibit 29: …but remains lower on an absolute basis, while
sales has been higher than its peers… not lagging significantly
(% of sales) FY17 FY18 FY19 FY20 (INR m) FY17 FY18 FY19 FY20
JUBI 5.7 4.9 4.9 6.4 JUBI 1,470 1,469 1,752 2,500
WLDL 5.9 5.5 4.9 4.8 WLDL 547 630 693 745
Devyani - 4.4 5.4 5.8 Devyani - 574 824 662
BURGERKI 10.2 14.1 8.5 5.8 BURGERKI 234 535 535 487
Rental costs to decline with increased brand recognition

 In the initial years, BURGERKI had to bear higher rental expenses due to its small
size, lower brand recognition and consequently, lower landlord confidence.
However, over time, BURGERKI has been able to negotiate lower rentals with
landlords for its newer stores as its brand growth has created brand awareness
and also alleviated landlord concerns related to the company’s capacity to
service its rentals.
 Consequently, the company’s weighted average rental cost is expected to
reduce from ~15% of sales (pre-IND AS 116) to 12.5% over the medium term.
BURGERKI’s delivery channel received a boost from COVID situation

 As indicated earlier, amidst the high fixed expenses (rentals and employee
expenses), the key to success for any retail business in India is to have at least
one of these features:
a) High volume throughput
b) High price point products (e.g. jewellery, electronics), or
c) Channels in addition to dine-in
 Accordingly, the Delivery channel is critical for the success of QSRs in India as
Delivery channel helps in boosting their sales per store.
received a boost for  As consumers were homebound during the lockdown, they took to technology
all QSRs during the
to meet their needs. COVID has thus proven to be a tailwind for the Delivery
pandemic and is
driving the recovery
channel of all QSR players, leading to a structural shift for the sector.
 Like its peers, BURGERKI also saw its Delivery channel salience increase during
COVID. The channel also saw faster recovery than dine-in. However, there is
likely to be some reversal for burger players in the post-COVID period as burgers
and fries offer a better consumption experience for customers in dine-in.
 BURGERKI generates orders through its own platform as well as aggregators, but
currently relies on aggregators and third-party players for deliveries.
 BURGERKI’s Delivery channel has gross margins similar to those of dine in,
although its operating margins are lower by 700-800bp due to incurring of
delivery charges.
16 July 2021 18
Burger King India
Exhibit 30: Delivery channel sees higher salience during

COVID… Exhibit 31: …and also recovers faster than dine-in
Delivery Dine in Delivery Dine in

124
106 112
80 82 86 88 89 86
29 76
50 52 57 56 57 61 54
59 60 61 62 60
93
100 76 80
71 59 60
50 48 41 43 48
43 44 41 40 39 38 40 43 34
15 24
0
May-20
Nov-20
May-20
Nov-20
Apr-20
Jul-20
Aug-20
Aug-20
Sep-20
Oct-20
Dec-20
Feb-21
Apr-20
Jul-20
Sep-20
Oct-20
Dec-20
Feb-21
Jun-20
Jan-21
Mar-21
Jun-20
Jan-21
Mar-21
New Burger King app Tech initiatives strengthen business model

 BURGERKI has made significant efforts on the technology front, including:
a) Creating a new lighter and faster Burger King app with 25% reduced size
and 40% improvement in app speed. The app delivers an omni-channel
experience with the ability to place orders for delivery as well as within
stores. It has also launched a loyalty program.
b) Increasing delivery efficiency by achieving 30% improvement in delivery
time
c) Strengthening CRM and analytics
 With technology coming sharply into focus during COVID, it is important to have
technology platforms (app, website) which elevate consumer convenience and
engagement.
16 July 2021 19
Burger King India
Peer comparison: BURGERKI to outperform on growth

 BURGERKI’s ADS (average daily sales per store) is lower than that of WLDL and
KFC but higher than that of JUBI and Pizza Hut. However, BURGERKI’s
performance is commendable as its stores are much younger as compared to
those of its peers.
 The ADS of all the players was affected in FY21 due to the COVID-led lockdowns,
although we expect it to bounce back sharply in FY22 and FY23, thereby
surpassing its pre-COVID levels. Our ADS estimates for BURGERKI still remain
conservative as compared to WLDL and JUBI which are expected to significantly
exceed their pre-COVID ADS levels in FY23.
Exhibit 32: ADS to witness strong recovery in FY22 and FY23
ADS (INR '000) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI 92.0 95.5 109.7 103.1 51.6 84.4 111.7
WLDL 103.2 116.2 134.1 137.9 86.6 117.4 148.0
JUBI 66.1 73.5 82.7 84.0 67.3 85.0 100.1
KFC (Devyani) - - 113.9 116.7 100.3 - -
Pizza Hut (Devyani) - - 44.7 43.9 34.9 - -
 While BURGERKI delivered strong SSSG in FY19, growth in FY20 was muted due
to a high base and COVID-led lockdown in Mar’20. Notably, the average SSSG
over FY19 and FY20 of BURGERKI was higher than peers.
 The SSSG of all QSR players declined in FY21 due to the lockdown in 1HFY21.
BURGERKI and WLDL were more severely affected than JUBI due their higher
dine-in proportion of sales.
 We expect BURGERKI to register the sharpest SSSG recovery on the back of its new
initiatives such as Stunner Menu and BK Café which are likely to result in a
significant shift in its operating model. The sharp recovery will also be aided by a low
base as BURGERKI has witnessed the sharpest SSSG decline among its peers in FY21.
Exhibit 33: BURGERKI to witness sharpest SSSG recovery among peers in FY22 and FY23
SSSG (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI - 12.2 29.2 -0.3 -39.3 69.8 51.2
WLDL 4.0 15.8 17.0 4.0 -27.1 34.0 30.0
JUBI -2.4 13.9 16.4 3.2 -17.7 30.0 25.0
KFC (Devyani) - - 4.7 3.2 -33.7 - -
Pizza Hut (Devyani) - - 4.7 -3.7 -30.3 - -
 BURGERKI’s aggressive target of 700 store openings by Dec’26 will result in rapid
store network expansion over the next two years. JUBI and WLDL are expected
to register an annual store expansion of ~8-10% over the next two years as
compared to ~20-22% for BURGERKI.
Exhibit 34: BURGEKI likely to have a larger store network than WLDL in FY23E
Ending no. of stores FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI 88 129 187 260 265 320 390
WLDL 258 277 296 319 305 330 355
JUBI (Domino's) 1,117 1,134 1,227 1,335 1,360 1,500 1,650
KFC (Devyani)* - - 134 172 264 - -
Pizza Hut (Devyani) - - 268 269 297 - -
*includes stores acquired from Yum! Brands Source: Companies, MOFSL
16 July 2021 20
Burger King India
Exhibit 35: BURGEKI to witness fastest store network expansion over FY21-23E
Store addition YoY (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI 79.6 46.6 45.0 39.0 1.9 20.8 21.9
WLDL 9.3 7.4 6.9 7.8 -4.4 8.2 7.6
JUBI (Domino's) 8.9 1.5 8.2 8.8 1.9 10.3 10.0
KFC (Devyani)* - - - 28.4 53.5 - -
Pizza Hut (Devyani) - - - 0.4 10.4 - -
 The sharp growth in its SSSG and network expansion will allow BURGERKI to
deliver a strong sales growth in FY21-23E. We expect BURGERKI to outperform
JUBI and WLDL on the sales growth front, aided by a lower base as the company
had reported the sharpest sales decline in FY21.
Exhibit 36: BURGERKI to deliver strong sales growth on back of sharp growth in SSSG and store network
Sales (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI 2,299 3,781 6,327 8,412 4,945 9,013 14,468
WLDL 9,308 11,349 14,020 15,478 9,860 13,607 18,506
JUBI 25,834 30,184 35,631 39,273 33,119 44,364 57,554
KFC (Devyani)* - - 4,641 6,091 6,443 - -
Pizza Hut (Devyani) - - 4,233 4,174 2,879 - -
Exhibit 37: BURGERKI to outperform JUBI and WLDL on sales growth front
Sales growth (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI - 64.4 67.3 33.0 -41.2 82.3 60.5
WLDL 11.7 21.9 23.5 10.4 -36.3 38.0 36.0
JUBI 6.0 16.8 18.0 10.2 -15.7 34.0 29.7
KFC (Devyani) - - - 31.2 5.8 - -
Pizza Hut (Devyani) - - - -1.4 -31.0 - -
*includes growth due to stores acquired from Yum! Brands Source: Companies, MOFSL
 The gross margins of JUBI and Pizza Hut are in the mid-to-high 70s due to the
high gross margins in the pizza category. BURGERKI, WLDL and KFC have
commendable gross margins in the mid-60s.
 We expect BURGERKI to record margin expansion in FY22 and FY23, led by its
gross margin accretive Stunner Menu and BK Café.
Exhibit 38: BURGERKI to witness margin expansion in FY22 and FY23, driven by Stunner Menu and BK Café
Gross margins (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI 59.9 62.0 63.6 64.2 64.5 66.0 67.0
WLDL 60.6 62.6 63.5 65.2 64.7 65.6 66.4
JUBI 75.6 74.6 75.1 75.0 78.1 77.5 77.5
KFC (Devyani) - - 66.0 64.8 67.7 - -
 In line with its sales decline, BURGERKI reported the sharpest EBITDA margin
decline in FY21 as well. However, with its sales bouncing back, we expect the
company’s EBITDA margins to recover as well.
 Additionally, BURGERKI’s gross margin expansion and savings in overhead costs
will also drive its EBITDA margin expansion over the coming years.
 Going forwards, we expect BURGERKI to narrow the gap with its peers on the
back of its sales growth and margin expansion.
16 July 2021 21
Burger King India
Exhibit 39: BURGERKI records sharpest EBITDA decline in FY21 but expected to witness sharp recovery in FY22
EBITDA* (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -39 81 790 1,040 150 1,253 2,228
WLDL 469 774 1,190 2,140 469 1,784 2,962
JUBI 2,411 4,401 5,998 8,756 7,712 11,195 14,690
KFC (Devyani)^ - - 1,192 1,298 1,545 - -
Pizza Hut (Devyani) - - 964 662 535 - -
*post-IND AS 116 except FY17 to FY19 for WLDL and JUBI; Source: Companies, MOFSL
^includes growth due to stores acquired from Yum! Brands
EBITDA for KFC and Pizza Hut is calculated by apportioning company level overheads and IND-AS 116 adjustment
Exhibit 40: BURGERKI to witness strongest EBITDA growth in FY21-23E, aided by a low base
EBITDA growth (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI - -308.9 872.0 31.7 -85.6 735.9 77.9
WLDL 10.2 64.8 53.8 79.9 -78.1 280.0 66.0
JUBI -8.5 82.5 36.3 46.0 -11.9 45.2 31.2
KFC (Devyani) - - - 8.9 19.0 - -
Pizza Hut (Devyani) - - - -31.3 -19.2 - -
Exhibit 41: BURGERKI’s EBITDA margin expansion to be driven by gross margin expansion and cost savings
EBITDA margins (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -1.7 2.1 12.5 12.4 3.0 13.9 15.4
WLDL 5.0 6.8 8.5 13.8 4.8 13.1 16.0
JUBI 9.3 14.6 16.8 22.3 23.3 25.2 25.5
KFC (Devyani) - - 25.7 21.3 24.0 - -
 JUBI is the most profitable QSR in the industry. BURGERKI and Devyani are loss-
making on the PAT level while WLDL has been delivering a volatile performance.
 So far BURGERKI has been loss making at the PAT level due to its young store
network and fast pace of expansion. However, we expect the company to turn
profitable in FY23E.
Exhibit 42: BURGERKI remains in red at PAT level but is expected to reduce its losses with each passing year
PAT (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -718 -822 -383 -722 -1,662 -601 29
WLDL -121 129 213 93 -1,036 -256 652
JUBI 699 1,962 3,180 2,974 2,305 4,412 6,628
Devyani - - -942 -1,214 -630 - -
 Being the most efficient QSR, JUBI has the best return ratios in the industry.
 We expect BURGERKI’s return ratios to improve in the years ahead, led by its
improving profitability.
Exhibit 43: JUBI has highest RoE; BURGERKI to witness RoE improvement ahead
ROE (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -19.5 -28.6 -15.3 -26.2 -24.7 -9.8 0.5
WLDL -2.3 2.4 3.8 1.6 -19.6 -5.5 13.3
JUBI 8.7 20.3 25.2 26.5 16.2 27.8 32.9
Devyani - - N/M N/M N/M - -
16 July 2021 22
Burger King India
Exhibit 44: JUBI also has highest RoCE; BURGERKI and WLDL are expected to report positive RoCE in FY23
ROCE (%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -12.1 -13.8 2.6 -0.7 -7.2 0.6 6.1
WLDL 0.5 3.9 4.2 6.3 -2.5 4.4 9.0
JUBI 8.9 22.1 28.5 20.3 12.1 18.4 23.6
Devyani - - - 3.4 4.3 - -
 Not surprisingly, JUBI has the strongest cash flows - OCF and FCF - among its
peers. BURGERKI’s OCF is comparable to that of WLDL.
 We expect BURGERKI to generate a strong OCF in the years ahead. However, it
is likely to record negative FCF due to high investments needed for store
additions.
Exhibit 45: JUBI has highest OCF; BURGERKI and WLDL have comparable OCF
OCF (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -33 305 865 1,127 1,139 1,025 2,542
WLDL 657 1,371 1,148 1,996 1,292 107 1,852
JUBI 2,036 4,091 4,256 7,278 7,506 10,781 13,855
Devyani - - 2,778 3,007 2,396 - -
Exhibit 46: High investments for store additions to keep BURGERKI’s FCF in negative territory
FCF (INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E
BURGERKI -966 -561 -789 -1,148 789 -1,527 -886
WLDL -251 312 -278 737 801 -963 352
JUBI 40 2,931 2,600 4,448 5,080 6,371 8,985
Devyani - - 1,371 2,019 1,066 - -
16 July 2021 23
Burger King India
Financial assumptions – Strong SSSG, rapid margin

expansion
 We expect BURGERKI to undertake rapid network expansion as the company
strives to achieve its annual targets and reach 700 stores by Dec’26. BURGERKI’s
stores addition was muted in FY21 due to COVID as the company opened 16
stores but closed 11 stores. Players across the industry closed down a significant
number of unprofitable stores in FY21 in a bid to optimize their networks.
 BURGERKI reported the sharpest decline in SSSG among its peers, although we
expect its SSSG to bounce back sharply, consequently leading to a recovery in its
ADS. This improved performance will be led by its Stunner Menu, BK Café and a
higher contribution by its premium products.
Exhibit 47: Stores addition to pick up along with SSSG bouncing back from FY22E onwards
FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
No. of stores 88 129 187 260 265 320 390 470 550 634
Net additions YoY 39 41 58 73 5 55 70 80 80 84
Addition (%) 79.6 46.6 45.0 39.0 1.9 20.8 21.9 20.5 17.0 15.3
ADS (INR '000) 92.0 95.5 109.7 103.1 51.6 84.4 111.7 120.7 129.4 138.0
SSSG (%) 12.2 29.2 -0.3 -39.3 69.8 51.2 23.9 21.5 18.8
 BURGERKI’s strong SSSG and network expansion will enable it to deliver a strong
sales growth, going forward.
 The management has guided for gross margins of 66%/68% in FY22/FY24E,
although there exists potential for an upside to the guidance as it does not
account for the positive impact of BK Café. As BK Café increases penetration in
BURGERKI’s network and begins contributing meaningfully to its overall sales,
we expect the gross margins to expand further.
 The gross margins expansion, coupled with capped royalty rates, and declining
rentals and overheads, are expected to drive an expansion in the EBITDA
margins as well.
 So far, BURGERKI has been posting losses at the PAT level, although we expect it
to turn profitable in FY24E.
Exhibit 48: Summary financials

(INR m) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
Net sales 2,299 3,781 6,327 8,412 4,945 9,013 14,468 18,951 24,097 29,819
YoY change (%) - 64.4 67.3 33.0 -41.2 82.3 60.5 31.0 27.2 23.7
Gross profit 1,377 2,343 4,027 5,397 3,188 5,949 9,694 12,886 16,627 20,873
Gross margin (%) 59.9 62.0 63.6 64.2 64.5 66.0 67.0 68.0 69.0 70.0
EBITDA -39 81 790 1,040 150 1,253 2,228 3,297 4,711 6,143
YoY change (%) - L/P 872.0 31.7 -85.6 735.9 77.9 48.0 42.9 30.4
EBITDA margin (%) -1.7 2.1 12.5 12.4 3.0 13.9 15.4 17.4 19.6 20.6
Profit before tax -718 -822 -383 -722 -1,662 -601 29 702 1,848 3,016
Adjusted PAT -718 -822 -383 -722 -1,662 -601 29 666 1,570 2,563
YoY change (%) - N/M N/M N/M N/M N/M L/P 2,228.2 135.6 63.2
PAT margin (%) -31.2 -21.7 -6.0 -8.6 -33.6 -6.7 0.2 3.5 6.5 8.6
 Post its IPO, BURGERKI has turned into a net cash company, and we expect it to
retain this position, going forwards as well.
16 July 2021 24
Burger King India
Exhibit 49: BURGERKI turns into net cash company after IPO and is expected to retain this position
Debt 0 0 1,000 1,985 0 0 0 0 0 0
Cash 125 74 160 280 2,161 1,275 819 991 1,843 3,513
Investments 1,773 869 384 186 1,243 920 1,010 1,050 1,425 2,000
Net debt -1,897 -943 456 1,519 -3,404 -2,195 -1,829 -2,041 -3,268 -5,513
 BURGERKI has a negative working capital, and we do not expect any material
changes in its working capital cycle.
Exhibit 50: BURGERKI has strong working capital cycle with negative working capital days
Inventory 40 52 69 94 100 123 159 208 264 327
Receivables 14 26 59 32 60 74 91 104 132 163
Payables 195 434 609 816 1,140 988 1,387 1,817 2,311 2,859
Days (year-end basis)
Inventory days 6 5 4 4 7 5 4 4 4 4
Receivables days 2 2 3 1 4 3 2 2 2 2
Payables days 31 42 35 35 84 40 35 35 35 35
Cash conversion cycle -22 -34 -28 -30 -72 -32 -29 -29 -29 -29
Days (average basis)
Inventory days 4 3 4 7 5 4 4 4 4
Receivables days 2 2 2 3 3 2 2 2 2
Payables days 30 30 31 72 43 30 31 31 32
Cash conversion cycle -24 -24 -25 -62 -36 -24 -25 -26 -26
 BURGERKI’s losses at the PAT level have led to the company posting a negative
RoE in recent years. However, as it turns profitable in FY24E, the company’s RoE
will also improve and become positive.
 BURGERKI’s RoCE has also remained in negative territory for most part of the
recent years, but is expected to turn positive in FY23E.
Exhibit 51: Return ratios expected to improve significantly
(%) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E
RoE -19.5 -28.6 -15.3 -26.2 -24.7 -9.8 0.5 9.8 18.7 23.4
RoCE -12.1 -13.8 2.6 -1.6 -14.7 0.6 6.1 10.2 14.0 16.9
 BURGERKI has been delivering a positive CFO since FY18 which we expect to
continue in the years ahead as well.
 The high capex required for its rapid store network expansion has kept
BURGERKI’s FCF in negative territory for most part of the recent years. We
expect its FCF to turn positive in FY25E.
Exhibit 52: Strong cash flow generation from FY23E onwards
CFO -33 305 865 1,127 1,139 1,025 2,542 3,630 4,815 6,113
Capex -933 -866 -1,654 -2,275 -350 -2,552 -3,428 -4,029 -4,070 -4,261
FCF -966 -561 -789 -1,148 789 -1,527 -886 -399 745 1,852
16 July 2021 25
Burger King India
Valuation and view

 We expect all listed Indian QSRs – BURGERKI, WLDL, and JUBI – to be significant
beneficiaries of the strengthening tailwinds in favor of QSR players. Even as the
Indian FSI industry is likely to witness the shutdown of 30-40% restaurants in
FY21, QSR players are expected to record net store additions in FY22 and
substantial additions thereafter. JUBI will remain: a) the most profitable player
in the Indian QSR market over the next few years, b) the player with the highest
RoCE, and c) the player to record the fastest recovery due to its higher (70%)
delivery proportion.
 At the same time, BURGERKI offers an attractive opportunity on account of its
topline growth as well as margin expansion. BURGERKI’s barbell strategy
We expect
focusing on premium and value products makes it well-placed to improve its
BURGERKI’s
performance. The introduction of BK Café from 4QFY22 onwards will provide a
premium multiples
to sustain on account further boost to its SSSG and gross margins, as seen in the case of WLDL’s
of the big shift in its McCafé. Together, these two initiatives mark a big shift in its business model.
operating model and Additionally, BURGERKI’s aggressive store network addition will drive a strong
strong growth system sales growth. Furthermore, its capped royalty rate of 5% till 2039 offers
prospects visibility on margin expansion, unlike in the case of WLDL where the tremendous
margin expansion efforts being made by the management will be offset by a
staggered increase in its royalty rate to 8% in FY27. Consequently, we expect
BURGERKI to become profitable at the PAT level in FY23.
 We expect BURGERKI to register a sales/EBITDA CAGR of 71%/286% over FY21-
23E (on a soft base) v/s 32%/38% for JUBI. BURGERKI’s sharp sales and EBITDA
decline in FY21 due to the lockdowns has resulted in a low base for growth. Over
FY21-26E, BURGERKI’s expected sales/EBITDA CAGR stands at 43%/110%.
 We initiate coverage on BURGERKI with a Buy rating and TP of INR210 per
share, valuing the company at 28x Sep’23 EV/EBITDA. We believe that
BURGERKI’s premium multiples are likely to sustain on account of its strong
growth profile and its evolving business model. From a three-year perspective,
we arrive at a TP of INR365 per share (30% CAGR), assuming 25x multiple.
Exhibit 53: Target valuation

One year Three year
Target multiple (x) 28 25
Target enterprise value (INR b) 77.4 135.7
Implied market capitalization (INR b) 79.2 138.9
Current m-cap (INR b) 63.7 63.7
Upside/(downside) (%) 24 118
Target price 210 365
Expected CAGR (%) 26 30
Exhibit 54: Comparative valuation

CMP Target Price Mkt Cap CAGR FY21-24E (%) EV/Sales (x) EV/EBITDA (x)
Company Reco
(INR) (INR) Upside (INR B) Sales EBITDA FY21 FY22E FY23E FY21 FY22E FY23E
BURGERKI Buy 166 210 26% 64 56.5 180.2 12.2 6.8 4.3 402.1 49.1 27.8
JUBI Neutral 3,105 2,970 -4% 417 28.7 33.1 12.5 9.3 7.1 53.9 36.9 27.8
WLDL Neutral 535 470 -12% 85 32.9 102.8 8.7 6.3 4.6 181.1 48.2 28.8
16 July 2021 26
Burger King India
Risks to our investment case
High store opening targets pose a risk on two fronts: a) Inability to meet annual
store expansion targets could lead to BURGERKI losing its franchise. However, it
does have a six-month cure period subject to certain conditions. Further, the targets
are not a concern as the management has successfully added similarly high number
of stores annually in the past. b) Aggressive store openings could lead to errors in
execution such as site selection, rental agreements, supply chain and other issues.
However, the management’s successful execution in the past, despite the high
targets, offers comfort.
Arrival of third wave of COVID-19 could significantly impact FY22 performance as it

could lead to another set of lockdowns and restaurant operating restrictions. While
our current estimates for FY22 do not factor in third wave impact, we are being
conservative in our projections. Even if the third wave eventuates, we believe the
subsequent years’ performance would not see any meaningful impact.
Delay in dine-in recovery post COVID-19 could affect SSSG and margins as the dine-
in channel contributes ~60-65% of sales. Further, not only is the dine-in experience
better for burgers, but the company also offers a larger variety of menu options
which increase consumer choice and elevate the experience. Lastly, the dine-in
channel has better margins as the delivery channel results in incurring of additional
delivery costs.
Increase in bargaining power of aggregators could affect delivery economics: If the

bargaining power shifts to aggregators like Swiggy, Zomato and Amazon Eats, then
companies such as BURGERKI, which lack their own delivery system, could be
affected. However, if BURGERKI continues to scale up as per expectations, then the
dependence will be mutual, thereby keeping its bargaining power intact. In addition,
with 30-40% of the restaurants shutting down due to COVID, the dependence of
aggregators on QSRs has increased and hence, an increase in the bargaining power
of aggregators is unlikely. The development and growth of its own app will also
protect BURGERKI. This risk can be further mitigated if BURGERKI launches its own
delivery.
16 July 2021 27
Burger King India
Bull and Bear Case

(INR b) FY21 FY22E FY23E FY24E Comments
SSSG (%) -39.3 73.2 54.9 26.4  Assuming faster recovery and growth
Sales (INR m) 4,945 9,224 15,181 20,275
YoY growth (%) -41.2 86.5 64.6 33.6
EBITDA (INR m) 150 1,337 2,429 3,812  Assuming sharper margin led by faster
Margin (%) 3.0 14.5 16.0 18.8 gross margin expansion and cost savings
EV-to-EBITDA multiple 30x
TP (INR) 250
(INR b) FY21 FY22E FY23E FY24E Comments

SSSG (%) -39.3 50.0 43.3 17.6  Assuming slower recovery and growth
Sales (INR m) 4,945 8,038 12,355 15,550
YoY growth (%) -41.2 62.6 53.7 25.9
EBITDA (INR m) 150 1,037 1,705 2,340  Assuming slower margin expansion with
slower gross margin expansion and
Margin (%) 3.0 12.9 13.8 15.1 lower cost savings
EV-to-EBITDA multiple 26x
Target price (INR) 140
 barbell product  COVID-led lockdowns  Large FSI market offers  Rapid store openings
strategy to drive SSSG affect dine-in channel opportunity to expand could lead to errors in
through volume growth which contributes 60- store network. site selection, supply
and premiumization. 65% of sales.  COVID tailwinds for chain, etc.
 Rapid network  Weak return ratios QSRs due to closure of  Failure to achieve
expansion to drive due to young stores 30-40% restaurants aggressive store
system sales growth. with low profitability and consumers shifting opening targets could
 Addition of BK Café to although their to branded players. lead to loss of
improve SSSG and performance is  Increasing frequency franchisee license.
margins. expected to improve. of eating out among  Aggressiveness by the
Indians provides long- competition could
term opportunity. affect SSSG.
16 July 2021 28
Burger King India
Management profiles
Mr. Rajeev Varman, CEO and Whole Time Director
Mr. Rajeev Varman has over 20 years of work experience in the food and beverage industry.
Prior to joining BURGERKI, he worked with Tricon/Taco Bell brand, Lal Enterprises Inc., and
Burger King Corporation, including stints in Canada and Northwest Europe. He is a mechanical
engineer from Bangalore University and holds an MBA in marketing from Golden Gate
University. He has been in his current post since February 27, 2014.
Mr. Sumit Zaveri, CFO

Mr. Sumit Zaveri has 18 years of work experience in finance control, treasury, budgeting and management
information systems. Previously, he worked with Nature’s Basket and Tata Group companies such as Tata Starbucks,
Tata Global Beverages and Indian Hotels. He is a Chartered Accountant and also holds a degree from the Institute of
Cost and Works Accountants of India. He joined BURGERKI on September 23, 2019.
Mr. Abhishek Gupta, Chief of Business Development and Operations Support Officer
Mr. Abhishek Gupta has 18 years of work experience in the areas of talent management, operations, and business
development. Previously, he worked with Career Forum, North Delhi Power and Tata Group companies such as Tata
Starbucks, Tata Services, and Indian Hotel. He is a civil engineer from the University of Roorkee and holds an MBA
from NMIMS, Mumbai. He joined BURGERKI on March 12, 2014.
Promoter profile
 QSR Asia is the promoter of BURGERKI and holds a 52.69% stake in the
company, as of March 31, 2021. It is essentially controlled by two PE firms,
Everstone Capital and 3G Capital.
 Everstone Capital indirectly owns F&B Asia Ventures which owns 87.64% in QSR
Asia. BK AsiaPac owns a 10.38% stake in QSR Asia and is a subsidiary of
Restaurant Brands International (RBI) which owns the Burger King brand. RBI is
managed by 3G Capital.
Exhibit 55: Burger King is essentially controlled by two PE firms – Everstone Capital and 3G Capital
Restaurant Brands International RV Services
Everstone Capital Ajay Kaul
(owned by 3G Capital) Pte. Ltd.*
(indirect) 1.71% 0.26%
F&B Asia Ventures (Singapore)

BK Asiapac Pte. Ltd. Others
Pte. Ltd.
10.38% 87.64% 1.97%
QSR Asia Pte. Ltd.

Singapore (Promoter)
52.69%
Burger King India
*owned by Rajeev Varman Source: Company, MOFSL
16 July 2021 29
Burger King India
Financials and valuations

Income Statement (INR m)
Y/E March 2017 2018 2019 2020 2021 2022E 2023E 2024E
Net Sales 2,299 3,781 6,327 8,412 4,945 9,013 14,468 18,951
Change (%) 64.4 67.3 33.0 -41.2 82.3 60.5 31.0
Material Consumed 922 1,439 2,301 3,015 1,756 3,064 4,775 6,064
Gross Profit 1,377 2,343 4,027 5,397 3,188 5,949 9,694 12,886
Gross Margin % 59.9 62.0 63.6 64.2 64.5 66.0 67.0 68.0
Operating expenses 1,416 2,261 3,237 4,357 3,038 4,696 7,466 9,589
EBITDA -39 81 790 1,040 150 1,253 2,228 3,297
Change (%) -308.9 872.0 31.7 -85.6 735.9 77.9 48.0
Margin (%) -1.7 2.1 12.5 12.4 3.0 13.9 15.4 17.4
Depreciation 448 640 822 1,164 1,275 1,316 1,561 1,837
Int. and Fin. Ch. 274 369 465 655 821 680 794 930
Other Non-recurring Inc. 42 106 114 56 285 141 156 171
PBT -718 -822 -383 -722 -1,662 -601 29 702
Change (%) N/M N/M N/M N/M N/M L/P 2,350.7
Margin (%) -31.2 -21.7 -6.0 -8.6 -33.6 -6.7 0.2 3.7
Tax 0 0 0 0 0 0 0 35
Tax Rate (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0
Adjusted PAT -718 -822 -383 -722 -1,662 -601 29 666
Change (%) - N/M N/M N/M N/M N/M L/P 2,228.2
Margin (%) -31.2 -21.7 -6.0 -8.6 -33.6 -6.7 0.2 3.5
Non-rec. (Exp)/Inc. 0 0 0 -43 -77 0 0 0
Reported PAT -718 -822 -383 -766 -1,739 -601 29 666
Balance Sheet (INR m)

Y/E March 2017 2018 2019 2020 2021 2022E 2023E 2024E
Share Capital 2,650 2,650 2,650 2,777 3,830 3,830 3,830 3,830
Reserves 1,026 221 -154 -23 2,905 2,304 2,332 2,999
Net Worth 3,676 2,871 2,496 2,754 6,735 6,134 6,162 6,829
Loans 0 0 1,000 1,985 0 0 0 0
Lease Liabilities 2,910 3,700 4,740 5,977 5,973 6,852 8,034 9,431
Capital Employed 6,585 6,572 8,237 10,717 12,707 12,985 14,196 16,260
Gross Block 5,430 7,217 10,032 13,558 14,159 16,711 20,139 24,167
Less: Accum. Depn. 683 1,294 2,107 3,191 4,303 5,597 7,133 8,944
Net Fixed Assets 4,746 5,923 7,926 10,367 9,855 11,114 13,006 15,224
Capital WIP 105 103 202 476 301 301 301 301
Investments 1,773 869 384 186 1,243 920 1,010 1,050
Deferred tax assets 2 6 8 10 15 15 15 15
Curr. Assets, L&A 358 402 684 938 2,868 2,102 1,792 2,135
Inventory 40 52 69 94 100 123 159 208
Account Receivables 14 26 59 32 60 74 91 104
Cash and Bank Balance 125 74 160 280 2,161 1,275 819 991
Others 180 251 397 531 547 629 724 832
Curr. Liab. and Prov. 399 732 968 1,260 1,575 1,466 1,927 2,464
Other Current Liabilities 169 248 283 224 199 219 240 288
Creditors 195 434 609 816 1,140 988 1,387 1,817
Provisions 35 50 76 220 236 260 299 359
Net Curr. Assets -41 -330 -284 -322 1,293 636 -134 -330
Appl. of Funds 6,585 6,572 8,237 10,717 12,707 12,985 14,197 16,260
E: MOFSL Estimates
16 July 2021 30
Burger King India
Financials and valuations

Ratios
Y/E March 2017 2018 2019 2020 2021 2022E 2023E 2024E
Basic (INR)
EPS -2.7 -3.1 -1.4 -2.6 -4.3 -1.6 0.1 1.7
BV/Share 13.9 10.8 9.4 9.9 17.6 16.0 16.1 17.8
DPS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Payout % 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Valuation (x)
P/E N/M N/M N/M N/M N/M N/M 2,224.2 95.5
EV/Sales 18.3 11.4 7.0 5.7 12.2 6.8 4.3 3.3
EV/EBITDA N/M 530.6 56.4 45.9 402.1 49.1 27.8 18.7
P/BV 12.0 15.3 17.6 16.8 9.5 10.4 10.3 9.3
Return Ratios (%)
RoE -19.5 -28.6 -15.3 -26.2 -24.7 -9.8 0.5 9.8
RoCE -13.5 -6.9 1.1 -0.7 -7.2 0.6 6.1 10.2
RoIC -11.1 -0.5 -1.4 -12.0 -0.6 5.9 10.7
Working Capital Ratios
Debtor (Days) 2 2 3 1 4 3 2 2
Inventory (Days) 6 5 4 4 7 5 4 4
Creditor (Days) 31 42 35 35 84 40 35 35
Asset Turnover (x) 0.3 0.6 0.8 0.8 0.4 0.7 1.0 1.2
Leverage Ratio
Debt/Equity (x) 0.0 0.0 0.4 0.7 0.0 0.0 0.0 0.0
Cash Flow Statement (INR m)

Y/E March 2017 2018 2019 2020 2021 2022E 2023E 2024E
OP/(loss) before Tax -718 -814 -386 -776 -1,738 -601 29 702
Int./Div. Received -23 -75 -83 -1 508 -141 -156 -171
Depreciation & Amort. 448 640 822 1,164 1,275 1,316 1,561 1,837
Interest Paid -265 -356 -448 -635 -763 -680 -794 -930
Direct Taxes Paid 1 4 2 2 5 0 0 35
Inc/(Dec) in WC 3 -201 -66 -108 -335 228 -314 -367
CF from Operations -33 305 865 1,127 1,139 1,025 2,542 3,630
Inc/(Dec) in FA -933 -866 -1,654 -2,275 -350 -2,552 -3,428 -4,029
Free Cash Flow -966 -561 -789 -1,148 789 -1,527 -886 -399
Others 0 1 0 0 25 1,514 1,526 1,538
Pur of Investments -1,285 993 515 209 -1,042 323 -90 -40
CF from Invest. -2,218 128 -1,140 -2,066 -1,367 -715 -1,992 -2,531
Issue of Shares 2,700 0 1,000 0 5,622 0 0 0
Incr in Debt 0 0 0 2,007 -1,985 879 1,183 1,397
Dividend Paid 0 0 0 0 0 0 0 0
Others -352 -484 -639 -948 -1,529 -2,074 -2,189 -2,324
CF from Fin. Activity 2,348 -484 361 1,059 2,109 -1,195 -1,006 -927
Incr/Decr of Cash 98 -51 86 120 1,881 -886 -456 172
Add: Opening Balance 27 125 74 160 280 2,161 1,275 819
Closing Balance 125 74 160 280 2,161 1,275 819 991
E: MOFSL Estimates
16 July 2021 31
Burger King India
Annexure
Annexure I: Food Service Industry
 According to industry estimates, the Indian FSI market was valued at INR4.2t in
Chain restaurants FY20 and is expected to touch INR6.5t by FY25E (9% CAGR).
market to see the  The organized sector of the Indian FSI comprises players that possess three
highest growth at characteristics: a) accounting transparency, (b) organized operations with quality
19% CAGR over
control and sourcing norms, and c) outlet penetration. The organized sector has
FY20-25E
been growing faster than the industry with its contribution increasing to 38% in
FY20 from 29% in FY15. It is expected to register a 15.4% CAGR over FY20-25E.
Consequently, its share is expected to increase further to 50% by FY25E.
 However, these numbers were estimated prior to the COVID-19 pandemic. We
expect the market to become more favorable for the organized sector in the COVID-
19 and post-COVID world due to: a) faster growth rates v/s unorganized players,
and b) shutting down of weaker restaurants. According to various experts, 30-40%
of restaurants across India are likely to shut down permanently in FY21.
Exhibit 56: Organized market to grow faster than industry… Exhibit 57: …leading to increasing share in FSI
CAGR CAGR
Organised Unorganised
FY15-20 FY20-25E
Unorganized market 5% 4%
50
71 62
Organized standalone market 13% 14%
Chain market 18% 19% 50

29 38
Restaurant in hotels 8% 6% FY15 FY20 FY25E
Source: MOFSL, Technopak Source: MOFSL, Technopak
FSI is highly urban centric

 India’s mega metros (Delhi and Mumbai) contributed 21.9%, while the top 29
cities contributed 53.5% of the total FSI revenues in FY20. In the case of chain
restaurants, the contribution of urban areas is sharply higher.
 However, for chain restaurants, the revenue contribution of smaller cities and
towns is increasing as the players are expanding to these geographies in order
to usher in their next phase of growth.
16 July 2021 32
Burger King India
Exhibit 58: Chain restaurants extensively urban centric
4.5
21.9 8.3
Mega Metros
Next 6 cities 42.4
46.5 Chain
FSI
Next 21 cities restaurants
20.8 Rest of India
44.7
10.9
Growth drivers
The growth drivers for Indian FSI include:
a) Increasing young population: According to the Economic Survey of India 2019-
65% 20, 62% of India’s population is in the 15-60 years age bracket with a further
30% under 15 years. India is poised to enjoy the benefits of a substantial
Population below
working age population for a long period of time. India’s median age is much
the age of 35
lower than that of China and other large economies.
Exhibit 59: India’s median age in 2022 is pegged at 28 years v/s 37 years for China
India median age in 2022E (years)
Japan 49
Western Europe 45
350m US 37
Size of India’s
China 37
middle class
India 28
Source: MOFSL, Media
b) Rising income levels: India’s middle class population has increased to 350m in
2019 from 160m in 2011. While COVID-19 has disrupted the Indian economy’s
growth momentum, the middle class population is set to swell further once the
economy reverts to the mid-single digit or higher growth trajectory. The
aspirational middle class seeks better services and experiences, thereby driving
consumption.
Frequency of eating c) Changing lifestyles with increase in frequency of eating out: Informal eating
out in Mumbai is 12 out is now a growing trend among Indians it is becoming more acceptable and
per month much affordable. There is also an increasing preference for ordering-in due to higher
below its benchmark
convenience and busy lifestyles. With a low monthly eating out frequency,
Asian city at 20 per
India’s per capita expenditure on meals outside the home is significantly lower
month
than that of other developing countries.
16 July 2021 33
Burger King India
Exhibit 60: Mumbai’s eating out frequency improving, but Exhibit 61: India’s per capita expenditure on meals outside
remains behind that of benchmark Asian city homes remains much lower than other developing countries
2003 2013 2018 Per capita expenditure on meals outside home in 2018 (USD)
US 1870
20
18
China 750
12.1
8.6 10
Brazil 745
3
India 110
Mumbai Benchmark Asian City
Source: MOFSL, WLDL Source: MOFSL, JUBI
d) Higher internet penetration: Internet penetration is rising at a fast pace, aided

by cheap mobile data. According to Kantar, the number of monthly active
internet users in India grew 24% YoY to 574m in 2019, with internet penetration
Chain restaurants at 41%, and is estimated to touch 639m in 2020. Internet access increases
market to see the consumer awareness of brands, trends and new cuisines, and also connects
highest growth at them to food aggregators and delivery apps. This is further accentuated by the
19% CAGR over rise of social media, which offers brands to communicate and engage with
FY20-25E
consumers directly.
Exhibit 62: Cost of 1GB mobile data (USD) in India is among the cheapest in the world
Nov'18 Feb'20 12.4
9.9
8.0
6.7 7.2
4.3
3.5
1.0 1.4
0.3 0.09 0.6
India China Brazil UK South Africa US
Source: MOFSL, cable.co.uk
e) Increasing availability of retail space: In view of the huge success witnessed by
639m food courts in malls, it is estimated that 20-25% of the total mall space was
leased to FSI players in FY18. Besides malls and high streets, FSI players have
Number of monthly expanded to other locations such as office complexes, educational institutes,
active internet users
highways, hospitals, etc. In the pre-COVID period, more than 2msqft of retail
in India
space was estimated to be added for FSI in the top seven cities over FY19-21.
f) Growth of online food delivery and food tech: There are two business models
in India, namely:
i) Direct restaurant-to-consumer, with orders placed on restaurant
apps/websites (e.g. Domino’s), and
ii) Platform-to-consumer, with orders placed on third-party platforms and
also delivered by them, barring a few exceptions (e.g. Swiggy/Zomato).
16 July 2021 34
Burger King India
India’s overall food delivery market is pegged to grow at 12.2% CAGR to

USD18.1b by FY25, led by a robust growth in platform-to-consumer. The growth
12% estimates got enhanced from 10% CAGR pre-COVID, due to consumers'
preference for food delivery over dine-in during this period of pandemic.
Expected CAGR of The online delivery market significantly adds to consumer convenience, while
India’s food delivery providing better reach, visibility, and consumer engagement for restaurants. In
marker over FY20-25E
order to develop the market, aggregator platforms offer deep discounts, further
pleasing consumers. In the COVID and post-COVID world, the role of online
delivery has become even more crucial as it offers assured safety along with
convenience to consumers.
Exhibit 63: Delivery market prospects enhanced due to COVID
Total delivery market post COVID-19
18.1
16.4
10.2
4.7
2016 2020 2025E
g) Urbanization and nuclear families: India’s urban population comprised 28%
34% of its total population in FY05, which increased to 34% in FY18 and is
estimated to touch 40% by 2030. At the same time, there has been an
Urban population increase in independent households and nuclear families. Urbanization and
nuclearization have led to a shift in consumption patterns. There is greater
consumption of outside food by these consumers on account of higher
convenience and changing lifestyles.
Annexure II: Westlife Development royalty rate schedule

The schedule was revised in FY21 amidst the COVID pandemic with 4% royalty rate
for FY21 being extended to FY22 as well, instead of being escalated to 4.5%.
Exhibit 64: WLDL’s royalty rate staggered to increase from 4% to 8% in FY27

Apr'19- Apr'20- Apr'21- Apr'22- Apr'23- Apr'24- Apr'25- Apr'26- Apr'30-
Mar'20 Mar'21 Mar'22 Mar'23 Mar'24 Mar'25 Mar'26 Mar'30 Mar'40*
Royalty rate (%) 4.0 4.0 4.0 4.5 4.5 5.0 5.0 8.0 8.0
*if extended Source: Company, MOFSL
16 July 2021 35
REPORT GALLERY Varun Beverages
RECENT INITIATING COVERAGE REPORTS
15 July 2021 1
Burger King India
Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
16 July 2021 37
Burger King India
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
16 July 2021 38

Whopper of An Opportunity: Burger King India

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Whopper of An Opportunity: Burger King India

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Company

Burger King India

Burger King India

BURGERKI offers an exciting investment opportunity in the Indian QSR space on

Complementary BK Café business to drive SSSG and margins

Rapid store network expansion to drive system sales growth

Capped royalty rate at 5% of sales offers comfort

Valuation and view

Exhibit 1: Target valuation

Exhibit 2: Comparative valuation

-39.3 92.0 95.5 109.7 103.1 51.6 84.4 111.7 120.7

Gross Margins (%) EBITDA Margins (%)

Source: Company, MOFSL Source: Company, MOFSL

31.7 77.9 48.0

Source: Company, MOFSL Source: Company, MOFSL

Huge opportunity in Indian FSI

QSR sector enjoys an edge

Competitive advantages for QSRs

12% Delivery gets a boost due to COVID-19

Exhibit 11: Delivery market prospects enhanced due to COVID

Total delivery market post COVID-19

2016 2020 2025E

Source: MOFSL, Technopak

Market Share by Outlet Count (%) Market Share by Revenue (%)

Burger King 4 Burger King 5

Source: MOFSL, Technopak Source: MOFSL, Technopak

(INR b) FY15 FY20 FY20 Market share (%)

58 Burgers & Sandwiches 30.9

Burgers & Pizza Chicken Indian Others Others 12.8

Recently-launched “barbell” product strategy to drive

Premium portfolio drives margins

Stunner Menu to become a strong growth engine

Source: Company, MOFSL

BK Café likely to be a game changer

5 37 75 111 149 190 223 224

SSS Growth (%)

Source: Company, MOFSL

 BURGERKI recently unveiled plans to introduce BK Café from 4QFY22 onwards

FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Source: Company, MOFSL

Rapid network expansion to drive high system sales

Vast market to absorb additional stores

Exhibit 23: BURGERKI’s store network is divided into six clusters

*as of 30 Sep’20 Source: Company, MOFSL

Change in geographic mix

Exhibit 24: Projected store distribution for CY26…

North West South East

Source: Company, MOFSL

Exhibit 25: …to reduce salience of North

North West South East

Source: Company, MOFSL

Capped royalty rate and agreement till 2039 offers

Royalty rate (%)

Ad spends to build brand awareness and equity

Rental costs to decline with increased brand recognition

BURGERKI’s delivery channel received a boost from COVID situation

Exhibit 30: Delivery channel sees higher salience during

Delivery Dine in Delivery Dine in

New Burger King app Tech initiatives strengthen business model

Peer comparison: BURGERKI to outperform on growth

Financial assumptions – Strong SSSG, rapid margin

Exhibit 48: Summary financials