Mrs Bectors Food lists at 74% premium; should you book profit?

The initial public offering (IPO) of Mrs Bectors Food Specialities received huge response with public issue garnering 198 times subscription
Shares of Mrs. Bectors Food Specialities made a strong debut at the bourses on Thursday with stock of the biscuit and bread manufacturer listing at Rs 501, a 74 per cent premium against its issue price of Rs 288 per share on the BSE on Thursday. A minute into the debut, the stock surged to its maximum upper limit of 20 per cent at Rs 601.20, rising more-than-double the issue price on the BSE.

At close, Mrs. Bectors Food Specialities was quoting at Rs 595.5 apiece, a 106-per cent gain against the issue price. It touched an intra-day high of Rs 600 post the debut. 

The initial public offering (IPO) of Mrs Bectors Food Specialities received huge response with public issue garnering 198 times subscription and generated bids worth more than Rs 40,000 crore. The so-called high networth individual (HNI) portion saw 620 times more demand than shares on offer. The qualified institutional buyer (QIB) portion was subscribed 177 times and retail category saw nearly 30 times subscription.

The company manufactures and markets cookies, creams, crackers, digestives and glucose under its brand 'Mrs. Bector's Cremica'. They also manufacture and market bakery products in savoury and sweet categories under its brand 'English Oven'. Bector Food is the largest supplier of buns in India to quick-service restaurant (QSR) chains such as Burger King India.

The company has reported strong margin expansion in the first half of the current fiscal (H1FY21) which, analysts say, seems unsustainable. That said, bounce back in Institutional business will provide reasonable profit growth in FY22.

Brokerage firm Prabhudas Lilladher believes Bread and Institutional Buns business is a silver lining for Mrs Bectors given the strong share and the credibility it provides to the system and processes from being a supplier to McDonald's, KFC, Burger King and Rebel Foods. "We believe that MBF is well placed to grow in the bread and Buns business but needs to scale up in the Biscuits business, given smaller size than Britannia, Parle and Sunfeast," the brokerage firm said in an IPO note.

For the next few years, analysts at Angel Broking expect the domestic biscuit and bakery market to grow by 9 per cent due to urbanization, increase in disposable income, favorable government policy. On the other hand, the institutional Indian bakery industry is expected to grow by 20 per cent due to increasing market share of QSR chain.

"We think the company should be able to grow in line with the industry managed by the promoters having more than 25 years of sector knowledge. Company results were better than the industry in the first half of the fiscal 2021," the brokerage firm said in a note.

Should you book profit?

After a bumper stock market debut for Mrs Bectors, analysts advise taking some profit off the table in the short-term as shares have doubled from their issue price, and they believe there are better plays available in the FMCG space.

"A short-term investor can take profits off the table as their money has nearly doubled. As far as long-term investors are concerned, even they can book half portion of their profits because there are better options available in the FMCG space than Mrs Bectors at this valuations," said Keshav Lahoti, Associate Equity Analyst at Angel Broking.

Gaurang Shah, head investment strategist at Geojit Financial Services too believes that investors with a short-term view, having a low-risk appetite and those who invested from a listing gain point of view can book profits in Mrs Bectors.  

However, Shah believes from a long-term point of view the QSR segment could be an outperforming sector on earnings upgrade and thus investors with a long-term investment horizon should stay invested in the company.

The brokerage in its IPO note had said that it sees healthy future growth prospects in packaged biscuits and QSR segment.

Meanwhile, AK Prabhakar, head of research at IDBI Capital said that listing gains is the best thing about an IPO. He suggests that investors can wait for a few days for the stock to give a direction before booking profits.  "From a financial standpoint, Mrs Bectors is better placed than Burger King," Prabhakar noted.

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