Bikaji Foods IPO opened for public subscription on Thursday (3 November), and the three-day issue will conclude on Monday. The price band for the IPO has been fixed at Rs 285-300 per share. The Bikaji Foods IPO consists of 2.93 crore shares in the public issue, which will be a pure offer for sale (OFS) by its promoters and existing shareholders. Since the IPO is completely an OFS, the company will not receive any proceeds from the issue. At the upper end of the price band, the IPO is expected to fetch Rs 881 crore. Bikaji Foods shares are commanding a grey market premium of Rs 75 on Thursday, according to people who deal in unlisted stocks.

Bikaji Foods International shares are expected to list on both BSE and NSE on Wednesday, 16 November 2022. Ahead of the IPO, the company garnered Rs 262.11 crore from 36 anchor investors. The company in consultation with merchant bankers has finalised the allocation of 87.37 lakh equity shares to anchor investors, Bikaji Foods said in its BSE filing. These shares were allocated to anchor investors at Rs 300 apiece. Out of total allocation to anchor investors, 36.83 lakh shares or 42.16 percent of anchor book were allocated to 10 domestic mutual funds through 17 schemes.

Should you subscribe to Bikaji Foods IPO?

“At 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 unorganized 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. Thus we assign a “Subscribe with Caution” rating for the issue.”

“In terms of valuations, the post-issue P/E works out to 98.5x FY22 EPS (at the upper end of the issue price band) which is in line with its peers like Prataaop Snacks Ltd, Nestle India Limited and Britannia Industries Limited. Further, Bikaji has better revenue/PAT growth over 2 years. Also, company has a very strong brand recall with the name “Bikaji” and pan india presence. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a SUBSCRIBE rating on the issue.”

“The snack industry is expected to grow at a CAGR of 13% in next four years and going by the past performance of the company we expect Bikaji to outperform the industry growth rate and hence we recommend SUBSCRIBE to the issue with a long-term view.”

“At the upper price band of Rs 300, Bikaji Foods is available at a P/E of 98.5x (FY22), which appears expensive compared to its peers. 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, we assign a “Subscribe” rating on a short-term basis for high-risk investors.”

“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. However, 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.”

“Bikaji Foods, with its strong market position across its diversified product portfolio, strong distribution, strategically manufacturing facilities, strong brand visibility and consistent financial performance is in a good position with healthy visibility going ahead. We recommend investors to SUBSCRIBE to the IPO.”

“The company has a strong management team and a significant percentage of promoter holdings. It generated strong revenue growth in the last 3 years where revenue improved from Rs. 1082.9 crore in FY2020 to Rs. 1621.45 crore in FY22. However, the company’s margins are on the declining side and a P/E valuation of 95.2 looks expensive. Finally, this issue is a complete offer for sale, and thus we recommend a Subscribe rating, but only for high-risk investors.”