Will Bikaji Foods spice up Dalal Street? Here's what brokerages say

The Rs 881-crore initial public offering (IPO) of Bikaji Foods International (BFIL) will kick off for subscription on Thursday, November 3. The company will sell its shares in the range of Rs 285 to 300 apiece.

Majority of the brokerages, which have rolled out their IPO notes, remain positive on the issue, but a few have a word of caution for investors.

Bikaji Foods International is India's third largest ethnic snacks company. As of June 30, 2022, the company sold more than 300 products under the Bikaji brand.

The valuations are in line with its 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, drop in demand of its key products as the key concerns for the company.

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

Some sellers in the offer for sale include promoters Ratan Agarwal and Deepak Agarwal along with investors like IIFL Special Opportunities Fund and Avendus Future Leaders Fund.

Being entirely an offer for sale, 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.

At a higher price band, Bikaji is demanding an EV/Sales multiple of 4.5x, which is premium to the peer average. The food market in which the company is operating is normally dominated by unorganised 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.

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

The company has reserved 50 per cent of shares for qualified institutional buyers, whereas non-institutional investors will get 15 per cent of shares. Remaining 35 per cent shares have been allocated for 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.

Hensex Securities has recommended 'subscribed' to the issue for listing gains and for long-term investment citing its pan-India presence and exports 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.

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