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Bikaji Foods International IPO  Fundamental Analysis

Bikaji IPO Review

  • Bikaji is the third largest ethnic snacks company in India with an international footprint in the Indian organized snacks market. Its product range is well diversified and includes six principal categories: bhujia, namkeen, packaged sweets, papad, western snacks as well as other snacks which primarily include gift packs (assortment), frozen food, mathri range, and cookies.
  • It was the largest manufacturer of Bikaneri bhujia in FY22 with an annual production of 29,380 tonnes and the second largest manufacturer of handmade papad with an annual production capacity of 9,000 tonnes. It is also the third largest player in the organized sweets market with an annual capacity of 24,000 tonnes for packaged rasgulla, 23,040 tonnes for soan papdi, and 12,000 tonnes for gulab jamun.
  • Sales of family pack products stood at Rs 640.74 crore (FY20), Rs 818.59 crore (FY21), Rs 970.51 crore (FY22) and ? 223.62 crore (Q1FY22), respectively which represented 59.76%, 62.64%, 60.57%, 58.43%, and 53.64% of the sale of food products, respectively, in such periods.
  • The Issuer has developed a large pan-India distribution network. As of June 30, 2022, it had six depots, 38 super stockists, 416 direct and 1,956 indirect distributors that work with super stockists, located across 23 states and four union territories in India.
  • Bikaji has a deep penetration in core markets and has the following market share in states of Rajasthan (45%), Assam (58%) and Bihar (29%) of the total organized Indian ethnic snack category.
  • Companies in this sector face pressure on their margins due to an increase in their key raw material. palm oil. The companies enter into long-term contracts to mitigate this escalation in cost.
  • The Issuer has engaged Amitabh Bachchan as their brand ambassador. It launched Bikaji café and Bikaji funkeen brands to promote its western snack segment. In the year 2008, they set up a restaurant cum retail store “ Bikaji Food Junxon” in Mumbai.
  • The Issuer has seven operational manufacturing facilities with four facilities located in Bikaner (Rajasthan), one in Guwahati (Assam), one facility in Tumakuru (Tumkur) (Karnataka) held through subsidiary Petunt Food Processors Private Limited to cater to the southern markets in India and one facility in Muzaffarpur (Bihar) held through subsidiary Vindhyawasini Sales Private Limited to cater to the core market of Bihar, respectively.
  • In addition, Bikaji has entered into a contract manufacturing agreement on a nonexclusive basis with a contract manufacturing unit in Kolkata to cater to certain parts of eastern India, two contract manufacturing agreements on an exclusive basis with one of the Group Company, Hanuman Agrofood for a contract manufacturing facility located at Bikaner and with another third-party contract manufacturer for a contract manufacturing facility located at Kanpur.
  • The Issuer also has one small facility in Mumbai to manage Mumbai restaurant sales. Bikaji intends to operationalize two additional manufacturing facilities, of which one in Rajasthan will be operated by the company and will manufacture frozen snacks and sweets products. And it has entered into a contract manufacturing agreement for the manufacture of namkeen and western snacks for the remaining manufacturing facility in Bihar.

Financial Review

    The topline of the Issuer is showing an increasing trend and profitability margins have remained between 7%-11%.

    Bikaji posted total revenues of Rs 423.82 crore in Q1FY23 and PAT of Rs 15.70 crore for the same period. For FY22, income increased by 22.60% to Rs 1621.45 crore from Rs 1322.21 crore in FY21. However, PAT has reduced by 15% to Rs 76.03 crore from Rs 90.34 crore in FY21 because of an increase in the prices of raw ingredients and a rise in finance costs due to higher interest costs on borrowings and lease liabilities.

    Return on net worth has been 1.94% (Q1FY23), 9.53% (FY22), 14.93% (FY21), and 10.65% (FY20) respectively. Debt is 0.21x of equity as of 30th June 2022 which is on the lower side.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars Q1FY2023 Q1FY2022 FY2022 FY2021 FY2020
Total Revenue 423.82 337.08 1621.45 1322.21 1082.9
Revenue from Operations 419.16 334.05 1610.96 1310.75 1074.6
PAT 15.7 12.41 76.03 90.34 56.37
EBITDA 30.79 25.99 139.54 144.77 94.6
Total Assets 1146.28 871.96 1102.13 817.15 676.64
Net cash from operating activities 37.51 25.92 57.48 117.19 60.67
EBITDA Margin 7.35% 7.78% 8.66% 11.04% 8.80%
Net Margin 3.70% 3.68% 5.75% 8.34% 8.33%

Valuation and Peer Comparison

The IPO is priced at 115.38x with annualized EPS of 2.60 for Q1FY23 calculated at the upper price band of Rs 300. P/E is 95.24x when calculated with EPS of 3.15 for FY22. Peer average P/E is 204.42 as per RHP which indicates that the IPO is fairly priced. The peers of the Issuer are Britannia, Prataap snacks, DFM Foods and Nestle, peer data can be seen below:

Table 2 - Listed Peer Comparison
Parameters Prataap Snacks DFM Foods Nestle India Britannia Ind Bikaji
Face Value/share 5 2 10 1 1
Total Income for FY22 (Cr) 1396.62 554.45 14709.4 14136.3 1611
EPS 1.24 -4.93 222.46 63.31 3.15
NAV Per Share 266.17 30.38 216.2 105.37 32.83
Return on net worth 0.47% -16.21% 102.90% 60.08% 9.51%
P/E 748.91 -77.84 86.85 59.75 NA
CMP (31st Oct 2022) 926 381.85 20288.4 3790.35 NA

Issue Details

Bikaji IPO opens on 3rd Nov- 7th Nov 2022 with a price band of 285-300 per share. The retail quota is 35% and investors can apply with a minimum bid of 50 shares (Rs 15,000). The maximum lot size is 650 shares (Rs 1,95,000). The issue is an offer for sale by the promoter group, investor shareholders; India 2020 Maharaja Ltd., Intensive soft share, IIFL special opportunities Fund, and Avendus Future Leaders Fund. The issue is expected to list on 16th Nov 2022.

Conclusion and Investment Strategy

The organized snack segment has been strengthening its position in the market over the last few years, with new product launches and product innovations. The organized snacks market was valued at Rs196 billion in the year 2015 and is Rs 423 billion in 2022.

Western snacks still dominate the organized market with 57.2% of the market share in the Indian snacks segment. Ethnic namkeen and snacks contribute 26.9% followed by ethnic bhujia which is 15.9% in the overall snacks market in the year 2022.

Bikaji has a pan-India presence and also exports to 21 international countries in North America, Europe, the Middle East, Africa, and APAC. It has a strong topline growth and in the future, the sector has strong growth momentum as demand for this consumer-oriented packaged food category is on the rise. Hence considering these factors one shall subscribe to the IPO.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 27th Oct 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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