The initial public offer (IPO) by Bikaji Foods International will open for subscription on Thursday. The Rs 881.22 crore issue is purely an offer for sale (OFS) of 29,373,984 shares, which would be sold in the 285-300 price band. The lot size comes in at 50 shares. Retail individual investor can apply for up to 13 lots. Last heard, the issue was commanding a grey market premium (GMP) of Rs 75.
Analysts believe the asking IPO valuations are expensive, but they largely have a ‘subscribe’ rating on the issue due to Bikaji’s brand recall and better revenue and PAT growth as compared to peers over the last two years.
At the upper limit of the price band, the IPO is demanding a valuation of 98.5 times FY22 EPS, which appears expensive compared to its peers, said Geojit Financial Services.
That said, "Considering Bikaji's consistent top-line growth, industry leading position, future expansion plans, new product launches, investments in strengthening the brand recall and good future prospects for the packaged food business, we assign a 'Subscribe' rating on a short -term basis for high-risk investors," the brokerage said.
Choice Broking said Bikaji is demanding an EV/Sales multiple of 4.5 times, which is premium to the peer average.
"The food market in which the company is operating is normally dominated by unorganised players. This might be the reason for lower operating margin for Bikaji, despite so much value addition. In the current inflationary environment, we are cautiously optimistic on the sustainability of the profitability margins. We assign a 'Subscribe with Caution' rating for the issue," it said.
Angel Broking compared the asking valuations of Bikaji Foods with Prataap Snacks, Nestle India and Britannia Industries and finds the valuations 'in line'. It said Bikaji saw a better revenue and PAT growth over the last two years and also has a strong brand recall. This brokerage has a 'subscribe' rating on the issue.
Bikaji is the third largest ethnic snacks company in India. It has four manufacturing facilities, with a total manufacturing capacity of 400 TPD, producing 300 products such as Bhujia, Namkeen, papad, Western snacks and cookies amongst others. Bhujia accounts for nearly 35 per cent of its sales.
Overall, Bikaji operated in 23 states and four union territories as of June 30 and has market leadership in the ethnic snacks market in Rajasthan, Assam, and Bihar. It also exports its products to 21 international countries, which account for 3.2 per cent of its total sales.
Shiv Ratan Agarwal (up to 2,500,000 shares), Deepak Agarwal (up to 2,500,000 shares) India 2020 Maharaja (up to 12,110,967 shares), Intensive Softshare (up to 50,000 shares) and IIFL Special Opportunities Fund (up to 3,110,056 shares) are among selling shareholders of the issue.
Axis Capital, JM Financial, IIFL Securities, Kotak Mahindra Capital Company and Intensive Fiscal Services are the book running lead managers to the issue.
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