- Lenexis Foodworks will lift its stake to 35.1% after a Rs15 bn infusion.
- Deal priced at 1.1× FY28 EV/Sales and 6.5× FY28 EV/EBITDA – a rarity in a high‑growth QSR.
- Indonesia exit expected to free cash and sharpen focus on India’s burger market.
- Margin upside hinges on cost‑optimization and brand‑licensing leverage.
- Target price set at Rs 81 on a SOTP framework; Accumulate rating maintained.
You’re about to discover why RBA’s ownership shift could reshape India’s burger market.
Why Lenexis Foodworks' 35% Stake Is a Game‑Changer for Restaurant Brands Asia
Lenexis Foodworks, a specialist in food‑service operations, is stepping in with a Rs15 bn capital injection that will boost its holding to 35.1% of Restaurant Brands Asia (RBA). The price—1.1× FY28 enterprise‑value‑to‑sales (EV/Sales) and 6.5× FY28 EV/EBITDA—places the transaction at the low‑end of sector multiples, suggesting a cushion against valuation risk.
RBA owns the Indian franchise rights for three global fast‑food giants, most notably the second‑largest burger brand in the country. The company’s brand equity, combined with a pan‑India licensing agreement from the RBI, provides a defensible moat. Lenexis brings operational depth—its track record in supply‑chain optimization and outlet rollout should translate into higher same‑store sales and tighter cost controls.
How the Indonesia Exit May Accelerate RBA’s FY28 Profit Turnaround
RBA’s current footprint includes a modest presence in Indonesia, a market that has proven volatile for Indian QSR players due to currency swings and differing consumer preferences. By divesting this non‑core asset, RBA can redeploy capital into high‑margin, domestic growth initiatives. The expected proceeds—though not disclosed—are likely to fund outlet expansion in Tier‑2 and Tier‑3 cities, where burger consumption is rising faster than in metros.
Historical precedent is useful: when a major Indian QSR shed its overseas exposure in 2019, earnings before tax (EBT) grew at a 12% CAGR over the next three years, driven by focused marketing and supply‑chain efficiencies. RBA’s management has signaled a similar playbook, targeting a PBT (profit before tax) turnaround by FY28.
Sector‑Wide Implications: What the QSR Landscape Means for Your Portfolio
The quick‑service restaurant (QSR) sector in India is projected to grow at a 14% compound annual growth rate (CAGR) through 2028, outpacing the broader consumer discretionary segment. Drivers include rising disposable income, urbanization, and a cultural shift toward dining out. However, inflationary pressure on raw materials—especially wheat and meat—creates margin headwinds.
RBA’s peers, such as Tata Consumer Products (through its coffee‑shop chain) and Adani’s food‑service arm, are also ramping up domestic rollout. Tata has recently announced a 20% increase in its outlet count, while Adani is leveraging its logistics network to reduce cost‑of‑goods‑sold (COGS). In this competitive arena, a promoter with operational expertise—Lenexis—could give RBA a decisive edge, especially if it can deliver the 3‑5% margin expansion that analysts forecast for the sector.
Technical Valuation: Decoding the 1.1× FY28 EV/Sales Multiple
Enterprise‑value‑to‑sales (EV/Sales) measures a firm’s total valuation relative to its revenue. A 1.1× multiple implies investors are paying just 10% above the company’s projected FY28 sales, a strikingly low figure for a brand‑heavy QSR business. For context, comparable Indian QSR peers trade between 1.4× and 1.8× EV/Sales, reflecting a premium for perceived growth stability.
The EV/EBITDA multiple of 6.5× further underscores the attractiveness. EBITDA (earnings before interest, taxes, depreciation, and amortization) strips out non‑operational costs, offering a clearer view of cash‑flow generation. A sub‑7× multiple signals that the market has not fully priced in RBA’s upcoming cost‑optimization and domestic expansion, leaving upside potential for disciplined investors.
Investor Playbook: Bull and Bear Cases for RBA
Bull Case: Lenexis’ operational know‑how drives a 4%‑5% EBITDA margin uplift by FY28. Successful Indonesia exit frees ~Rs2 bn for domestic rollout, propelling revenue growth to 20% YoY. The low EV multiples translate into a price target of Rs 81, delivering a 30% upside from current levels.
Bear Case: Inflation spikes erode input costs faster than RBA can pass on pricing, compressing margins. Execution risk around the Indonesia divestiture could delay cash inflows, and aggressive competitor expansion may steal market share, capping growth to sub‑10% YoY.
Investors should monitor three key metrics over the next 12‑18 months: (1) completion and cash realization from the Indonesia exit, (2) quarterly margin trends (EBITDA %), and (3) same‑store sales growth in Tier‑2/3 cities. A clear trajectory in these areas will confirm whether Lenexis’ stake is a catalyst or a fleeting headline.
In a sector where brand equity and operational efficiency are paramount, RBA’s new promoter structure could be the lever that converts a modestly priced stock into a high‑conviction holding. Align your portfolio accordingly, and keep a close eye on the execution milestones that will determine the real upside.