Grill Splendour Services coming with IPO to raise Rs 16.47 crore

Grill Splendour Services 

• Grill Splendour Services is coming out with an initial public offering (IPO) of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share. 
• The issue will open for subscription on April 15, 2024 and will close on April 18, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 12.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Nikita Jawa.

Profile of the company

The company is engaged in the business of selling Bakery and patisserie food items through chain of Birdy’s store. The company is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. The company was incorporated in November 2019 as a hospitality company to acquire the bakery and confectionary business along with brand Birdy’s Bakery and Patisserie from WAH Restaurants. The acquisition was done via a Business Transfer and Intellectual Property Assignment Agreement dated December 27, 2019 (Acquisition Agreement). After that the company proceeded to invest in the business and grow the brand and spread presence. The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company vide above referred Acquisition Agreement. The primary focus of the Company was to bring back the quality and sheen of the brand. 

Its production facility is largely based on a manual production format. The food items are handmade by its chefs and they are of various varieties / sizes and types accordingly, there is no possibility to work out capacity. Hence capacity and capacity utilization does not apply to its business. It requires many ingredients viz. Chocolate, Premixes, Grocery, Whipping & Cooking Cream, Butter as raw material for which it supplies chain have a panel of listed negotiated vendors. These vendors supply all products like grocery, chocolate, dairy etc. Its major requirements are met through local vendors. 

The Promoters of the company, Srinidhi V Rao and Vandana Srinidhi Rao, individually have more than 30 years of experience in Hospitality industry. Its vision is to make available affordable experiential stores to meet every aspirational needs of individuals. Its Promoters inspirational leadership has led Grill Splendour Services (GSSL) to be recognised as one of the trusted food chains in its region. Further, the Company is managed by a team of experienced personnel. The team comprises of personnel having customer relationship, operational, marketing and business development experience.

Proceed is being used for:

• Funding additional working capital requirements
• Pre-payment/Repayment, in full or part, of certain outstanding borrowings availed by the company
• General corporate purposes

Industry overview

India’s food service sector is one of the vibrantly growing segment, which has witnessed noticeable growth in past few years. The sector, including both organised and unorganized segments, stands at Rs 4,23,865 crore in 2018-19. The sector is expected to reach to $79.65 billion by 2028, with a CAGR of 11.19%. Factors accelerating the progress of the food services sector include changing demographics, increase in disposable income, growing urbanization, increasing internet penetration and proliferation of online services. Also, young affluent couples with penchant for eating out are adding to the growth further.

According to a report, the market for food services in India is predicted to increase from $41.1 billion in 2022 to $79.65 billion by 2028, with a CAGR of 11.19%. According to the Food Service and Restaurant Business Report 2022-23 by Francorp and restaurantindia.in, the industry is predicted to employ 1 crore people by 2025, despite losing over 20 lakh jobs at the height of the COVID-19 pandemic. The country's restaurant and food service market is split into two segments, with the unorganised segment holding the lion's share of the market, according to the report, which also noted that the organised sector expanded rapidly between 2014 and 2020. The market for quick service restaurants (QSRs) in the country is predicted to be worth $690.21 million in 2022 and $1069.3 million in 2027, rising at a CAGR of 9.15%, according to the report's additional findings. The QSR chain market is anticipated to increase at a CAGR of 23% over the course of FY20–25, making it the fastest growing sub-segment overall in the food service industry.

Pros and strengths

Strong Brand recognition: The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company. The primary focus of the company was to bring back the quality and recognition of the brand. It did that over a period of last few years by a series of initiatives.

Chain of stores spread across Mumbai region: It is a chain of gourmet Bakery and Patisserie spread across Mumbai and Thane through 17 retail stores, a centralized production facility and multiple corporate clients. This presence helps it serves customer in major part of city and create satisfactory base of customers. The company after acquisition of Birdy’s brand has renovated more than half the shops. These shops now boast of seating, music ambience, table service, free library and freshly made food and beverages. These cafes attract a new category of customers called dine- in which was absent earlier.

Strong B2B customer relationships: Its quality of products and client relationships help the company to get repeat business from its B2B customers. Its client relationships also help it to cross sell its other products and services to them. Further it has been mutually value creating and stable association with its customers through products & services offered by the company. This has helped it creates a long-term relationship with its customers and improve its customer retention strategy. Through these efforts, it aims to become the ‘first choice service provider’ for all its customers for the products / services it offers.

Risks and concerns

B2B operations are subject to high working capital requirements: it started pursuing B2B business aggressively from end of last fiscal. Its B2B business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. It expects this to grow further in the coming years as it increases its focus on B2B business. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations.

Do not have long-term contracts with customers: It generates retail sales generally by its continuing relationships with its customers as well as walk-in customers. It does not enter in any long- term contract with any of its customers. It offers wide range of food products which are being sold under its stores operating under registered brand name ‘Birdy’s’. It has entered into agreements with most of its B2B customers and loss of any significant customers would have a material effect on its financial results. it cannot assure that the customers would renew their agreements or pay it in a timely manner or it would be able maintains the historical levels of business from these customers or that it will be able to replace these customers in case it losses any of them.

Operate in a highly competitive industry: The segments of the industry in which it operates are subject to intense competition. Its principal competitors are other established brands of the similar products it sells, including other major retail chains with well-established and recognized brands. If it is unable to compete successfully, its revenues or profits may decline or its ability to maintain or increase its market share may be diminished. It competes primarily on brand name recognition and reputation, customer satisfaction, quality of service etc. Some of its competitors are larger than it is in terms of size of operations and its competitors may also have greater financial and marketing resources than it does, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect its ability to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.

Outlook

Grill Splendour Services is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. On the concern side, it operates in a competitive market and competition is based primarily on quality of products and pricing of such products & services. To remain competitive in the market it strives to improve its sales & marketing efforts, reduce cost and improve operating efficiencies. If it fails to maintain its strengths, its competitors will gain an advantage over it, which would adversely affect its market share and results of operation. It faces competition from those who may be better capitalized, have longer operating history, have greater brand presence, and better management than it. If it is unable to manage its business, it might impede its competitive position and profitability.

The company is coming out with an IPO of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share to mobilize Rs 16.47 crore. On performance front, the revenue from operations for the FY 2023 is Rs 1,529.35 lakh as compared to Rs 1,150.49 lakh during the FY 2022 showing an increase of 32.93%. This overall increase in sales was mainly due to increase in B2B business during FY 2023. Profit after tax (PAT) increased from Rs 3.46 lakh for the FY 2022 to Rs 199.10 lakh in FY 2023. Meanwhile, the company will look to acquire brands of different styles that are scalable. These brands would offer popular cuisines in a casual dining format. This would enable them to have a lower real estate footprint. These brands would have processes where bulk of the production is done in the central kitchen and the restaurant kitchens are more final assembly/finishing areas. This would mean lower skill requirements and hence lower staff costs. It would also lead to consistency and ease of roll out.