Bikaji Foods International IPO subscribed 67% on the first day

• The IPO of Bikaji Foods International was subscribed 0.67 times on the first day of bidding on November 3.
• The IPO received tepid response from retail and qualified institutional investors.
• The grey market is indicating a premium of over ₹75 per share.

FMCG company Bikaji Foods International opened its initial public offering (IPO) today on November 3 and will close on November 7.

The price band of the IPO is set at ₹285-300 a share.

On the first day, the issue was subscribed by 0.67 times. The IPO has received bids for 1.38 crore equity shares as against 2.06 crore equity shares on offer. However, the retail portion of the IPO was fully booked.

The company raised ₹262 crore from anchor investors to which mutual fund companies secured the biggest pie of the anchor book. About 42.16% of the total anchor book size was allocated to 10 mutual funds through 17 schemes amounting to ₹110.51 crore.

The shares of the company are currently commanding a grey market premium, or GMP, of ₹75 per share. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges.

Bikaji Foods’ products fall broadly into six categories – bhujia, namkeen, packaged sweets, papad, western snacks as well as gift packs (assortments), frozen food, mathri range and cookies.

Analysts had recommended subscribing to the IPO on a strong revenue growth trajectory in the last three years.

“The company has a strong management team and a significant percentage of promoter holdings. It generated strong revenue growth in the last 3 years where revenue improved from ₹1,082.9 crore in FY20 to ₹1621.45 crore in FY22. However, the company's margins are on the declining side and a P/E valuation of 95.2 looks expensive,” said a report by broking firm Swastika Investmart. The brokerage firm gave a ‘subscribe’ recommendation, but only for high-risk investors.

The FMCG brand has a strong presence in North and Eastern Indian markets with a wide range of ethnic snacks and namkeens. It is the market leader in the branded Bikaneri bhujia market. Lately, players such as Prataap Snacks, DFM foods, Pepsi and ITC have forayed into ethnic namkeen and snacks market.

“Company has an extensive distribution network in India with strategic arrangements with retail chains in India and international markets. Company’s growing e-commerce channel with significant multi-product export sales and consistent financial performance makes it attractive issue to deploy the funds in. Hence, we recommend Subscribe on the issue,” said a report by Hem Securities.

Bikaji Foods International is the third largest player in the branded Indian ethnic snack industry with 9% market share after Haldiram and Balaji.

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