Mrs Bectors IPO: How Do The Financials Stack Up?

By December 16, 2020 IPO No Comments

Mrs. Bector Food Specialties Limited (MBFSL) Rs 540.5 crore IPO opened for subscription on 15th December, i.e., yesterday. The company manufactures a range of products such as biscuits, bread, and buns. Furthermore, it markets its biscuit variety under the brand name Mrs. Bector’s Cremica and bread under the brand name English Oven. As of 30th June 2020, its Biscuit segment had a total of 384 items, while the bakery segment had a total of 96 products.

The biscuit and bread maker is also the largest supplier of buns in India to well-known QSR chains such as Connaught Plaza Restaurants Private Limited, Burger King India Private Limited, etc. More importantly, all its products are manufactured in the house across 6 strategically located units in 5 different cities.

The company is in the top 2 premium and mid-premium biscuits segments in various parts of India. Additionally, its premium bakery brand English Oven is among the largest selling brand in metros such as Mumbai, New Delhi, and Bengaluru.

It cornered a 12 percent market share in biscuit exports in CY19 while shipping to 64 countries. The company also boasts of a widespread and established distribution network with a presence in 26 states. They also manufacture Oreo biscuits and Chocobakes cookies for Mondelez on a contractual basis.

The IPO can be subscribed from this link: https://box.tradesmartonline.in/report/ipo

Company Profile

Biscuit Business

The management noted that the domestic biscuit business has grown at a compounded annual growth rate (CAGR) of 7.5 percent over FY18-FY20 despite facing constraints related to capacity in FY18 and some parts of FY19.

They primarily manufacture and market biscuits in the premium and mid-premium segments including a wide variety of creams, cookies, crackers, and digestives, accounting for about 59.2 percent, 68.26 percent, and 60 percent of the revenue from operation for FY20, H1FY21, and H1FY20 respectively.

The key competitors within this market include players such as Britannia Industries Limited, Parle Biscuits Private Limited, ITC Limited, Anmol Industries Limited, etc. The market shares are displayed below

Market Share of brands in the Biscuit Market

It also competes with regional players such as Surya Agro Food Limited and on a broader scale with regional bakeries in the unbranded biscuit sector.

Gross Margin for Biscuit business

EBITDA Margin for Biscuit Business

FY18 42.1 10.3
FY19 43.6 10.4
FY20 44.4 8.8
H1FY20 45 6.9
H1FY21 45.8 15.7

Source: DRHP, Tavaga Research

The company has one of the highest gross margins in the biscuit industry due to its in-house manufacturing and has averaged 44 percent over the past several years.

Bakery Business

MBFSL also manufactures and sells various types of premium bakery products in sweet and savory categories to retail customers including pizza bases, bread, buns, and cakes. The company primarily caters to the premium segment in Mumbai, Delhi NCR, and Bengaluru. The revenue from the bakery business accounted for 17.09 percent, 20.51 percent, and 16.05 percent of the revenue from operations for FY20, H1FY21, and H1FY20, respectively. The bread business has grown at a CAGR of 29.07 percent in the last three financial years.

They face competition in this market from players such as Britannia Industries Limited, Harvest Gold Foods India Private Limited, Modern Food Industries (India) Limited, etc. The overall bakery market in India is highly fragmented, with the unbranded players contributing as much as 45 percent of the value share in the overall bakery market.

Gross Margin for Bakery Products (in %)

The company had an average gross margin of over 51 percent over the past three and a half years.

EBITDA Margin for Bakery Products (in %)

Key Financial Numbers and Ratios

FY 2019

FY20

H1FY21

Revenue (Rs cr) 784 762 431
EBIDTA 96 93 72
PAT Adj 33 30 39
EPS 5.8 5.3 6.8
EV/EBIDTA 18.9 19.3 24.7
Return on Equity (ROE) 11.8% 9.3% 10.3%

Source: Company DRHP, Tavaga Research

The fall in revenue for FY20 was on account of a reduction in the export of biscuits to certain African countries due to political and financial instability in those jurisdictions and a reduction in the supply of bakery products to QSR customers in March 2020 due to the pandemic.

IPO Details

The subscription for the IPO opened yesterday. The Rs 541 crore public issue is priced in the band of Rs 286-288 apiece. The IPO would consist of a fresh issue of Rs 41 crore and an offer-for-sale (OFS) of Rs 500 crore by the existing investors. Ahead of the IPO Mrs. Bectors Food shares were seen trading at a premium of Rs 200-202 over the issue price of Rs 288 apiece in the grey markets. The shares were trading at Rs 409 apiece, implying a premium of around 70 percent.

Investors can apply for the IPO with a lot size of 50 shares for Rs 14,400. The subscription closes on the 17th of December and the listing will happen on the 28th of December. The shares will be listed both on the NSE and the BSE. 35 percent of the issue size is reserved for retail investors, 15 percent for non-institutional investors, and 50 percent QIB. Post the IPO the promoter’s shareholding will reduce marginally from 52.4 percent to 51.1 percent.

Mrs Bectors Food IPO Summary

Disclaimer: Tavaga has no recommendation on the ongoing IPO of Mrs Bectors Food Specialties Limited.

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