Primary markets end 2020 with a bang, Mrs Bectors closes at 106% premium

Mrs Bectors Food Specialties Ltd made a strong market debut on Thursday. The stock closed at 594.20, a whopping 106.31% premium over its issue price of 288. The stock was listed at 500, around 73.61% higher from its issue price.

This is the last stock market listing in 2020 and also one of three issues to see 100% jump on debut day. Burger King which debuted on 14 December made a listing gain of 125% while Happiest Minds on 17 September rose 123% on first day. Following a lull period in primary markets due to covid, consumer focussed companies mostly driven by retail investor enthusiasm saw strong markets listing in 2020. In this year 14 companies went public, out of which four were oversubscribed over 100 times while four stocks fell on first day of listing.

The initial public offering (IPO) of Mrs Bectors Food to raise upto 540.54 crore with a price band of 286 to 288 per piece was open for subscription in 15-18 December. The issue was subscribed 198 times.

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 Limited feels that over dependence on 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 stake sale will be used to finance project cost towards Rajpura Expansion Project by establishing a new production line for biscuits. Promoter of the company including Anoop Bector, his family and a family trust own 52.40% in Mrs Bectors Food.

Mrs Bectors manufactures and sells biscuits primarily in the premium and mid-premium biscuits 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 our flagship brand ‘Mrs. Bector’s Cremica’. It also manufactures and markets bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under our 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 Private Limited.

Mrs Bectors manufactures and sells a variety of bakery and frozen products such as buns, kulchas, pizzas, and cakes for quick service restaurants (QSR) customers with pan India presence, cloud kitchens such as Rebel Foods Private Limited as well as PVR Limited. It is the sole supplier of burger buns and pan muffins (frozen) to Connaught Plaza Restaurants Private Limited and Hardcastle Restaurants Private Limited.

Mrs Bectors 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 the 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,” it said in the RHP.

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