StockAxis

Bikaji Foods International Limited - IPO Note

FMCG

Bikaji Foods International Limited - IPO Note

FMCG

Price range
Rs. 285-300
Issue Period:
Nov 03, 2022
Nov 07, 2022
Rating
Subscribe
November 03, 2022

Stock Info

Sensex
60846.14
CNX Nifty
18057.50
Face value (Rs.)
1
Market lot
50
Issue size
Rs. 881 cr.
Public Issue
2.9 cr. shares
Market cap post IPO
7485 cr.
Equity Pre - IPO
24 cr.
Equity Post - IPO
24 cr.
Issue type
Offer For Sale

Shareholding (Pre IPO)

Promoters
77.97
Public
22.03
Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Promoters
75.96
Public
24.04
Source: Ace equity, StockAxis Research

Company Description

Bikaji Foods International Ltd. was incorporated on 6th October 1995. It is the 3rd largest ethnic snacks company in India with international footprints. The company is the 2nd fastest growing company in Indian organized snacks industry (Source F&S report). The company was the largest manufacturer of Bikaneri Bhujia in FY22, with an annual production capacity of 29380 Tonnes and was the 2nd largest manufacturer of handmade papad with annual production capacity of 9000 Tonnes in FY22. (source F&S report). Under the organised sweets market the company had an annual capacity of 24000 tonnes for packed Rasgulla , 23040 Tonnes for Soan papdi and 12000 Tonnes for Gulab Jamun. Bikaji’s footprints on international grounds are vast with export to 21 countries namely North America, Europe, Middle East, Africa, etc.

Company’s business model includes both B2B & B2C segments. It’s diverse product portfolio is divided into three major categories Ethnic snacks, Western snacks and Frozen sweets & snacks. The five major products are Bhujia, Namkeen, packed sweets, Papad and western snacks including mainly chips and wafers. In states such as Rajasthan, Assam and Bihar it has witnessed market share of 45%, 58% and 29% respectively in FY22.

Manufacturing
Currently company has 7 operational manufacturing facilities with 4 facilities at Bikaner (Rajasthan), 1 in Guwahati (Assam), 1 in Tumakuru (Karnataka) and 1 in Muzaffarpur (Bihar).

Product – wise capacity utilisation

FY20 FY21 FY22 June 30, FY22
Products Average estimated annual capacity available (metric tonne) Actual production (metric tonne) capacity utilisation (%) Average estimated annual capacity available (metric tonne) Actual production (metric tonne) capacity utilisation (%) Average estimated annual capacity available (metric tonne) Actual production (metric tonne) capacity utilisation (%) Average estimated annual capacity available (metric tonne) Actual production (metric tonne) capacity utilisation (%)
Bhujia 45600 23801 52.20% 52372 29672 56.66% 57600 32055 55.65% 14400 8077 56%
Namkeen 67938 27504 40.48% 71133 30442 42.80% 77446 33144 42.80% 22380 9185 41%
Machine made papad 1200 317 26.47% 1896 449 23.72% 2400 405 16.88% 600 139 23%
Western snacks 10800 2902 26.88% 10800 3232 29.93% 12263 3331 27.17% 4650 152.9 32%
Packaged sweets 38173 11061 28.98% 47572 13384 28.13% 56734 15836 27.91% 14183 267.9 18.80%

Investment Rational

Leading player in the industry, with PAN India network
Bikaji is a well - established player ranked as 3rd largest player under ethnic Indian food snacks industry. They sell their products under the brand name ‘Bikaji’. Under this they have a diverse product portfolio covering Bhujia, papad, etc, ethnic Indian snacks which serves best to the taste of people at minimum possible prices. A major part of their sales is derived from sale of ‘Family packs’ , which constitute around 61% of total sales of the company in FY22. It is the market leader in family packs segment. The company has strategically built its brand Bikaji, where various product innovations are done in terms of packaging & advertisement to lure the customers from different parts of India and outside India. The advertisement expenses in FY20, FY21 and FY22 were Rs 36.78 Cr., Rs30.6 Cr. and Rs 29.1 Cr. which was 3.4%, 2.3% and 1.8% respectively of the total sales. Moreover Bikaji is the only Indian snacks brand which has brand ambassador as Amitabh Bachan.

Bikaji Foods International

Source: Company RHP

Bikaji Foods International

Source: Company RHP

Diversified product portfolio, designed to serve various consumers and regions
They have a well-defined understanding of Indian taste and preferences of customers. The company’s diverse product portfolio of 300 products. Under Western snacks segment company is not a major player of the industry but they are in progress of building a strong product base under this segment too. With quality and diversity in products company is not dependent on anyone product or segment for generating revenues. The company keeps innovating & exploring new avenues to diversify its product portfolio. For example during current year they have ventured into frozen foods segments, with frozen sweets and snacks. The company is in process of setting up a manufacturing facility in Bikaner to manufacture frozen products. This will de risk company’s dependence from ethnic and western snacks segment and will open doors of opportunity to a fast growing frozen segment. The company’s revenue is well spread over basket of 6-7 products with no over dependence on any one item.

Product FY20 % Sale of food products FY21 % Sale of food products FY22 % Sale of food products 30June FY22 % Sale of food products CAGR (FY20-FY22)
Bhujjia 347.9 32.46% 464.1 35.51% 560.1 34.96% 145.8 34.98% 26.87%
Namkeen 401.6 37.47% 480.5 36.77% 570.4 35.60% 163 39.18% 19.17%
Packed sweets 129.7 12.10% 160.5 12.29% 203.4 12.70% 31.5 7.57% 25.21%
Papad 82.2 7.67% 91.4 6.99% 107.3 6.70% 29 6.97% 14.24%
Western snacks 56.1 5.23% 65.7 5.03% 91.9 5.74% 36 8.64% 28.02%
Other snacks 33 3.08% 29.5 2.26% 40.4 2.52% 5.6 1.34% 10.54%
Others 21.2 1.98% 14.9 1.14% 28.4 1.78% 5.4 1.31% 15.69%
Total 1072.1 100% 1306.9 100% 1602.2 100% 416.8 100% 22.25%

Extensive distribution network on PAN-India basis, Export market and Retail & E-commerce channels
The company has large distribution network with 6 depots, 38 super stockists, 416 direct and 1956 indirect distributors that work with stockists located across 23 states and 4 union territories of India as of June 30 FY22. This has enabled the company to increase its customer base. The company primarily focuses on integrated inventory and distribution system which uses strategic approach across distribution channels, proper availability of stock with such sellers.

The company has engaged with modern retail channels such as supermarkets, hypermarkets and retail store chains, either through direct channels or through super stockists. Sales through modern retail chains for FY20, FY21 & FY22 accounted for Rs 71.6 Cr., Rs 77.6 Cr. & Rs 110 Cr., respectively. In International markets company has direct arrangements with the help of distributors with International retail stores.

Under E-Commerce platforms company has arrangements with various E-commerce platforms, start-up distributors and its own website www.bikaji.com. Sales through E-commerce channels in FY20, FY21 & FY22 accounted for Rs 2.9 Cr., Rs 10.2 Cr. & Rs 18.6., Cr respectively.

Channel FY20 % Sale of food products FY21 % Sale of food products FY22 % Sale of food products
General Trade 915.6 85.40% 1128 86.37% 1358.1 84.77%
Modern Trade 71.6 6.68% 77.6 5.94% 110 6.87%
Exports 46 4.29% 66.4 5.09% 63.7 3.98%
E-commerce platforms 2.9 0.28% 10.2 0.78% 18.6 1.17%
Others 35.9 3.35% 23.8 1.82% 51.6 3.22%
TOTAL 1072.1 100% 1306.9 100% 1602.2 100%

Peer Comparison

Name of the Company Total Income FY22 (In Cr.) Market Cap. EPS (Basic in Rs/ share) PE RoNW (%) M.cap/sales
Bikaji Foods International Ltd. 1610.00 7485.00 3.15 95.23 9.51% 4.64
Prataap snacks Ltd. 1396.00 2152.00 1.24 748.91 0.47% 1.54
DFM Foods Ltd. 554.00 1866.00 -4.93 -77.84 -16.21% 3.36

Note: Other significant but unlisted peers are Haldiram and Balaji Wafeers

Risks

  • Intensely competitive environment
    The company faces intense competition from domestic and multinational companies. The organised snacks industry operates in a highly competitive environment where price differentiation plays a key role. Major players of the industry are Haldiram, ITC, Balaji Wafers Pvt. Ltd. etc, are big competitors of the company.
  • Product innovation and strategic marketing
    Company has to consistently work towards building its diverse product portfolio which suits to the taste & flavour of customers from all parts of India. Under this kind of business marketing of products plays a huge role & needs heavy spends on advertising . Apart from this product packaging also impacts the sales of the companies to a great extinct & accounts for major expenses.

Valuation

Company has a strong business model, with consistent growth in its operations. Over the years Bikaji foods has established itself as a strong market leader in ethnic snacks industry. It has delivered consistent growth in its financial operations. Bikaji’s Bhujia has witnessed immense popularity in the market on PAN India basis. Now, the company is ready to venture into frozen foods segment, which will help the company to accelerate its growth. We believe Bikaji is direct play on India consumption story which has a long runway of growth ahead.

At upper band of IPO price Rs 300/ share asking valuation is 95.23x of its FY22 earnings and M.cap/sales of 4.64x .

We recommend subscribe rating.

Key Information

Use of Proceeds:

  • The offer is ‘Offer for sale’ of 29,373,984 equity shares of face value Rs1 in the price band of Rs 285-300. The issue size is between Rs 837 Cr. – Rs881 Cr. The bid size is of 50 shares and in multiple thereof.
  • The company wants to achieve the benefits of listing the Equity shares as it will enhance the brand value and visibility of their products. The offer is an offer for sale hence selling shareholders are solely entitled to the entire proceeds from the issue. The company will not receive any proceeds.

Book running lead managers:
JM Financial Limited Axis Capital Limited IIFL Securities Limited Intensive Fiscal Services Private Limited Kotak Mahindra Capital Company Limited

Management:
Shiv Ratan Agarwal ( Promoter, Chairman and Whole-time Director) Deepak Agarwal (Promoter, Managing Director) Rishabh Jain (Chief Financial Officer)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars FY20 FY21 FY22 30 June 2022
Equity share capital 24.31 24.31 24.95 24.95
Reserves 504.86 579.79 794.31 809.85
Net worth stated 529.17 604.10 819.26 834.80
Revenue from operations 1074.50 1310.75 1610.96 419.16
Revenue growth % - 21.98% 22.90% 25.48%
Gross Margin 30.68% 28.52% 27.35% 24.37%
EBITDA 94.60 144.77 139.54 30.79
EBITDA Margin 8.80% 11.04% 8.66% 7.35%
PAT 56.30 90.34 76.03 15.70
PAT Margin 5.25% 6.89% 4.72% 3.75%
Current asset ratio 2.19 1.45 1.80 1.77
Inventory turnover ratio 19.76 16.02 15.59 3.39
trade receivable turnover ratio 25.76 27.71 21.98 5.95
ROE 10.65% 14.89% 9.50% 1.94%
ROCE 12.79% 20.88% 13.89% 2.63%
Debt/ Equity 0.10 0.14 0.17 0.19