Ms. Bectors Food Specialties IPO opened for subscription Tuesday as investors prepared another public offering. Private investors, who received a strong response, oversubscribed the problem within an hour. The Rs 540 billion initial public offering consists of a new issue of Rs 40.5 billion, while the remaining Rs. 500 billion is an offer for sale (OFS) to existing shareholders in the company. Mrs Bectors Food is a well-known supplier of fast food (QSR) such as Burger King, McDonalds, KFC, Carl’s Jr., Pizza Hut, and even Dominos Pizza. Investors can subscribe for the issue at a price range of Rs 286 to Rs 288 per share.
Oversubscribe private investors
On the first day of the three-day subscription window, Ms. Bectors Food had already received 3.49 subscriptions. Retail investors have bid 6.44 times for their stake, while Ms. Bectors employees have bid 277% of their stake in the issue. Non-institutional investors are bidding for 1.25 times their stake while there were no QIBs on the first day of subscription.
Prior to the issue, Ms. Bectors Food raised 162 rupees from anchor investors at 288 rupees, the high end of the price range. Marquee investors who bought shares in Mrs Bectors prior to the issue include the Franklin India Smaller Companies Fund, Indian State Bank, Nomura Funds Ireland, Goldman Sachs, HDFC Life Insurance, Macquaries and the Abakkus Emerging Opportunities Fund.
The majority of the issue is an OFS through which existing investors sell part of their shares. Post-issue, the promoter’s stake in Ms. Bectors will decrease from 51.39% prior to the issue to 51.13%. The public share will increase to 48.87% from 47.61% before the issue. 50% of the issue is reserved for qualified institutional buyers (QIB), while 15% and 35% of the shares are reserved for non-institutional investors and private investors, respectively.
“At the higher price range of Rs. 288, Bectors Food is asking for a TTM P / E valuation of 28.6x, which is a discount to the comparative average of 62x,” said broker and research firm Choice Broking. The broker has a ‘subscribe’ rating on the stock. Analysts at ICICI Securities have not rated the stock, but note that it trades at a price / earnings ratio of 55.5x FY20 and EV / revenue of 2.3x FY20.
Financially, Ms. Bectors saw sales grow from Rs 695 billion in fiscal 2018 to Rs 765 billion in the previous fiscal year. Although revenue growth has declined slightly in the previous fiscal year, the industry Ms. Bectors operates in is expected to hit new highs as the economy recovers after a slowdown and pandemic. The Indian branded biscuit market is expected to grow 9.2% CAGR over the next five years, according to ICICI Securities.