- Indian IPO seen at top of range
- IPO price implies 43% of group market cap
- Fast-growing Indian aviation market
Upper Crust operator SSP Group (SSPG) skipped 9% higher to top the mid-cap gainers after revealing a higher-than-expected IPO (initial public offering) price range for its Indian subsidiary TFS.
The gain takes the shares into positive territory for the year to date and up 29% over the last 12 months, comfortably ahead of the 7% advance in the FTSE 250 index.
SHARES PRICED AT UPPER END
TFS has set a price band for its IPO of between 1,045 to 1,100 rupees, giving the company an indicative market capitalisation range of £1.17 billion to £1.23 billion using the spot rate of 117.45 rupees to the pound.
That means SSP’s 50.01% share of TFS is equivalent to 43% of the group’s market capitalisation at the middle of the range. Shore Capital notes the price is at the upper end of its initial expectations.
‘We see the valuation (circa 40x implied earnings) as endorsement of the generational opportunity India offers and TFS’ market leading position, which is yet to be fairly reflected in the SSP share price in our view, trading on a current year price to earnings ratio of under 15 times and implying a look-through valuation to the rump of the group of under 10 times,’ explained analysts Greg Johnson and Clive Black.
FAST-GROWING MARKET
TFS has a market-leading position in the fast-growing travel market where it operates 442 quick service restaurants and 37 lounges across 14 Indian and three Malaysian airports.
India is third largest aviation market in the world and on track to be the fastest-growing air passenger markets among key economies.
The Indian company has 127 brands including a strong portfolio of in-house brands as well as international names like KFC, Domino’s Pizza and Wagamama.
Shore Capital estimates TFS currently accounts for around 15% of group earnings and is expected to build over time given the long-term attractions of the Indian aviation market.
In prior research Johnson and Black have laid out how TFS’s total addressable market is forecast to increase six-fold over the next decade to £3.1 billion.
TFS shares are expected to start trading on the Indian Stock Exchanges on 14 July with the final IPO price to be determined by a bookbuild process between 7 July and 9 July.
