Another week, another IPO. 2020 may have disrupted a lot of businesses worldwide, yet it has failed to demotivate companies to take a public route to raise funds. Mrs Bectors Food Specialities Ltd initial public offer will open on 15th December 2020. Let’s dig deeper and understand more about this IPO.
About the Company
Mrs Bectors Food Specialities Ltd was founded by Mrs Rajni Bector. She built this Indian company in 1978 by unveiling her passion for making ice creams, bread and biscuits. It is one of the few leading companies in the premium bakery segment. It is also present in the premium and mid-premium biscuit segment in North India. Thus, the company caters around two categories which are biscuits and bakery products. Few examples of products are bread, buns, pizza bases, cakes, cookies, creams, crackers, etc. Manufacturing and selling of biscuits take place through the brand “Mrs Bector’s Cremica”. Similarly, bakery products are sold via the “English Oven” brand.
It has 6 manufacturing units in India. They are present in Rajasthan, Maharashtra, Uttar Pradesh, Karnataka, Punjab and Himachal Pradesh. All of the products are manufactured in-house, thus, saving them from incurring additional cost. As of Q1 FY21, Mrs Bectors has 96 products and 384 products in its bakery segment and biscuits segment respectively. Apart from in-house manufacturing, Mrs Bectors has a strong distribution network as well. They have 154 super-stockists and 644 distributors. These distributors supply products through 458,000 retail outlets and 3,594 preferred outlets. They are also the largest supplier of biscuits to the Canteen Stores Department of Government of India across 33 locations in the country.
Interestingly, Mrs Bectors supplies buns to quick-service restaurant (QSR) chains such as McDonald’s, KFC, Burger King and Carl’s Jr among others.
Mrs Bectors has both, national and international presence. Its products are sold in 23 states around the country and are exported to 64 countries all over the world under its brand name and third-party labels.
About the IPO
The investors are allowed to bid only in multiples of 50 equity shares. The minimum and maximum bid for the IPO will be Rs 14,300 [Rs 286 x 50 shares] and Rs 1,87,200 [Rs 288 x 650 shares].
This IPO consists of two parts: a fresh issue and an offer for sale(OFS). As a part of OFS, which is money going to promoters, shares worth Rs 500 crore will be sold by Linus Private Limited, Mabel Private Limited, GW Crown Pte Ltd and GW Confectionary Pte Ltd. The biggest seller will be Linus Private Limited who is going to sell shares worth Rs 245 crore. All the qualified employees will get a discount of Rs 15 per share. Total shares worth Rs 50 lakh will be kept aside completely for these eligible employees.
India is still in a recovery mode after facing a huge economic contraction in Q1FY21 due to lockdown. Thus, a question arises: why is the company looking to take the public route during this tough period? Just like other companies, Mrs Bectors will use the proceeds to finance their projects related to expansion. The sum acquired will be used to fund its Rajpura expansion project. This project involves opening a completely new production line for biscuits. The money left after financing will be used for general corporate purposes like fulfilling short-term and long-term working capital needs. The equity shares of Mrs Bectors Food will debut on the markets on December 28, 2020.
As mentioned before, Mrs Bectors work closely with Burger King whose IPO hit the market on 2nd December 2020. Burger King’s IPO was a very successful event for the quick-service restaurant (QSR) as it was subscribed 156.65 times. Burger King’s IPO will also debut on the market on December 14, 2020.
Financial Overview of Mrs Bectors Foods
|30 September 2020||31 March 2020||31 March 2019||31 March 2018|
|Profit after Tax||38.88||30.40||33.15||35.89|
Mrs Bectors Foods’ profits have been declining for the last three years but are looking stable in the last few quarters. The main reason behind this is their intent to expand. Negative profits are very common for the company which is trying to grow. This year seems to be going financially well for the company. Till the end of Q2 FY21, the company has reported a revenue of Rs 438 crore and a profit of Rs 38 crore. Mrs Bectors’ strengths lie in its strong sales and distribution network. Also, their production plants are well-equipped with modern infrastructure which will help them in the long run. To prove how safe their products are, the company has acquired major food certifications of authorities like RC, USFDA, FSSAI and FSSC.
Their biggest competitors amongst the listed companies are Nestle and Britannia. A table below shows a brief comparison between the three companies.
|Company||Total Income ’20||EPS||ROE|
|Nestle India||Rs 11,600 crores||214||70%|
|Britannia India||Rs 12,369 crores||71.4||32%|
|Mrs Bectors Food||Rs 764 crores||4.93||10%|
IPO Details in a Nutshell
|IPO Date||Dec 15, 2020 – Dec 17, 2020|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price||Rs 286 to Rs 288 per equity share|
|Lot Size||50 shares (Rs 14,400 per lot)|
|Offer for Sale(goes to promoters)||Up to Rs 500 crore|
|Fresh Issue(goes to company)||Up to Rs 40.54 crore|
|Issue Size||Up to Rs 540.54 crore|
|Listing At||BSE, NSE|
ICICI Securities, SBI Capital Markets and IIFL Securities are the lead managers for the IPO.
Risk Factors for Mrs Bectors Foods
- Covid-19 forced the Indian government to implement nation-wide lockdown in March. Mrs Bectors closed its manufacturing plants only for 6 days and then reopened them as they service ‘essential goods’. Though their retail sales were not affected, their sales to QSR customers and Indian Railway canteen were affected as they were forced to close due to lockdown.
- As the company services in the Fast Moving Consumer Goods(FMCG) segment, the companies are required to constantly monitor customer’s changing taste and preferences. If they fail to adapt, customers will move to another brand in no time.
- The biscuits and bakery industry requires a lot of capital to meet expenditure. Thus, the company might be willing to incur debt in future. Thus, exposing themselves to interest rate fluctuations and other risks.
- Any adverse change in the macroeconomic policy by the government can cause disruptions in the company’s business. As the company requires a huge number of human resource, any type of strikes by the labours can affect its operations.
The Indian biscuits and bakery retail market is expected to grow at a CAGR of 9% over the next 5 years. The current biscuit market is dominated by Britannia Industries Ltd and Parle Products with a market share of 28% and 27% respectively. Currently, Cremica holds only 1% market share. The main reason behind low market share is that their products are present in only very limited markets. The more they expand, the greater the market share they will be able to capture.
The industry in which Mrs Bectors Food Limited is surely bound to expand in future. Keeping the positive industry outlook and the robust foundation of the company in mind, Mrs Bector Food does look like an exciting prospect. Let’s not forget how amazing returns Burger King was able to deliver. Their shares surged 131% from the issue price on its first day of trading. Can we expect Mrs Bectors Food to take a similar path?
I will be waiting till 2 pm on Thursday and look at how institutions portion is subscribed. Only if institutions are showing heavy interest will I go ahead and apply for a (hopefully) quick listing gain.
You can find the company’s red herring prospectus here. What are your thoughts on this IPO? Do let us know by commenting below.