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INTERVIEW: Home recipes that are set for a $73 million IPO⁠— Mrs Bector’s Food is no cookie cutter

Dec 15, 2020, 11:43 IST
Mrs Bectors
  • Mrs Bector's Food Specialities ₹540 crore initial public offering (IPO) is now open for public subscription.
  • The story of the company’s rise from a housewife’s backyard kitchen to become the supplier for marquee brands like McDonald's, Domino’s and Indian Railways is inspiring to say the least.
  • Analysts say the IPO has been priced at a significant discount compared to peers like Britannia, Nestle India, Prataap Snacks and DFM Foods.
  • Mrs Bector’s Foods holds 1% of the market size in the branded biscuit market in India.
A premium biscuit-maker and leading supplier of buns to fast-food chains like McDonald’s, the Indian Railways as well as government canteens, Mrs Bector’s Food Specialities ₹540 crore (about $73 million) share sale through an initial public offering (IPO) is now open for the public subscription ⁠— a day after another client of the company, Burger King, lifted the street’s spirits more than doubling investors’ money on debut.

And ahead of the IPO, the spirits are up for the owners, the analysts as well as the grey market where the premiums are 70% over the issue price band of ₹286-288 per share. Rajni Bector, the housewife who began baking as a small business in 1978 to kill time after her children left for college may not have dreamt of this day. Yet, it’s here.

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The legend goes that company’s flagship brand "Mrs Bector's Cremica" was born out of the Hindi phrase “cream ka” (made of cream) when Rajni used to sell ice creams. Her recipes became so popular that the initial investment of ₹20,000 is today a ₹1,000 crore business spanning countries. “Today as you know, we are one of the leading brands in biscuits and bakery business in North India, and we have established this brand from scratch. We hold a 4.5% market share in North India. We export 12% of the total biscuit exports from India,” Anoop Bector, Rajni’s son and the Managing Director of the company told Business Insider in an interview.
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Most of these exports go to North America, Africa and the Middle East. Within India, however, Cremica cookies are still a very small part of the market. Nonetheless, it’s a booming segment and the market is very hot.


The company plans to use the IPO proceeds for financing the project cost towards its Rajpura expansion project by establishing a new production line for biscuits.
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Here are the details of Mrs Bector's Foods IPO

ParticularsIssue details
Opens onDecember 15
Closes onDecember 17
Price band₹286-288 per share
Reservation for retail investors35%
Reservation for qualified institutional buyers50%
Reservation for non-institutional buyers15%

During the IPO investors can bid for a minimum of 50 equity shares and thereafter in multiples of 50 equity shares. The equity shares will be listed on both the exchanges — BSE and NSE.

Here’s why the analysts are excited

According to Angel Broking, Mrs Bector’s Foods IPO has been priced at a significant discount compared to Britannia Industries, Nestle India, Prataap Snacks and DFM Foods — and given the significant discount compared to listed peers there is “comfort” on the valuation.
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CompanyPrice-to-Earnings Ratio
Britannia Industries50.2 times
Nestle India85.6 times
Prataap Snacks57.1 times
DFM Foods97.6 times
Mrs Bector’s Foods27.9 times

The price-to-earnings (P/E) ratio is a metric used to value businesses, and it shows how much an investor is willing to pay for a share in future profit. It rises when the profits are more certain and are likely to be high—higher the P/E ratio, more the value of the company. According to analysts at Angel Broking, for Mrs Bector’s Foods, an investor is willing to pay ₹27.9 now for every rupee earned in profit a year down the line. And that is too small a price to pay, according to Angel Broking, and therefore the stock price is likely to gain as the fears recede.

And biscuits are flying off the shelves since the pandemic broke out. India’s largest biscuit maker, Britannia, clocked a growth of 9% in the number of biscuits sold where the gross profit margin was over 41%, at the end of the September quarter.

However, Bector’s is coming off three years of stagnation. While its revenue grew faster than its bigger peers, the profit has seen a decline in the last three years. “In FY20 there has been a certain reason like due to COVID we lost nearly one month of sales, we also had a one time cost of ₹7 crore — and if these core sales weren't lost our EBITDA would have been much higher. So going forward we are keeping our EBITDA stronger, and we have already shown our EBITDA stands at 17% in the first half of FY21. And, going forward, we are in a much stronger position in giving better results”.
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The business is hot and so is the competition

Although the company’s results were better than the industry in the first half of the fiscal year 2021, it faces several challenges from the branded and unbranded businesses. In India, most people still prefer cheaper, locally made cookies made by unorganised players more than the branded ones.

According to Axis Capital, “within the branded bakery market, they face competition from Harvest Gold Foods India, Britannia Industries, Modern Food Industries and Bonn Nutrients, which currently have the larger manufacturing capacity and larger market presence.”
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That aside, sales to some of its important buyers like the Railway canteens came to a halt when the trains stopped plying due to the lockdown and haven’t recovered in a big way.

And so, the company needs a plan B and, for that, more money and hence, the IPO. “We have invested a large sum of money over the last three years building our capabilities, and we have put up the imported lines for biscuits and bakery side. So our focus is on the premium and mid-premium segment of the biscuits,” Bector said.

“We are also increasing our distribution network. So, we are covering in North India nearly 4 lakh outlets, and there are a total of 25 lakh outlets approximately. And we have an immense amount of gap, although we have a 4.5% market share, we have a tremendous amount of gap to increase our market share. So we will continue to improve our distribution network ad to bring on brand quality for our customers,” he added.
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The recipe matters

In a tightly contested segment, differentiation becomes key. And Anoop is not just targeting people in specific regions, he is targeting their taste buds too. “We have products like Ajwain and jeera biscuits, which are usually in the traditional meals of the North Indian customers. So going forward I think we have a great product in place for Rajasthan, Haryana and other markets and our distribution reach will take us way forward with that,” he said.

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