Mrs Bectors Food IPO opens Tuesday, grey market premium surges 70%; should you subscribe?

Mrs Bectors Food IPO, burger kingInvestors can apply for Mrs Bectors Food Specialities IPO with a lot size of 50 shares for Rs 14,400.

Mrs Bectors Food Specialities IPO is scheduled to open for subscription on Tuesday. The Rs 540-crore public issue will be sold in the price 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 PE investors. The company markets and sells a range of bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under the brand ‘English Oven’. Ahead of IPO subscription, Mrs Bectors Food shares were seen trading with Rs 200-202 premium over the issue price of Rs 288 apiece in the grey market today. The shares were trading at Rs 409 apiece, implying a premium of 70.13 per cent over the issue price.

Also read: IPO Watch: Burger King, McDonald’s supplier Mrs Bectors IPO opens Dec 15; check price, bid details

Investors can apply for Mrs Bectors Food Specialities IPO with a lot size of 50 shares for Rs 14,400. Being a flagship brand, Mrs Bectors Cremica is one of the leading biscuit brands in the premium and mid-premium segments across North India with a market share of 4.5 per cent and its bakery products brand ‘English Oven’ is also one of the largest selling brands in Tier-I & II cities with a market share of 5 per cent in the branded breads segments in India. The company caters to well-renowned brands such as PVR, Burger King, McDonald’s in India and has a budding exports business contributing to 22 per cent of its revenues. “Financially too, this company has shown strong revenue CAGR of 12 per cent compared to a 10 per cent CAGR by Britannia Industries in FY17-19,” Nirali Shah, Senior Research Analyst, Samco Securities, said.

Also read: Mrs Bectors Food grey market premium zooms 64% today; should you subscribe when IPO opens?

According to an IPO note by LKP Securities, Mrs Bectors Food has shown a robust improvement in its financials over the last three years on various parameters such as margins, cash flows, working capital and borrowings. The company has improved its EBIDTA margins from 12 per cent in FY18 to 17 per cent in H1FY21 with an overall improvement in the gross margins by 400bps over the same period.

Should you subscribe to Mrs Bectors Food IPO?

Nirali Shah, Senior Research Analyst, Samco Securities said that its free cashflows have improved from the previous year and its debt to equity ratio has also been on a decline despite the pandemic. Mrs Bectors trades at a lower valuation multiple of 53.9x-54.2x P/E compared to its peer Britannia Industries which is trading at a 62.3x P/E which makes it a good bet from a subscription standpoint. “However, a number of risks such as stiff competition, higher dependency on the north Indian market for growth and a premium category target market which might not appeal to the rural and semi-urban areas make Mrs Bectors a prime candidate solely for listing gains,” Nirali Shah added.

Analysts at LKP Securities said that at the higher price band of Rs 288, the stock is valued at 28x TTM earnings of Rs 10.32, which looks quite attractive considering the brand equity, distribution network, strong fundamentals and robust growth prospects. “We recommend investors to SUBSCRIBE for this initial public offering of Bectors Food Specialties Ltd,” it said.

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