India: After Stellar IPO, Mrs Bectors Food Lists At 74% Premium Over Issue Price

Ahead of the issue, analysts at Prabhudas Lilladher said that the stock is being offered at 28 times FY21 in comparison to 48 times FY21 earnings per share (EPS) for Britannia which provides a long term re-rating opportunity if it scales up the biscuits business.

“The company has reported strong margin expansion in first half, which seems unsustainable, although bounce back in institutional business will provide reasonable profit growth in FY22. We believe that Mrs Bectors Food is well placed to grow in the bread and buns business but needs to scale up in the biscuits business, given small size than Britannia, Parle and Sunfeast,” it said in a report.

Geojit Financial Services Ltd feels that over-dependence on the biscuits business and not having long-term contracts with its quick service restaurant (QSR) customers are key risks for Mrs Bectors Food. “At the upper price band of ₹288, the stock is available at a price to earnings of 22 times on FY21 EPS (annualized), which looks attractive, given its higher profitability compared to similar sized peers,” it said.

Part of the proceeds from the stake sale will be used to finance project cost towards Rajpura Expansion Project by establishing a new production line for biscuits. Promoters of the company including Anoop Bector, his family and a family trust own 52.40% in Mrs Bectors Food.

Mrs Bectors Food manufactures and sells biscuits primarily in the premium and mid-premium segment and the premium bakery segment in North India. It manufactures and markets a range of biscuits such as cookies, creams, crackers and digestives under its flagship brand ‘Mrs Bectors Cremica’.

It also manufactures and markets bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under the brand ‘English Oven’.

Biscuits contributed 59.20%, 68.26% and 60% of its revenue from operations for FY20, April to September 30, 2020, and April to September 2019, respectively. It also manufactures ‘Oreo’ biscuits and ‘Chocobakes’ cookies on contract basis for Mondelez India Foods Pvt. Ltd.

Mrs Bectors Food manufactures and sells a variety of bakery and frozen products such as buns, kulchas, pizzas, and cakes for QSR customers with pan India presence, cloud kitchens such as Rebel Foods Pvt. Ltd as well as PVR Ltd.

It is the sole supplier of burger buns and pan muffins (frozen) to Connaught Plaza Restaurants Pvt Ltd and Hardcastle Restaurants Pvt Ltd.

Mrs Bectors Food also sells various types of premium bakery products in savoury and sweets categories such as breads, buns, pizza bases, and cakes under the ‘English Oven’ brand, which caters to the premium segment in Delhi NCR, Mumbai and Bengaluru.

In its red herring prospectus, the company said that continuing effect of the covid-19 pandemic is a risk for the business.

“As a result of covid-19, in order to prevent the shortage of raw materials, we have maintained additional raw materials for our production. However, continued supply disruptions could exert pressure on our costs, and we cannot assure you that all or part of any increased costs can be passed along to our consumers in a timely manner or at all, which could negatively affect our business, results of operations and financial condition,” Mrs Bectors Food said in the RHP.