Bikaji Foods IPO open for subscription: Should you have a crispy bite of the issue?

New Delhi: The Rs 881-crore initial public offering (IPO) of Bikaji Foods International (BFIL) kicks off for subscription on Thursday, November 3. The company will be selling its shares in the range of Rs 285-300 apiece.

Bikaji Foods is India's third-largest ethnic snack company. The company's product range includes six principal categories: bhujia, namkeen, packaged sweets, papad, and western snacks among others.

The issue is entirely an offer for sale (OFS) of up to 29,373,984 equity shares with a face value of Re 1 each by existing shareholders and promoter group entities.

The issue is open for subscription till Monday, November 7. Investors can make a bid of a minimum of 50 equity shares and in multiples thereof.

Being entirely an OFS, the company will not receive any proceeds from the issue. The selling shareholders will be entitled to the entire proceeds, giving them a partial or full exit from the company.

As of June 30, 2022, the company sold more than 300 products under the Bikaji brand. The company exports products to 21 international countries, including North America, Europe, the Middle East, Africa, and Asia Pacific.

Bikaji Foods has six operational manufacturing facilities, including four facilities located in Bikaner (Rajasthan), one in Guwahati (Assam), one facility in Tumakuru (Karnataka) through the subsidiary Petunt Food Processors.

Its revenue from operations grew 23% to Rs 1,610.96 crore in FY22 against Rs 1,310.75 crore a year-ago. For the three months ending June 30, revenue from operations stood at Rs 419.16 crore, with a net profit of Rs 15.7 crore.

The company has reserved 50% of the shares for qualified institutional buyers, whereas non-institutional investors will get 15% of the shares. The remaining 35% of shares have been allocated to retail bidders.

JM Financial, Axis Capital, IIFL Securities, Intensive Fiscal Services, and Kotak Mahindra Capital Company are the bankers to the issue, whereas Link Intime India has been appointed as registrar to the issue.

Bikaji Foods International mobilised Rs 262.11 crore from 36 anchor investors ahead of its IPO as it allocated 87.37 lakh equity shares at Rs 300 apiece.

Government of Singapore, Whiteoak Capital, Blackrock Global Funds, Goldman Sachs, Morgan Stanley, Eastspring Investments, Neuberger Berman Emerging Markets, Carmignac Portfolio, Bay Capital and Edelweiss were among the anchor investors.

Majority of the brokerages remain positive on the issue but a few have flagged pricey valuations and a complete OFS issue as areas of concern.

Here is what a host of brokerage firms said about the initial public offering of Bikaji Food International:

Marwadi Financial Services
Rating: Subscribe with caution
Considering EPS of Rs 3.27 on a post-issue basis, the company is going to list at a P/E of 91.74x with a market cap of Rs 7,485.3 crore whereas its peers namely Prataap Snacks and Nestle India are trading at P/E of 306x and 83x.

"We assign 'subscribe with caution' rating to this IPO as the company is the third-largest ethnic snacks company in India with an international footprint. The IPO is richly priced and company will have to continue growing its business at high growth rate in order to justify its valuation which keeps us cautious from a long-term perspective," it said.

Geojit Financial Services
Rating: Subscribe
Considering its 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, Geojit Financial Services assigned a subscribe rating on the issue.

Religare Broking
Rating: Avoid
On the financial front, the company has seen strong growth. However, on the valuation front, it seems expensive, said Religare Broking as it suggested to avoid the issue.

"Bikaji plans to strengthen its presence by adding products and investing behind its brand," the brokerage added. It has cited intense competition in the Indian food market and expensive valuation as the key risks to the issue.

Hensex Securities
Rating: Subscribe
Hensex Securities has recommended a 'subscribe' rating to the issue both for listing gains and for the long term, citing its pan-India presence and exposure to 21 international countries in North America, Europe, the Middle East, Africa, and APAC.

"It has a strong topline growth and in the future, the sector has strong growth momentum as demand for this consumer-oriented packaged food category is on the rise," it added.

Choice Broking
Rating: Subscribe with caution
At the higher price band, Bikaji is demanding an EV/sales multiple of 4.5x, which is a premium to the peer average. The food market in which the company is operating is normally dominated by unorganized players, said Choice Broking.

"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," it added with a 'subscribe with caution' rating for the issue.

Angel One
Rating: Subscribe
The valuations are in line with peers including Prataap Snacks, Nestle India and Britannia Industries. The company has a very strong pan India brand recall with 'Bikaji' and presence across the country, said Angel One with a subscribe rating.

However, in its IPO note, it has cited evolving consumer taste & preference, ensuring superior product quality, and drop in demand for its key products as key concerns for the company.

AUM Capital
Rating: Subscribe for long term
Bikaji has a strong brand recall with a good distribution network. The company is planning to enter new markets. With its vast portfolio of products and strategic expansion of manufacturing capabilities across multiple locations, it said.

"The snack industry is expected to grow at a CAGR of 13% in the next four years and going by the past performance of the company we expect Bikaji to outperform the industry growth rate" it added with a 'subscribe for long term' rating.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)