Bikaji Foods International IPO

Published by Sharekhan Education | November 3, 2022

Amit Pathak | Sharekhan Education

Bikaji Foods International IPO

About the Bikaji Foods International IPO:

Issue size: ₹ 837-881 Cr
Price Band: ₹ 285-300
The issue opens on: Thursday, 3rd Nov’2022
The issue closes on: Monday, 7th Nov’2022

Company Overview:

Bikaji is one of the largest ethnic snacks companies in India. Its product ranges from bhujia, namkeen, packaged sweets, papad, western snacks, mathri, and cookies. The annual production of Bikaneri bhujia is around 30,000 tonnes. It has established market leadership in the states of Rajasthan, Assam, and Bihar. The company has Amitabh Bachchan as its brand ambassador. Bikaji’s founder and promoter, Shiv Ratan Agarwal has more than three decades of experience in this industry. His lineage traces back to Gangabishan Agarwal, founder of the Haldiram brand.

Objectives of the Issue:

The entire IPO is an offer for sale. The company will not receive any proceeds from the same. The company expects that the listing will enhance its visibility and brand image. The listing will also provide liquidity to its shareholders and a public market for its equity shares in India. The minimum application is to be made for 50 shares and in multiples thereon. Post allotment, shares will be listed on both BSE and NSE.

Industry Overview:

Indian snacks market falls within two categories – western snacks, and traditional snacks. Traditional snacks contribute around 48% of the total snacks market. The organized segment has about 55% market share. Due to demonetization and GST, many small and regional unorganized players shut down their businesses, which helped organized players gain market share. They have strengthened their position with new product launches and product & packaging innovations. The demand for regional snacks is increasing pan-India on account of urbanization and working population migration to different regions. The organized snacks market in India was INR 423 Bn in FY22 and is estimated to grow at 15% CAGR till FY26E.

Competitive Strengths:

Bikaji has given a novel twist to classic Indian snacks with a contemporary taste while maintaining regional flavors. The company has established its brand as one of the preferred home consumption snacking brands for Indian families. It is the market leader in the family pack segment (above ₹ 10 packs) garnering a 60.5% market share in FY22, reflecting the strength of its brand as a planned purchase product compared to its competitors, who focus on small packs with the impulse purchase decision. Bikaji’s manufacturing facilities are built for large-scale operations and are strategically located near the key raw material supplies. This strategy improves their distribution and supply of finished products, resulting in reduced freight and logistics-related time and cost.

Key Concerns:

Bikaji is dependent on the sale of its bhujia products. The product contributes approximately 35% to overall revenues. It exposes the company to product concentration risk. Inadequate or interrupted supply of raw materials & packaging materials and price fluctuation could adversely affect its business operations. The proposed capacity expansion plans are subject to the risks of unanticipated delays in implementation and cost overruns.

Financials:

The company has reported healthy revenue growth CAGR of 19.8% over FY18-FY22 and a growth of 9.1% in EBITDA over the same time. Despite the increase in raw material prices, the company managed an EBITDA margin of 8.7% in FY22. The ROCE/ROE for the company stood at 13.9%/ 9.5%, respectively in FY22. The post-issue P/E works out to be 98.5x FY22 EPS (at the upper end of the price band) which seems to be on the higher side. Investors with a short-term horizon should look at it for listing gains.

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