Mrs Bectors Food grey market premium zooms 64% today; should you subscribe when IPO opens?

Mrs Bectors Food Specialities’ Rs 540-crore initial public offering (IPO) is set to open for bidding next week. The shares of the supplier of buns to quick service restaurant (QSR) chains such as McDonald’s, KFC and Burger King, were seen trading with over 64 per cent premium in the grey market today. The shares were trading Rs 185 higher at Rs 473 apiece over the issue price of Rs 288 in the grey market. Analysts believe that the current market conditions may favour the company on listing.

Also read: IPO Watch: Burger King, McDonald’s supplier Mrs Bectors IPO opens Dec 15; check price, bid details

Manthan Mehta, Head Unlisted & Private Equity Rurash Financial Services Pvt Ltd, told Financial Express Online that Mrs Bectors Food Specialities Ltd faces stiff competition, not only from national players such as Britannia Industries, Parle Industries, ITC and Anmol India Ltd, but also from regional bakeries in the unbranded biscuit sector. In the last 3 years, Mrs Bectors gross margins stood at the highest at 44 per cent, whereas key brand biscuits companies stood in the range of 35-39 per cent. Mehta said that at the upper price band of Rs 288, PE ratio comes at 21 of the FY21E EPS, which seems to be quite cheap in comparison to listed peers.

“Thus, looking at the growth opportunities and expansion plans of the company, we believe that the investors should apply for this IPO both for long term and listing gains of at least 40 per cent,” Manthan Mehta added.

More than a dozen of companies including Burger King India, SBI Cards and Payment Services, Rossari Biotech, Route Mobile, Happiest Minds Technologies, CAMS, Mazagon Dock Shipbuilders, Angel Broking and Gland Pharma have come up with their public issues so far this year. “In the first two-quarters of FY21, the company showed positive growth. Highly competitive industry and poor growth will stand against the company in the longer-term. Hence, investors might want to look at booking some listing gains,” Gaurav Garg, Head Research, CapitaVia Global Research Limited, told Financial Express Online.

A strong distribution network besides the quality of the products is of the essence for success in the consumer segment, Abhijeet Ramachandran, Independent Analyst/ Co-Founder and Trainer at Tips2Trade told Financial Express Online. Mrs Bectors Food is well known for its strong distribution network and robust business in northern India. However, their financials especially profit and ROE have been on a downward trajectory since the past few years indicating operational weakness. “Having said that, it’s IPO is attractively priced only from a short-term or listing gains perspective and after a while, new investors should enter at lower levels after a good market correction,” Ramachandran said.