Burger King India operator's shares zoom 20% to hit upper circuit; here's why

Shares of Restaurant Brands Asia, operator of Burger King India, rose sharply in Thursday's trade despite a weak quarterly show. The sudden jump in the share price came after news agency Reuters, citing a business channel, reported that private equity (PE) firm Everstone Capital is planning to sell its stake in Restaurant Brands Asia. Also, the Singapore-headquartered buyout firm is in talks with Jubilant Foodworks, which operates Domino's pizza in India, as well as a consortium of PE firms Advent International and General Atlantic, the report added.

The stock today soared 20 per cent to hit its upper price band of Rs 128.45 over a previous close of Rs 107.05. It eventually settled 14.34 per cent higher at Rs 122.40. The company commanded a market capitalisation (m-cap) of Rs 6,053.35 crore. As of March 31, 2022, Everstone Capital held a 40.90 per cent stake in Restaurant Brands through its investment vehicle QSR Asia Pte Ltd. The stake was worth around Rs 2,470 crore.

"Despite poor Q4 FY23 results due to a sharp increase in raw material costs, plans to sell and exit current business have led to a sharp uptrend in Restaurant Brands Asia stock price which is currently at a 6-month high. The news ensures a strong positive trend may persist but keeping this in mind, the stock price looked overbought on the daily charts with strong resistance at Rs 125. Investors should book profits at current levels and wait for a dip near support of Rs 100 to buy for better returns," said AR Ramachandran from Tips2trades.

The company's consolidated net loss widened to Rs 73.37 crore in the quarter that ended March 31, 2023, from Rs 67.07 crore a year earlier. Its revenue from operations increased nearly 29 per cent to Rs 514 crore as it opened a number of new restaurants over the past year.

"Restaurant Brands was very aggressive with its expansion plans. It wanted to double its store count in around two to three years and because of that the stock didn't perform much. Today's spike came on a buzz that Everstone is planning to offload its entire stake," a source, requesting anonymity, said.

On the technical setup, the stock traded higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 81.31. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a negative price-to-equity (P/E) ratio of 87.63. It has a price-to-book (P/B) value of 2.76.

Meanwhile, Indian equity benchmarks extended their losses for the third straight session, dragged by pharma, consumer and automobile stocks.

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