McDonald's and Burger King supplier Mrs Bectors Foods files for a Rs 550 crore IPO

Premium biscuit-maker and supplier to fast-food chains like McDonald's and Burger King, Mrs Bectors Food Specialities, has filed a draft red herring prospectus (DRHP) with Securities and Exchange Board of India (SEBI) to raise nearly Rs 5,50 crore via an Initial Public Offering (IPO).

This is the Ludhiana-based firm's second attempt at an IPO. It made an attempt in 2018 and had secured SEBI's approvals but chose to defer the plans. The move now comes on the back of a sharp surge in the demand for packaged food items during the lockdown.

The company manufactures and markets a range of biscuits under its  flagship  brand ‘Mrs.  Bectors  Cremica’ and its bakery products under the brand ‘English Oven’.

Mrs Bectors is backed by private equity funds CX Partners and Gateway Partners. Both PE firms plan to make a partial exit through the proposed IPO. The promoters hold 52.45 per cent stake, while  the private equity investors CX Partners and Gateway own 46.75 per cent stake.

The IPO comprises a fresh issuance of shares worth Rs 50 crore and the offer of sale component by existing shareholders is for Rs 500 crore. The proceeds of the IPO will be used for growth capital linked to the firm’s manufacturing unit at Rajpura, Punjab and for general corporate purposes, the company said in its filing with the regulator.

“Post feedback from Sebi, the plan is to launch the IPO in early 2021, either in January or February,” said an individual familiar with the listing plans.

“Mrs Bector’s has six  manufacturing  facilities located in  Phillaur  and Rajpura  (Punjab),  Tahliwal (Himachal  Pradesh),  Greater  Noida  (Uttar  Pradesh),  Khopoli  (Maharashtra)  and  Bengaluru (Karnataka) and this spread ensure standardization of products and access to pan India chains,” added a second individual.

Both individuals spoke to Moneycontrol on the condition of anonymity.

DOUGH YOU KNOW!

According to the documents filed with SEBI, Mrs Bectors Food Specialities is the largest supplier of buns in India to leading QSR (quick service restaurant) chains such as Burger King , McDonalds, KFC and Pizza Hut.

It has also ventured into the frozen dough segment where it competes with rival vendor Baker's Circle, which has the largest market share.

“While there was an accelerated increase in sale of our biscuits and bakery products to our retail customers during this time, the sales of our products to our QSR customers, CSDs and Indian Railway Canteens were significantly impacted during for the period April 1, 2020 to June 30, 2020,” the DRHP said on the impact on business due to the outbreak of Covid-19.

SBI Capital, ICICI Securities and IIFL Capital are the merchant banks working on the IPO according to the DRHP. Law firm Shardul Amarchand Mangaldas is the legal advisor to the company and the banks and AZB & Partners is the legal advisor to Gateway Partners.

ITC & Britannia are the firm’s key listed peers in the biscuits and bakery products segment while other branded rivals include Parle, Modern and Harvest Gold.

As of March 31, 2020. The firm’s revenues stood at Rs 762 crore with the profit after tax at around Rs 30 crore. A report dated 24th May, 2019 by ratings agency ICRA indicated the liquidity position of Mrs Bectors.

“Despite sizeable capex, the liquidity profile of the company remains adequate as the business has inherently low working capital intensity and the cash flow generation remains strong,” it said.

The Indian biscuits and bakery retail market is valued at $7 billion and is expected to grow at a CAGR (compounded annual growth rate) of approximately 9 percent over the next five years. Biscuits and other snacking bakery products such as rusks, wafers and tea cakes contribute nearly 89 percent to the total market share and the balance 11 per cent is contributed by breads  including  loaves, buns and pizza  bases.