India’s first restaurant chain IPO to be served up

The Rs 24-crore company plans to issue 55,00,000 shares of Rs 10 each which will constitute 52.42 per cent of the fully diluted post issue paid-up capital of the company. Promoter Narang’s stake will fall to 35 per cent after the IPO hits the markets.

But the company has not decided on the timing as the stock market regulator Securities and Exchange Board of India (Sebi) is yet to clear the issue. Interestingly, the company — which operates 16 outlets — has an accumulated loss of Rs 2.55 crore for the fiscal ended March 2004.

Analysts say it will be tough for the company to convince investors to put their money in a company whose business model has high failure record. Mars itself has closed 10 restaurants in Mumbai as they were unviable. ‘‘It looks like the issue is very small and the company requires money to meet its fund requirements,’’ says BSE broker Venkatesh Aiyer. ‘‘Its huge losses could be a dampner and risky for investors.’’

The IPO will be funding Narang’s expansion project to open more food courts across the country.

Among the risk factors, the company said it is being promoted by first generation entrepreneurs and the investments will be subjected to all risks associated with such ventures.

Besides, the company said the issue for which funds are being raised were its own estimates and have not been appraised by any financial institution and no monitoring agency has been appointed to monitor the use of funds. ‘‘The proposed expansion project is mainly funded by the public issue. Any delay in raising the funds from IPO may have an adverse impact on the future performance of the company,’’ it warned investors.

The company is yet to identify the locations for its proposed restaurants for which the present IPO is being made. The company has entered into agreements in respect of four premises and these agreements are due for expiry in September/November 2005. The non-renewal of the same would have adverse effect on the business of the company.