Should you look at Mrs Bectors IPO? | Economic Times

ET Intelligence Group: Mrs Bectors Food Specialties (MBFS), a biscuit and bakery products manufacturer, is hitting the Street with an IPO comprising of a fresh issue of Rs 40.5 crore to be used for financing the expansion of its Rajpura project and an offer for sale of Rs 500 crore providing a partial exit to the strategic investors.A nationwide distribution network, in-house manufacturing, a strong presence in the export market, double-digit margin profile and lower debt-equity ratio are some of the key positives for the company. However, given its smaller size of operations amid the intense competition from established large players and the short-term uncertainty over the demand scenario due to the pandemic, the IPO looks more suitable for long-term investors with a high-risk appetite.Business and financialsCremica and English Oven are among the leading brands of the company in the north Indian market.The first half of the current fiscal year has been exceptionally good for biscuit companies on account of high household consumption and hardly any marketing and travel expenses during the lockdown to curtail the pandemic.This enabled Mrs Bectors to reduce the net debt to Rs 107 crore at the end of September 2020 from around Rs 133 crore in FY18 while the working capital days reduced to 25 from 33 during the period. At Rs 38.8 crore, net profit for the first half of FY21 exceeded the previous year’s profit of Rs 30.4 crore.79731670ValuationBased on the post-IPO equity and FY21 expected net profit, the price-earnings (P/E) multiple works out to be 27.7. This is much lower than its FY20 trailing P/E of 54 due to the exceptionally high profit in the first half of the current fiscal, which may not be reflective of the company’s performance over the medium term. Besides, high competition from larger players such as Britannia, ITC and Parle may pose a challenge to the company as its business scales up.