mrs. ectors food specialities ltd

Mrs. Bectors Food Specialities Ltd

Issue Opens Tuesday, December 15, 2020

Issue Closes Thursday, December 17, 2020

Price Band (in Rs) 286/288

Bid Lot 50 shares and multiples thereafter

SNAPSHOT

Issue Opens Tuesday, December 15, 2020

Issue Closes Thursday, December 17, 2020

Price Band (Rs) 286/288

Bid Lot 50 shares and multiples thereafter

Face Value Rs10

Listing BSE & NSE

Type of Issue Offer for Sale & Fresh Issue

Offer Size (Rs Mn)

Fresh Issue 405

OFS 5,000

Total 5,405

*Implied Market Cap (Rs Mn)

16,919

P/E (based on FY21 Earnings TTM)*

27.9

*Note: Implied Market Cap & P/E are calculated at upper price band of Rs288

Issue Allocation

Reservations % of Net Issue

QIB 50

NIB 15

Retail 35

Total 100

Object of the Offer

Achieve the benefits of listing

To finance the cost of expansion of Rajpura project

To meet general corporate purposes

Please Turn Over Page No 1

IPO UPDATE

Mrs. Bectors Food Specialities Limited

Industry:

Global Biscuit Market: is estimated at Rs7,839bn (in 2020) and is projected to grow at a CAGR of 6% over next five years where rising urbanisation, increasing disposable incomes and demand for convenience foods will be the key drivers for growth.

Indian Packaged Food Market: Valued at Rs1,636bn, the Indian packaged food business has been growing in the last five years on account of rising incomes, urbanization, favorable demographics and changing lifestyle. The sectors retail revenue is estimated to grow at CAGR of 10.40% and was sized at Rs984bn in FY15. The shutting down of foodservice options led to a rise in the eating occasions at home and the demand for packaged foods surged in the first quarter of FY21. The shift towards packaged food, premiumization, competition amongst bigger brands, innovation and performance of smaller categories is powering growth within packaged food. Some of the key triggers for the growth include demographic change, rising domestic demand, shrinking family support structures, fast-paced work lives, gradual expansion of modern retail including e-commerce and government policies favoring growth of packaged food.

Exhibit 01: Global Biscuit Market Size (Rs bn)

Source: Company RHP, Progressive Research

Exhibit 02: Indian Packaged Food Market (Rs bn)


IPO UPDATE


Page No 2

Exhibit 03: Indian Biscuits and Bakery Market (Rs bn)

Please Turn Over

Industry: (contd.) The key emerging trends in India which are affecting consumers’ behaviors and consumption patterns include, shift towards packaged and branded products, traction towards premium products, convenience and healthy eating trends, emergence of modern retail and online grocery delivery platforms, growing necessity, convenience, increasing participation of women in workforce, experimentation with new brands & taste and influence of organized food chains. Indian Biscuits and Bakery Segment: Valued at Rs450bn and expected to grow at a CAGR of ~9% over the next five years, the Indian biscuits and bakery retail market is also poised to grow at a gradual pace. Biscuits and bakery products such as rusks, wafers and tea cakes contribute almost Rs400bn or 89% to the total market while the balance 11% is contributed by breads including loaves, buns, pizza bases etc. Growth drivers in Indian economy include higher income, changing lifestyle, QSR, growth in organized retail, technological advancements, improved packaging solutions, availability of products, affordability etc. The biscuit industry is composed of few large players, some regional brands as well as small scale industries. The biscuit industry is growing at a CAGR rate of over ~10% where the per capita yearly consumption in India is only 2.5 kg, compared to 10 kg in USA and Western European countries and more than 4.25 kg in south-east Asian countries. In the unbranded sector, there are about 75,000 bread manufacturers spread all over where the average per capita yearly bread in India is estimated at 1.4 kg compared to 96 kg in the UK and 46 kg in the USA.

Exhibit 04: Market Size of Brands in FY2020 (Rs380bn)



Exhibit 05: Bread and Buns Retail Market Size (in Rs bn)


Exhibit 06: Bread Sales Breakup (Financial Year 2020)



IPO UPDATE


Page No 3 Please Turn Over

About the Company: Mrs. Bectors Food Specialities Ltd (MBFSL) is one of the leading companies in the premium and mid-premium biscuit as well as premium bakery segment in North India. The product portfolio of the company mainly consists of two categories of products i.e. (i) biscuits including cookies, creams, crackers, digestive, etc. and (ii) bakery products including bread, buns, pizza bases, cakes, etc. The company manufactures and sells biscuits (384 items) under the brand name Mrs. Bector's Cremica while the bakery products (96 products) are manufactured under the brand name English Oven. MBFSL is one of the largest suppliers of buns in India to QSR chains like Burger King India Limited, Connaught Plaza Restaurants Private Limited, Hardcastle Restaurants Private Limited, and Yum! Restaurants (India) Private Limited. These products are offered in the premium market segments in major cities like Delhi NCR, Mumbai, and Bengaluru. These products are manufactured in 6 strategically located manufacturing units in 5 different cities i.e. Maharashtra, Karnataka, UP, Himachal Pradesh, and Punjab. The company is powered by a very strong distribution network of 154 super-stockists and 644 distributors supplying products through 4.58 lakh retail outlets and 3,594 preferred outlets. In addition to this, the company also exports its products under its own brand name and third-party private labels to over 64 countries. Competitive Strengths:

Leader in biscuits and bakery business in North India: in the premium and mid-premium biscuits segment and sells products under our flagship brand Mrs. Bector’s Cremica. In FY2020, the company had a market share of 4.5% of the premium and mid-premium biscuits (market in North India). The company focuses on the brand English Oven brand for manufacturing and selling bakery products.

Leading exporter of biscuits: with approximately 12% share of the Indian biscuit export market (in CY2019) with exports to 64 countries (March 2020). The company exports a variety of cookies, creams, crackers, some glucose biscuits while also manufacturing biscuits (for international retail chains) under their private labels.

Presence in retail and institutional bakery business: while selling premium bakery products in savory and sweet categories such as breads, buns, pizza bases, cakes etc. to retail customers under the brand English Oven. Mrs. Bectors is one of the largest suppliers of buns to reputed QSR chains like Connaught Plaza Restaurants Private Limited, (buns and pan muffins) to Hardcastle Restaurants Private Limited, Burger King India Limited, Yum! Restaurants (India) Private Limited and PVR Limited.

Automated production processes facilities: are located in proximity to the target markets, which helps minimize freight and logistics related expenses. Biscuits are manufactured at Phillaur, Rajpura and Tahliwal while breads and other bakery products including buns and frozen products are manufactured in our Greater Noida, Khopoli and Bengaluru. These manufacturing facilities are fortified with advanced equipment, modern technology and automated systems ensuring desirable quality standards

Robust sales and distribution network: help the company reach to a wide range of consumers in the northern states of India as well as urban and semi urban markets via a network of super stockists and distributors. The distribution network comprises of 196 super stockists and 748 distributors supplying through 458,000 retail outlets.

Experienced Management Team: and senior management have a wide experience and an in-depth understanding of the retail business, which also enables the team to identify new avenues of growth and implement business strategies in an efficient manner.

Exhibit 07: Business Category


IPO UPDATE


Page No 4 Please Turn Over

About the Company (contd.) Strategies focusing on

Growth: via expansion in premium products with higher margins, expansion of product portfolio, increasing sales realization and volumes

Product Development: and expansion of product portfolio are integral pillars to growth of the business while increasing the capacities

Increasing Brand Awareness: while continuously allocating resources to strengthen the brand Mrs. Bector’s Cremica and English Oven,

Expand Product Reach: while leveraging the brands and expand the presence in India as also increase the presence in export markets

Distribution Network Expansion: while having a vision for pan India presence and setting up adequate infrastructure for such expansion

The Management has been constantly looking at achieving sustainable earnings growth by

4 Pillars of Strength: include Domestic Biscuits, Biscuits Exports, Branded Breads and Institutional Breads

Augmenting Capacities: and Significant investments are made to set up new manufacturing facilities over the last 3 years

Premiumization: via Significant increase in the price realization of products across all business segments

Innovation & Product Development: has been at the forefront while introducing new and innovative products across various categories

Distribution Network: is continuously monitored on real time basis via in-house automation tool ‘Peri’

Professional Management Team: with strong industry experience and background

Financials: MBFSL has 2 major product segments i.e. biscuits and bakery products where bakery products garner higher Ebitda margins as compared to biscuits segment. The company's revenue increased from Rs6906mn in FY18 to Rs7621mn in FY20. For H1FY21, it reported net revenue to the tune of Rs4310mn as compared to Rs3646mn in H1FY20 and also an increase in net profit to Rs338.83mn in H1FY21 to Rs101.74 in H1FY20. MBFSL exported biscuits to around 64 countries during the end of the financial year and reported revenues from export of biscuits to the tune of Rs1,676.51mn in FY20 representing 22% of total revenue. H1FY21 revenue from export of biscuits stood at Rs1056.23mn as compared to Rs760.85mn in H1FY20. Price realization per from sales of biscuits (exports) has improved to Rs94.29 in FY20 from 81.04 in FY18. Margins in H1FY21 were seen in the range of 17% or so, while PAT margin stood at nearly 9% or so, the company does not intent to take any debt going further. The company has increased focused on higher margin products sale instead of focusing on volume driven sales. In FY20 the company has reduced exports to certain African countries which have political unrest, worsening socio-economic conditions and foreign currency restrictions. With a view to generate higher margins via premium products, the company has started looking at opportunities in emerging markets of Australia, Asia, Europe, East and South Africa, MENA and North America regions. In FY2020, the company had a market share of 4.5% of the premium and mid-premium biscuits (market in North India) while the same for Britannia was around 17%. In the long run, the company intends to follow the ethics as well as the distribution patterns of Britannia. The brand English Oven has shown a CAGR growth of 36% while that of the industry is around 9% as per the Management commentary.


Exhibit 08: Focused Strategy


Exhibit 09: Investments Made


Exhibit 10: Capacity Utilization

IPO UPDATE


Page No 5

Risks & Concerns:

Forex Fluctuations

Further impact of Covid-19, if any

Restriction in the use of the brand name

Negative publicity (of products)

Changes in consumer preferences Outlook and Recommendations: The company is currently more or less a regional player, however in times to come would try to explore opportunities in other states in India and try to compete with other players in the metro cities. In near future, the company also plans to set up a new manufacturing facility in Dhar (Madhya Pradesh), in order to cater/ serve markets outside North India, especially in Maharashtra and West Bengal. Management intends to focus on quality, product range and effective pricing which in the past has also helped them develop strong brand recognition and consumer loyalty. Strong and recognizable brand is a key strength in both the industries which Mrs. Bectors caters to while closely working with its institutional customers who require stringent quality standards and industry best practices in overall manufacturing processes. Knowing that the company is in an expansion mode now, the food industry has been doing well, the revival of the QSR and the bakery products can boost the revenues going forward post the pandemic, commanding 12% of exports market, having no challenges or constraints to launch new products with lot of room to grow the share in the existing outlets and fill the gaps in the number of distributions for generic as well as exclusive products, focus on premiumization, the stock is available at a trailing PE of around 27.9(TTM). We recommend a SUBSCRIBE from a long-term perspective and one could garner some listing gains as well.

Revenues (Rs mn) FY18 FY19 FY20 6M ending Sept,2020

Sales 6,906 7,837 7,621 4,310

EBITDA 855 961 928 721

EBITDA Margin % 12.4 12.3 12.2 16.7

Net profit After Tax 359 332 304 389

Net Profit Margin % 5.2 4.2 4.0 9.0

Earning Per Share 6.3 5.8 5.3 6.8

RoNW (%) 13.5 11.3 9.5 19.6

Exhibit 11: Financials Snapshot


IPO UPDATE


DISCLAIMERS AND DISCLOSURES- Progressive Share Brokers Pvt. Ltd. and its affiliates are a full-service, brokerage and financing group. Progressive Share Brokers Pvt. Ltd. (PSBPL) along with its affiliates are participants in virtually all securities trading markets in India. PSBPL started its operation on the National Stock Exchange (NSE) in 1996. PSBPL is a corporate trading member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE) for its stock broking services and is Depository Participant with Central Depository Services Limited (CDSL) and is a member of Association of Mutual Funds of India (AMFI) for distribution of financial products. PSBPL is SEBI registered Research Analyst under SEBI (Research Analysts) Regulations, 2014 with SEBI Registration No. INH000000859. PSBPL hereby declares that it has not defaulted with any stock exchange nor its activities were suspended by any stock exchange with whom it is registered in last five years. PSBPL has not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has its certificate of registration been cancelled by SEBI at any point of time. PSBPL offers research services to clients as well as prospects. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Other disclosures by Progressive Share Brokers Pvt. Ltd. (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 2014 with reference to the subject company (s) covered in this report-: · PSBPL or its associates financial interest in the subject company: NO · Research Analyst (s) or his/her relative's financial interest in the subject company: NO · PSBPL or its associates and Research Analyst or his/her relative's does not have any material conflict of interest in the subject company. The research Analyst or research entity (PSBPL) has not been engaged in market making activity for the subject company. · PSBPL or its associates actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report: NO · Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report: NO · PSBPL or its associates may have received any compensation including for brokerage services from the subject company in the past 12 months. PSBPL or its associates may have received compensation for products or services other than brokerage services from the subject company in the past 12 months. PSBPL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Subject Company may have been client of PSBPL or its associates during twelve months preceding the date of distribution of the research report and PSBPL may have co-managed public offering of securities for the subject company in the past twelve months. · The research Analyst has served as officer, director or employee of the subject company: NO PSBPL and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material. Our sales people, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses (if any) may make investment decisions that may be inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest including but not limited to those stated herein. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution publication, availability or use would be contrary to law or regulation or which would subject PSBPL or its group companies to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, the same may be ignored. Unless otherwise stated, this message should not be construed as official confirma-tion of any transaction. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of PSBPL. All trademarks, service marks and logos used in this report are trademarks or registered trademarks of PSBPL or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Terms & Conditions: This report has been prepared by PSBPL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of PSBPL. The report is based on the facts, figures and information that are considered t rue, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. PSBPL will not treat recipients as customers by virtue of their receiving this report.

Compliance Officer:

Mr. Shyam Agrawal,

Email Id: [email protected],

Contact No.:022-40777500.

Registered Office Address: Progressive Share Brokers Pvt. Ltd,

122-124, Laxmi Plaza, Laxmi Indl Estate, New Link Rd, Andheri West,

Mumbai-400053; www.progressiveshares.com | [email protected]

mrs. ectors food specialities ltd

Documents