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Mrs. Bectors Food IPO  Fundamental Analysis

Mrs Bectors IPO Company Strengths

  • One of the leading brands in biscuits and bakery businesses in North India with an ability to establish brands.
  • Investments made to develop an in-house automation tool “peri” which monitors the distribution network on a real-time basis.
  • Strong and long-standing relationship with some of the largest QSRs

Mrs Bectors IPO Company Challenges

  • Sustainability of revenue growth in the future.
  • Intense competition among the organised and unorganised players in the food service industry.

About Mrs Bectors Food

  • Incorporated in the year 1995, Mrs. Bectors Food Specialities Limited (hereinafter called as BFS) is in the business of manufacturing biscuits such as cookies, creams, crackers, digestive, and glucose. The products are sold with the brand of Mrs. Bector’s Cremica. BFS is also engaged in the manufacturing of bread, buns, pizza bases, and cakes under the brand English Oven.
  • Customers include retail consumers in 26 states within India, reputed institutional customers with pan-India presence, and 64 countries across six continents during the Financial Year ended March 31, 2020.
  • Mrs. Bector’s Cremica is the leading biscuit brand in the premium and mid-premium segment in Punjab, Himachal Pradesh, Jammu and Kashmir, and Ladakh and English Oven is one of the largest selling brands in the premium bakery segment in Delhi NCR, Mumbai, and Bengaluru. 
  • BFS is the largest supplier of buns in India to reputed QSR chains such as Burger King India Limited, Connaught Plaza Restaurants Private Limited, Hardcastle Restaurants Private Limited, and Yum! Restaurants (India) Private Limited.
  • The products are manufactured at in-house six manufacturing facilities located in Phillaur and Rajpura (Punjab), Tahliwal (Himachal Pradesh), Greater Noida (Uttar Pradesh), Khopoli (Maharashtra), and Bengaluru (Karnataka).
  • To minimize the freight and logistics related to time and expenses, the manufacturing facilities are strategically located in proximity to the target markets.

Mrs. Bectors Food Financial Review/Financial Performance

The financial performance of Mrs. Bectors Food has been consistent in the last three fiscals with the pandemic effect seen in FY20. Total revenues for FY20 reduced by 2.70% to Rs 764.98 crore from Rs 786.03 crore in FY19. The decline is attributable to a reduction in the supply of bakery products to QSR customers and a reduction in the export of biscuits to African countries.

PAT is showing a reducing trend in FY20 and FY19 when compared to corresponding last year. For FY20, PAT reduced by 10% to Rs 29.80 crore from Rs 33.18 crore due to the increased finance cost and depreciation cost. Operating margins have been consistent at 12% since the last three fiscals. Net margins are 3.89% and 4.22% for FY20 and FY19 respectively.

A rising trend is seen in the financial performance for H1FY21. For the six months, revenue from operations has increased to Rs 438.56 crore (20%increase) as against Rs 366.21 crore in H1FY19. This was due to the increased sale of products in domestic as well as export category and price revision undertaken in October 2019. The demand for packaged food has increased due to the COVID-19 pandemic. Operating and Net margins rose to 18.51% and 8.77% for H1FY21.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title H1FY20 FY2020 FY2019 FY2018
Total Revenue 438.56 764.98 786.03 695.76
Revenue from Operations 430.99 762.12 783.67 693.97
PAT 38.44 29.76 33.18 36.07
EBITDA 79.78 92.86 96.16 85.51
Total Assets 608.73 565.72 577.04 511.06
Cash and Bank 47.66 30.25 12.03 10.73
Cash generated from Operations 74.64 121.85 68.35 62.00
Operation Margin(%) 18.51% 12.18% 12.27% 12.32%
Net margin(%) 8.77% 3.89% 4.22% 5.18%

Peer Comparison

Table 3 - Peer Comparison (Amount in Rs Crore)
Particulars Nestle India Britannia Pratap Snacks DFM Foods Mrs Bectors
Face Value Per Share 10 1 5 2 10
Total Income for FY20 (INR Crore) 12615.78 11878.95 1403 514.72 764.98
Basic EPS 204.28 58.35 20.01 4.86 5.3
NAV per Share 200.41 183.09 259.24 29.03 55.76
Return on Net Worth 101.93% 31.65% 7.72% 16.79% 9.32%

Mrs. Bectors Food Valuation

The P/BV is 5.16 at NAV of Rs 55.76 as at 31st March 2020. At upper band price of Rs 288, P/E is 49.74 as against the industry average of 63.92.

Table 2- MRs Bectors Food Valuation
Valuation Parameters EPS P/E NAV Industry P/E Industry P/BV
. 5.31 49.74 55.76 63.92 5.16

Sectoral Outlook

The packaged food industry has seen sustainable growth in India due to the increase of packaged food consumption and awareness, and demand for quality products. Coronavirus outbreak is expected to have a positive impact on packaged foods due to rising consumer awareness.

As per RHP, according to the Technopak Report, the premium and mid-premium category biscuits market is expected to grow at a CAGR of 9.5% from FY20 to FY25. And the market for bread and buns retail market in India is estimated to grow at a CAGR of 9% from FY20-FY25. The outlook for the sectors remains promising although with high competition among the organized and unorganized players competing for the market share.

Conclusion

Mrs. Bectors Cremica is one of the leading brands in biscuits in North India and English oven is a growing brand in the bread segment. BFS has made substantial investments of approx. Rs 258 crore to increase the capacities which have resulted in increased sales volumes. Fresh issue proceeds are proposed to be utilized for a new production line for the biscuit segment. However, the financial performance has been stable since the last three fiscals with the rising trend seen in H1FY21. BFS’s capability to sustain this performance amidst the highly competitive food industry needs to be tracked. Hence investors may subscribe for the medium term.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 6th Dec 2020

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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