Bikaji Foods: Investors continue to snack on the stock that’s up 35% since listing

• The stock has been rising steadily since it’s listed at a 7% premium on November 16.
  
  
• Analysts had advised investors to ‘lock in listing gains’ in their pre-IPO notes.
  
  
• Indian savoury market is expected to grow at 13% CAGR over FY22-26 as compared to the 6% growth it has seen in the last seven years.
  

Shares of Bikaji Foods, well known for its Indian savouries like bhujiya and other namkeens, have been rising steadily since listing at a 7% premium on November 16. On Friday, the ninth day after its market debut, its shares are trading at ₹406 per share – that’s a 35% gain over its allotment price.

Bikaji’s market capitalisation stands at ₹10,133 crore, as of 10:40 am on Wednesday, as per BSE.

Started by Shiv Ratan Aggarwal, the grandson of Haldiram founder, Bikaji offers similar products of the flagship brand like bhujia, namkeen, mathri, packaged sweets, papad, western snacks as well as gift packs (assortments), frozen foods and cookies.

The interest for the company had been high during the IPO subscription phase, as it was subscribed at around 26.67 times amidst volatile market conditions. However, most of the interest was from institutional buyers who subscribed 80.63 times the IPO offer, while the retail portion was subscribed 4.77 times.

The large buyers’ interest had been high in spite of two key factors – IPO is a complete offer for sale wherein all the proceeds will go to the promoters and shareholders who were selling stake. That means none of the ₹881 crore raised will go to the company.

In addition, analysts had warned that the IPO had been priced too high.

“The company's margins are on the declining side and a P/E valuation of 95.2 looks expensive. Therefore, we advise investors to lock in listing gains, and only aggressive investors should consider making a long-term commitment to the company,” said Pravesh Gour, senior technical analyst at Swastika Investmart.

The sector in a growth phase

The company’s margins have been falling due to input cost inflation and rise in prices of edible oils in the last two years, but the sector has been on a growth phase.

“The company has grown revenue at 20% CAGR over a long period of time and expects similar trajectory to continue. The company expects to revert to normalized EBITDA margins as several raw materials have seen moderation and good crop of pulses is expected,” said a pre-IPO report on the company by Haitong.

Moreover, the sector is expected to exhibit steady growth going forward. Indian savoury market was valued at ₹75,100 crore in FY22 and is expected to grow at 13% CAGR over FY22-26 as compared to the 6% growth it has seen in the last seven years, according to a report by Haitong.

The growth projections for the organized players like Bikaji is even higher as it is expected to clock in 15% CAGR over FY22-26, as per the research report.

Bikaji Foods is the third largest player in the Indian branded ethnic snack industry with 9% market share after Haldiram and Balaji. Bikaji also has plans to expand other categories within the snack market.

“The management aims to scale the share of western snacks from 5-6% to 10% over the next few years. The company is not aiming for market leadership in western snacks, however the product range is complementary to traditional snacks and the channel is the same for both segments,” said the Haitong report.

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