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BECTORS FOOD IPO NOTE (Apply)

Review By Rudra Shares & Stock Brokers Ltd on Dec 14, 2020

COMPANY OVERVIEW

Incorporated in 1995, Mrs. Bectors Food Specialities Limited is one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment in North India.

Company manufactures and market a range of its biscuits such as cookies, creams, crackers, digestives and glucose under its flagship brand 'Mrs. Bector's Cremica'. They also manufacture and market bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under its brand 'English Oven'.

⇒ The company supply its products to retail consumers in 26 states within India, as well as to reputed institutional customers with pan-India presence and to 64 countries across 6 continents during FY 2020.

Company's all products are manufactured in-house at their 6 manufacturing facilities located in Phillaur and Rajpura (Punjab), Tahliwal (Himachal Pradesh), Greater Noida (Uttar Pradesh), Khopoli (Maharashtra) and Bengaluru (Karnataka).

 Company has a strong distribution network in India and globally in the general trade and the modern trade segment. During the period between April 1, 2020 to September 30, 2020, the company distributed its biscuits across 23 states in India, through its widespread network of 196 super-stockists and 748 distributors supplying to wide range of customers through 458,000 retail outlets and 4,422 preferred outlets. They are also one of the largest suppliers of biscuits to Canteen Stores Department of GoI ('CSD') supplying in 33 locations across India and an approved and listed supplier for Indian Railways having strong presence across Railway Station Canteens and their stores in North India. 

According to Technopak Report, 'Mrs. Bector's Cremica' is one of the leading biscuit brands in the premium and mid-premium segment in Punjab, Himachal Pradesh, Jammu and Kashmir and Ladakh and 'English Oven' is the one of the largest selling brand in the premium bakery segment in Delhi NCR, Mumbai and Bengaluru.

They are the largest supplier of buns in India to reputed QSR chains such as Burger King India Ltd., Connaught Plaza Restaurants Pvt. Ltd., Hardcastle Restaurants Pvt. Ltd. and Yum! Restaurants (India) Pvt. Ltd.

 

Diversified product portfolio

Biscuits: In the recent past, we have launched new products such as 'Trufills', 'Premium Sugar and Classic Crackers', 'Pista Almond Cookies', 'Choco Chip Cookies', 'Honey Oatmeal Cookies' and for the period between April 1, 2020 to September 30, 2020, its  product portfolio for biscuits category consists of 384 SKUs. They  also manufacture 'Oreo' biscuits and 'Chocobakes' cookies on contract basis for Mondelez India Foods Private Limited.

Bakery Products: Company manufacture and sell a variety of bakery and frozen products such as buns, kulchas, pizzas and cakes to its QSR customers with pan India presence, cloud kitchens such as Rebel Foods Pvt. Ltd. since 2015, multiplexes such as PVR Ltd, as well as certain hotels, restaurants and cafés. They are the sole supplier of burger buns and pan muffins (frozen) to Connaught Plaza Restaurants Pvt. Ltd. and associated since the year 1995 and preferred supplier of burger buns and pan muffins (fresh) to Hardcastle Restaurants Pvt. Ltd. since 2007.

Recently, they have introduced new products such as sub breads, pizzas, garlic breads, cheese garlic bun fills, frozen cookies for its retail as well as institutional customers and during period between April 1, 2020 to September 30, 2020, its diversified product portfolio for their bakery segment consists of 118 SKUs

 

Impact of COVID on business

During nation-wide lockdown, company's Tahliwal Manufacturing Facility, Phillaur Manufacturing Facility, Rajpura Manufacturing Facility and Khopoli Manufacturing Facility were shut down for a period of around 3-6 days. The company typically maintain an inventory of raw materials for a period of 15-20 days due to which they have not faced any disruption in its manufacturing process during this period.

While there was an accelerated increase in sale of its biscuits and bakery products to its retail customers during this time, the sales of its products to their QSR customers, CSDs and Indian Railway canteens and stores were significantly impacted due to COVID-19 pandemic. While the sales of its products to its QSR customers and CSDs have improved, they continue to be adversely impacted as the operations of Indian Railway canteens are severely impacted.

There is significant increase in the consumption of packaged foods, which indicates an accelerated shift to packaged foods because of increasing quality and safety concerns amongst the customers due to the COVID -19 pandemic and increase in demand for leading Indian packaged food brands in the export markets due to lower cost of skilled labor and processing packaged foods as compared other jurisdictions.

 

FINANCIAL HIGHLIGHTS

During FY 2020, biscuits were exported to 64 countries. In the FY 2020, 2019, 2018, the period April 1, 2020 to September 30, 2020, and the period April 1, 2019 to September 30, 2019, revenues from export sales were Rs 167.65 crores, Rs 246.84 crores, Rs 229.06 crores, Rs  105.62 crores and Rs 76.08 crores respectively, representing 22.00%, 31.50%, 33.17%, 24.51%, and 20.87% of revenue from operations in such periods respectively.

For FY 2020, 2019, 2018, the period April 1, 2020 to September 30, 2020 and the period April 1, 2019 to September 30, 2019, revenue from operations was Rs 762.12 cr, Rs 783.66 cr, Rs 693.96 cr., Rs 430.99 cr and Rs  364.61 cr respectively.

Recorded a decrease in PAT by Rs 2.74 crores or by 8.28% from Rs 33.15 crores in FY 2019 to Rs 30.40 crores in FY 2020.

Company had consolidated cash and cash equivalents of Rs 17.24 crores as of September 30, 2020, Rs 2.30 crores as of September 30, 2019, Rs  20.69 crores as of March 31, 2020, Rs  5.52 crores as of March 31, 2019 and Rs  5.87 crores as of March 31, 2018.

As of March 31, 2020, had long term borrowings (including interests accrued) of Rs 113.35 crores and short term borrowings of Rs 18.05 crores and as of September 30, 2020, had long term borrowings (including interests accrued) of Rs 122.59 crores and short term borrowings is Nil.

 

CAPITAL STRUCTURE

The  share capital of Company, is set forth below:-

                                                                                                                   (Amount in Rs except share data)

Authorized Share Capital :-

   65,000,000 Equity Shares @10 Aggregate value Rs 650,000,000

Issued, subscribed and paid up capital before the Offer :-

   57,337,922 Equity Shares @10 Aggregate value Rs 573,379,220

Offer for sale: Equity Shares @ 10 aggregating up to Rs 500  cr 

Fresh Issue: Equity Shares @ 10 aggregating up to Rs 40.54 cr

 

 OBJECT OF THE OFFER

The funds raised through the Mrs. Bectors Food IPO are proposed to be utilized towards below objects:

ØTo finance the cost of Rajpura Expansion Project.

Ø To meet general corporate purposes.

 

THE OFFER

Issue Open : 15th December 2020 to 17th December 2020

  »»  Issue Type:  Book Built Issue IPO

    »»  Total Issue Size:  Rs 540.54 cr 

  »»  Fresh Issue: Equity Shares @ 10 aggregating up to Rs 40.54 cr  

  »» Offer for Sale: Equity Shares @ 10 aggregating up to Rs 500  cr 

       »»  Face Value:  Rs 10 Per Equity Share 

  »»  Issue Price:  Rs 286 - Rs 288 Per Equity Share 

  »»  Market Lot:  50 Shares 

  »»  Minimum Order Quantity:  50 Shares 

  »»  Listing At:   BSE, NSE

 

Growth drivers for processed and convenience food

?Changing lifestyles

? Increasing preference for branded and packed cakes

? Growth in organized retail

? Technological advancements

? Improved packaging solutions

? Innovation in ingredients

? Bakery Products in QSRs and Cafés

 

STRATEGIES AHEAD

?Focusing on growth in premium biscuits and bakery segment to improve margin

?Focus on product development in biscuits and bakery segments

? Expand the product reach in India and globally

? Expansion of the distribution network through diversification?

?Focus on increasing our brand awareness

 

STRENGTHS

?One of the leading brands in biscuits and bakery businesses in North India with an ability to establish brands

?A leading exporter of biscuits

?Established presence in retail and institutional bakery business

? Modern and automated production processes with a focus on quality control?

? Wide spread and established sales and distribution network

 

RISK FACTORS

Ø The outbreak of Corona virus, could have an adverse impact on the  business

Ø One of Group Companies, CAFL, has incurred losses in the Financial Year 2018 and may incur losses in the future

Ø Company have experienced negative cash flows (from investing activities and financing activities) in the past and may continue to have negative cash flows in the future.

Ø Foreign currency exchange rate fluctuations

Ø Company do not have any long term contracts with QSR customers and any disruption in business operations with QSR customers will adversely affect business, financial condition and results of operations.

 

 

 

 


Conclusion / Investment Strategy

MBFSL is one of the leading player in the premium & mid-premium biscuit and premium bakery segment in North India with market share of 4.5%. It has a wide spread and established distribution network with presence in 26 states. Further, company has maintained a high average gross margins of 44.35% for Biscuits which is higher compared to peers owing to its in-house manufacturing and 50.1% for bakery segment, in the past three years, looks encouraging. Besides, company introduced new products such as sub breads, pizzas, garlic breads, cheese garlic bun fills, frozen cookies to improve sales. Financially too, company looks attractive; has shown good CAGR revenue growth of 12% compared with 10% for Britannia in FY17-19. On working capital front, company has shown improvement by reducing overall working capital days from 33 days in FY18 to 25 in 1H FY21. Net debt also reduced from Rs 121.77 crores in FY18 to Rs 74.80 crores in 1H FY21, bringing down its debt equity ratio to 0.21 times. On an upper price band of Rs 288, with estimated EPS at Rs 14.03 for FY 21, the stock is available at a P/E of 20.52x, is justified compared to its similar sized peers. Hence, considering its future growth prospects in biscuits segment, we recommend to subscribe the issue for listing as well as long term perspective.

Reviewer recommends Subscribing to the issue.

Review By Rudra Shares & Stock Brokers Ltd on Dec 14, 2020

Review Author

Rudra Shares & Stock Brokers Ltd.

Rudra Shares & Stock Brokers Ltd. is Kanpur based brokerage houses offering services to Retail and HNI customers. Rudra Shares offer a range of financial services which includes institutional and retail brokerage of Equity, Currency, Commodities, Derivatives, Online Trading, Depository Services, Fixed Deposits, IPOs and Mutual Funds Distribution, Wealth Advisory and Research.

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