Mrs Bectors Food Specialities IPO Day 2: Issue subscribed 4.2 times, retail portion booked 8 times

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The public offer of Mrs Bectors Food Specialities had been subscribed 4.2 times by the morning of December 16, the second day of bidding. The Rs 540.54-crore initial public offering (IPO) has received bids for 5.59 crore equity shares against an offer size of more than 1.32 crore equity shares (excluding anchor book), the subscription data available on the exchanges shows.

Retail investors and employees have shown interest in IPO as their reserved portions have been subscribed 7.83 times and 9.8 times, respectively.

The portion set aside for non-institutional investors has been subscribed 1.4 times and that of qualified institutional buyers 1.13 percent.

The issue comprises a fresh issue of Rs 40.54 crore and an offer for sale of Rs 500 crore by public shareholders. The price band has been fixed at Rs 286-288 per share.

Mrs Bectors Food Specialties IPO opens: Here are 10 key things to know

At the upper end of the IPO price band, "the issue is offered at 28.1x its trailing twelve months (TTM) earnings, demanding Rs 1,691.8 crore market cap, which we believe is quite reasonable. Further, its listed peers like DFM Foods and ADF Foods are currently trading at 50.5x and 24.9x respectively of its TTM earnings. We further believe that there is a good possibility of listing gains given lower valuations as compared to other listed peers," Anand Rathi said.

Further considering attractive valuation and strong future growth prospects in packaged biscuits, the brokerage recommended a subscribe rating to this IPO for the long term.

Mrs Bectors Food Specialties IPO opens: Should you subscribe?

Incorporated in September 1995, Mrs Bectors Food Specialities was formally known as Quaker Cremica Foods Private Limited. It is one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment in North India.

The company manufactures and markets cookies, creams crackers, digestives and glucose biscuits under its flagship brand Mrs. Bector's Cremica. it also manufactures bakery products in the savoury and sweet categories, including breads, buns, pizza bases and cakes, under the English Oven brand.

The company has six in-house manufacturing facilities in Phillaur and Rajpura, Tahliwal, Greater Noida, Khopoli and Bengaluru.

The company plans to use fresh issue proceeds for expansion of the Rajpura manufacturing facility in Punjab by establishing a new production line for biscuits.

For the next few years, Angel Broking expects the domestic biscuit and bakery market to grow by 9 percent due to urbanisation, increase in disposable income and favourable government policy.

On the other hand, the Indian bakery industry is expected to grow by 20 percent due to the increasing market share of QSR chain.

"We think Mrs Bectors Food should be able to grow in line with the industry managed by the promoters having more than 25 years of sector knowledge. The company results were better than the industry in the first half of the fiscal 2021," said Angel Broking.

Its peers such as Britannia Industries, Nestle India, Prataap Snacks and DFM Foods were trading at trailing PE of 50.2, 85.6, 57.1 and 97.6, respectively. "On the other hand, the company is priced at trailing PE of 27.9. Given the significant discount compared to listed peers there is comfort on the valuation," the brokerage firm said.

The brokerage is positive on the long-term growth prospects of the industry and the company, hence recommended that the issue be subscribed for the long term as well as listing gains.