Mrs Bectors IPO fully subscribed on day one; Retail, NIIs, and employees oversubscribe quota

Mrs Bectors Food Specialities initial public offering opened for subscription on Tuesday as investors geared up yet another public issue. Witnessing a strong response, retail investors oversubscribed to the issue within an hour. The Rs 540-crore IPO consists of a Rs 40.5 crore fresh issue while the remaining Rs 500 crore is an Offer For Sale (OFS) by existing shareholders of the company. Mrs Bectors Food is a well known supplier to quick service restaurants (QSR) such as Burger King, McDonalds, KFC, Carl’s Jr, Pizza Hut and even Dominos Pizza. Investors can subscribe to the issue at a price band of Rs 286-288 per unit.

Retail investors oversubscribe

On the first day of the three-day subscription window, Mrs Bectors Food has already been subscribed 3.49 times. Retail investors have bid for their portion 6.44 times while employees of Mrs Bectors have bid for 277% of their portion of the issue. Non-institutional Investors bid for 1.25 times their portion while QIBs were non-existent on the initial day of subscription.

Prior to the issue, Mrs Bectors Food raised Rs 162 crore from anchor investors at Rs 288, the upper end of the price band. Some of the marquee investors who bought stakes in Mrs Bectors ahead of the issue include, Franklin India Smaller Companies Fund, State bank of India, Nomura Funds Ireland, Goldman Sachs, HDFC Life Insurance, Macquaries, Abakkus Emerging Opportunities Fund, among others.

Bulk of the issue is an OFS through which existing investors will sell a part of their stake. Post issue the promoter shareholding in Mrs Bectors will drop to 51.13% from 51.39% pre-issue holding. Public shareholding will increase to 48.87% against 47.61% prior to the issue. 50% of the issue is reserved for Qualified Institutional Buyers (QIB) while Non-institutional investors and retail investors have 15% and 35% stake reserved for them, respectively.

Valuations

“At the higher price band of Rs. 288, Bectors Food is demanding a TTM P/E valuation of 28.6x, which is at discount to the peers average of 62x,” said brokerage and research firm Choice Broking. The brokerage has a ‘Subscribe’ rating on the stock. Analysts at ICICI Securities have no rating on the stock but find it to be trading at 55.5x FY20 price to earnings & 2.3x FY20 EV/sales.

Financially, Mrs Bectors has seen its revenue grow from Rs 695 crore in financial year 2018 to Rs 765 crore in the previous fiscal year. Although the revenue growth did take a marginal fall in the previous fiscal, the industry that Mrs Bectors operates in is expected to scale to new highs as the economy picks up pace after a slowdown and a pandemic. ICICI Securities said that India’s branded biscuits market is expected to grow at 9.2% CAGR in the next five years.