About the company:
Mrs. Bectors Food Specialties Ltd is coming up with an IPO offering of Rs.540.5 Cr consisting of Rs.500 Cr as Offer for Sale and a Fresh Issue of Rs.40.5 cr. The IPO is all set to open from 15th to 17th Dec and the price band is fixed at Rs.286 – Rs.288 per share for a lot size of 50 shares per lot bid.
Punjab-based Mrs.Bectors Food Specialties Ltd which was earlier known as Quaker Cremica Foods Private Limited was incorporated in 1995. It is one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment across North India. The company manufactures and markets a range of biscuits such as cookies, creams, crackers and digestives under its flagship brand ‘Mrs. Bector’s Cremica’. It is also into manufacturing and markets bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under the ‘English Oven’ brand. The premium biscuit maker supplies its products to retail and institutional customers in 26 states within India and to 64 countries across six continents. It is also the largest supplier of buns to reputed QSR chains in India such as Burger King India Limited, Connaught Plaza Restaurants Private Limited, Hardcastle Restaurants Private Limited, and Yum! Restaurants. A strong presence across Biscuit and Bakery products in domestic and export markets coupled with huge opportunities in Institutional bakery business suggests good listing gains opportunity for this IPO. Given the fair valuations of 53.9x (Lower band) – 54.2x (Upper band) it currently trades at when compared to Britannia (62.3x), investors can subscribe to this IPO for listing gains only.
Financials:
The company has delivered strong revenue CAGR of 12% during FY17-FY19 as compared to 10 percent CAGR for Britannia. However, the revenues remained largely flat in FY20 due to marginal impact of COVID-19 but in H1FY21 revenues across domestic & export biscuit businesses grew by 32% and 39% YoY respectively. In the same period, its branded breads business also grew 51% YoY. In terms of its margins the company recorded highest ever PAT & EBITDA margins of 9% and 17% respectively in H1FY21 due to lower operational costs and other savings. The company’s gross margins stood at 44.3% (3 month’s average) compared to 39.3% by Britannia and 35.9% by Parle in the same period. Despite the pandemic, its balance sheet shows sufficient cash and a reduction in its debt to equity ratio. With healthy return ratios, Mrs. Bectors is a sound company to invest in at the current moment through the primary market.
Risks:
• High Competition from Regional and Branded players
• Low pricing and margins to compete with regional brands
• Expansion beyond core region (North India) remains a concern
• Lacks high customer recall value
But despite the various risks, the positives seem to be in favour of the Company and hence investors can subscribe to this IPO for listing gains only.
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