Bikaji Foods IPO opened today; all you need to know about the issue

The IPO of Bikaji Foods, the third-largest player with a 9 per cent share in the organised sweets market, opened for public subscription today on November 3. The price band has been fixed in the range of ₹285 to ₹300 per share for its ₹881 crore-initial share sale. The three-day Bikaji Foods IPO will close on November 7, 2022.

On the first day of bidding, the issue had been subscribed around 21 per cent by 12.06 pm. The Bikaji Foods IPO consists of 2.93 crore shares which will be a pure offer for sale (OFS) by its promoters and existing shareholders. This means that existing investors will be selling their shares in the IPO and the company will not receive any proceeds from the offer.

Both the company’s promoters Shiv Ratan Agarwal and Deepak Agarwal are among the shareholders looking to sell up to 25 lakh company shares each. Bikaji Foods is an established, fast moving consumer goods brand in the ethnic snacks market. It has a large pan-India distribution network.

Profile of Bikaji Foods

Incorporated in 1995, Bikaji Foods International, was founded by Shiv Ratan Agarwal, grandson of the founder of the Haldiram brand. The company’s most popular product is Bikaneri Bhujia, which contributes close to 35 per cent to the total revenue.

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Founded by Shiv Ratan Agarwal in 1986, it was originally incorporated as Shivdeep Industries Ltd. In 1993, the company’s name was changed to Bikaji Foods. The company’s product range includes six principal categories: bhujia, namkeen, packaged sweets, papad, western snacks and other snacks which primarily includes gift packs (assortment), frozen food, mathri range and cookies.

Besides snacks, the company is also a leading maker of packaged rasgulla, soan papdi and gulab jamun. In its red herring prospectus (RHP), the company said they are also the third largest player in the organised sweets market with annual capacity of 24,000 tonnes for packaged rasgulla, 23,040 tonnes for soan papdi and 12,000 tonnes for gulab jamun.

The objective of this IPO are to list equity shares on the stock exchanges and carry out the offer for sale.

Market on Bikaji Foods IPO

Brokerage Geojit in an IPO note wrote that taking into account the Bikaji Foods’ IPO’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, they assign a “Subscribe” rating on a short-term basis for high-risk investors.

Meanwhile, Motilal Oswal Financial Services in its IPO note said, “Bikaji with its industry leading position is well placed to capture the high growth snacks market. Upcoming new manufacturing facilities, expansion of distribution base and strengthening of product/geographic portfolio could propel earnings growth. Despite high competition, we expect Bikaji to do well given the strong positioning of its brand and products. However, it is valued at 98xFY22 P/E which seems expensive. Thus, we suggest investors to Subscribe for listing gains.”

Though, some experts pointed out that Bikaji Foods has posted declined margins for FY22 on higher sales and this margin pressure has scaled back the bottom line growth. And, they reiterated that considering the company’s FY23 valuations, the IPO is highly priced.

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Ahead of IPO, Bikaji Foods anchors ₹262.11 crore from investors

Ahead of its IPO, Bikaji Foods on November 2 mobilised ₹262.11 crore from 36 anchor investors ahead of its IPO.

In consultation with merchant bankers, the company 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 ₹300 for one.

Participants in the anchor book included the Singapore government, ICICI Prudential, HDFC Mutual Fund, Nippon Life India, Aditya Birla Sun Life, Whiteoak Capital, Blackrock Global Funds, Goldman Sachs, Morgan Stanley, Eastspring Investments, Neuberger Berman Emerging Markets Equity Master Fund, Max Life Insurance, Tata Mutual Fund, Carmignac Portfolio, Kotak Mutual Fund, Bay Capital and Edelweiss.

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Risks factors mentioned in RHP

Since Rajasthan, Assam and Bihar are Bikaji Foods’s core markets, with the three states accounting for over 70 per cent of its sale of food products, the company warns in the eventuality of any adverse developments in these states, their operations can be affected. And, this can lead to drop in sales and significant losses.

Fear of obesity among the general public, additional government regulations concerning marketing, labelling, packaging or sale of products, and negative publicity may hit demand or lead to a spike in the cost of the snacks, all of which can hurt the company’s profitability.

The company’s investments in unsecured debt instruments, their debt  profile ( Bikaji’s total borrowings stood at 156.9 crore on June 30), 25 criminal proceedings against the company, one tax proceeding, 24 statutory or regulatory proceedings and five material and civil litigations, including five criminal proceedings against the company’s directors and two statutory and regulatory proceedings are other risks mentioned in the RHP.

Listing Dates

The company will finalise the IPO share allotment on November 11 and refunds will be credited to bank accounts of unsuccessful investors by November 11. The IPO shares will be transferred to demat accounts of eligible investors by November 14.

Bikaji Foods will make its debut on the BSE and National Stock Exchange on November 16.