The $ 540 million initial public offering (IPO) of Ms. Bectors’ food specialties will open on Tuesday (December 15th) for three days. The price band was set at 286-288 rupees per share.
The IPO includes new share issues of Rs 40.54 crore and the sale offer of Rs 500 crore by existing shareholders. Linus Private Limited, Mabel Private Limited, GW Confectionary Pte Ltd and GW Crown Pte Ltd will offer shares in the initial sale of the shares.
The net proceeds of the issue will be used to finance the cost of the project to expand its Rajpura manufacturing facility by establishing a new production line for biscuits and general corporate purposes. In addition, the company aims to gain the advantage of listing on the stock exchange.
SBI capital markets, ICICI securities and IIFL securities will manage the IPO. The capital shares will be listed on BVB and NSE.
About the company
Ms. Bectors Food, established on September 15, 1995, is a premium biscuit maker and supplier of buns for restaurant chains such as McDonald’s. The company produces and sells a wide range of products such as biscuits, bread and buns. It sells a wide variety of biscuits and bread under the emblematic brand “Mrs. Bector’s Cremica” and “English Oven” respectively.
The company is one of the leading companies in the premium and mid-premium biscuit segment and the premium bakery segment in northern India.
The company supplies its products to retail consumers in 26 states in India, as well as reputable institutional customers with a pan-Indian presence and to 64 countries on six continents during the financial year ended March 31, 2020. For the distribution of biscuits, the company has a wide network of 196 supermarkets and 748 distributors that provide a wide range of customers through 458,000 retail outlets and 4,422 favorite stores.
According to brokerages, the company’s competitive strengths include: the company is a major exporter of biscuits, has established its presence in retail and bakery, boasts modern and automated production processes, with an emphasis on quality control and has a wide spread and established a sales and distribution network. In addition, the company has an experienced promoter and management team.
On the other hand, the company’s lack of long-term contracts with its QSR customers and its excessive reliance on the biscuit business are the main risks in the future.
Here’s what the major brokerages on offer suggest.
Angel Broking – Subscribe
For the next few years, we expect the domestic market for biscuits and bakery to grow by 9% due to urbanization, increased disposable income, and favorable government policy. On the other hand, the Indian bakery industry is expected to grow by 20% due to the increase in the market share of the QSR chain.
We believe that Ms. Bectors Food Specialties should be able to grow in line with the industry run by promoters who have more than 25 years of industry knowledge. The company’s results were better than those in the industry in the first half of fiscal year 2021. The company’s colleagues, such as Britannia Industries, Nestle India, Prataap Snacks and DFM Foods, trade at the final PE of 50.2, 85.6, 57 , 1 and 97.6, respectively. On the other hand, the company has a final PE price of 27.9.
Given the significant reduction compared to the listed colleagues, there is comfort in the evaluation. We are positive about the long-term growth prospects of the industry and the company and therefore recommend that you “subscribe” to the long-term issue as well as for listing earnings.
Prabhudas Lilladher – Subscribe
Ms. Bectors Food Specialties has a presence in the Biscuits and Bakeries segment under the Creamica and English Oven brands. Although the brand is well known in northern India, it has only 4.5% market share in key states. Given the 11% share from the present point of view, it suggests significant room for expanding the quota by increasing distribution. We notice that the company has improved the quality of the products over the years and has benefited from the fact that it was the contractual manufacturer of Oreo biscuits for Mondelez. We believe that the Bread and Institutional Buns business is a silver line, with a strong weight and credibility in the system and processes, from being a supplier to McDonald’s, KFC, Burger King and Rebel Foods.
The company reported a strong margin expansion in the first half of the year, which seems unsustainable, although the return to institutional activity will provide a reasonable increase in profit in fiscal year 22. We believe that MBF is well placed to grow in the bread industry and buns, but must expand into the biscuit business, having a smaller size than Britannia, Parle and Sunfeast.
The stock is offered at around 28xFY21 compared to 48xFY21 EPS for Britannia, which offers a long-term revaluation opportunity if the Biscuits business grows.
Geojit – Subscribe
At the top price range of Rs.288, MBFSL is available at a P / E of 22x on FY21E EPS (annualized), which looks attractive, given its higher profitability compared to colleagues of similar size. Given its future growth prospects in packaged biscuits and the QSR segment, we recommend a “Subscribe” rating with a long-term outlook.
LKP Research – Subscribe
At the price range higher than 288 rupees, the stock is valued at 28x TTM gains of 10.32 rupees, which looks quite attractive, given the brand’s equity, distribution network, strong fundamentals and solid growth prospects. We recommend that investors “SUBSCRIBE” for this IPO.