Bector Foods Limited or Cremica IPO

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About Bector Food

1.They are one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment in North India, according to the Technopak Report.

2.They manufacture and market a range of biscuits such as cookies, creams, crackers, digestive, and glucose under their flagship brand ‘Mrs. Bector’s Cremica’. In FY19-20, the biscuit segment contributed 450 Crores in the top-line. In the biscuits segments, recently, they have launched new products such as ‘Trufills’, ‘Premium Sugar and Classic Crackers’, ‘Pista Almond Cookies’, ‘Choco Chip Cookies’, ‘Honey Oatmeal Cookies’. They also manufacture ‘Oreo’ biscuits and ‘Chocobakes’ cookies on a contract basis for Mondelez India Foods Private Limited

3. Apart from biscuits, they also manufacture and market bakery products in savory and sweet categories which include bread, buns, pizza bases, and cakes under the brand ‘English Oven’. The ‘English Oven’ is one of the fastest-growing largescale premium bakery brands in India. In FY19-20, this segment contributed 130 Crores in the top-line.

4. The products manufactured at Bector are supplied to retail consumers in 26 states within India, as well as to reputed institutional customers with pan-India presence and to 64 countries across six continents.

5. According to Technopak Report, ‘Mrs. Bector’s Cremica’ is one of the leading biscuit brands in the premium and mid-premium segment in Punjab, Himachal Pradesh, Jammu and Kashmir, and Ladakh and ‘English Oven’ is one of the largest selling brands in the premium bakery segment in Delhi NCR, Mumbai, and Bengaluru. Moreover, they are the largest supplier of buns in India to reputed QSR chains such as Burger King India Limited, Connaught Plaza Restaurants Private Limited, Hardcastle Restaurants Private Limited, and Yum! Restaurants (India) Private Limited.

Manufacturing Units:

They have 6 manufacturing units at Phillaur and Rajpura (Punjab), Tahliwal (Himachal Pradesh), Greater Noida (Uttar Pradesh), Khopoli (Maharashtra), and Bengaluru (Karnataka). All the products are manufactured in-house.

Distribution network:

In any business, success depends upon an efficient distribution network.

Biscuit Distribution Network

1. Bector Food has a strong distribution network in India and globally in the general trade and the modern trade segment. During distributes products through its wide network of 154 super-stockists and 644 distributors supplying to a wide range of customers through 458,000 retail outlets (Source: Technopak Report) and 3,594 preferred outlets.

2. They are also one of the largest suppliers of biscuits to Canteen Stores Department of Government of India (“CSD”) supplying in 33 locations across India and an approved and listed supplier for Indian Railways having a strong presence across Railway Station Canteens and their stores in North India.

3. They are one of the leading exporters of biscuits from India, according to Technopak Report, and export biscuits under the Bector brand as well as under third-party private labels to 64 countries.

Bread Distribution Network

They have a strong distribution network for the bakery products sold under the brand ‘English Oven’ which is supplied to the customer through 132 distributors and over 14,000 retail outlets (Source: Technopak Report) situated in Delhi NCR, Mumbai, Pune, and Bengaluru under modern trade and general trade channels, direct sales to supermarkets, departmental stores or indirect sales through wholesalers and distributors.

How the company is focussing on high-margin business?

1. The weighted average realization from the sale of biscuits per kilogram has been ₹84.04, ₹87.30, ₹81.57, in FY20, 3MFY21, 3MFY20, respectively.

To increase the margins from the sale of the biscuits in export markets, Bector foods is targeting developed and emerging markets.

2. The average realization of sale of branded bread and bakery products per pack sold under the ‘English Oven’ brand has been ₹19.98, ₹22.64, and ₹19.74, in FY20, 3MFY21, 3MFY20, respectively.

To increase the margin in the bakery segment, they have recently introduced new premium products such as sub bread, frozen doughs, pizzas, garlic bread, cheese garlic bun fills, and frozen cookies.

They are also installing a dedicated line at Greater Noida Facility to cater to the production of high margin products including desserts and frozen products such as frozen pizzas, sandwiches, and cakes, which they aim to cater to the institutional customers such as multiplexes, cloud kitchens, hotels restaurants, cafés as well as retail customers.

Industry Overview:

1. According to the Technopak Report, the premium, and mid-premium category biscuits market is expected to grow to ₹ 50400 Crores by Financial Year 2025 growing at a CAGR of 9.5% from Financial Year 2020 to Financial Year 2025.

2. According to the Technopak Report, the market for bread and buns retail market in India is estimated to grow to ₹ 7600 Crores by Financial Year 2025 from ₹ 5000 Crores at Financial Year 2020, estimated to grow at a CAGR of 9% from Financial Year 2020 to Financial Year 2025.

 

Objects of the Bector Foods Limited or Cremica IPO:

1. The Offer comprises of a Fresh Issue aggregating up to ₹ 50 Cr by the Company. ₹ 50 Crores will be utilized for the following purpose; a) Financing the project cost towards the expansion of the Rajpura Manufacturing Facility by establishing a new production line for biscuits (“Rajpura Expansion Project”). b) General corporate purposes. 2.  Offer for Sale of up to Equity Shares, aggregating up to ₹ 500 Crores by the Selling Shareholders.
DRHP of Bector Foods Limited or Cremica IPO

Bector Foods Limited or Cremica IPO Details:

Open Date: Dec 15 2020
Close Date: Dec 17 2020
Total Shares: 18750000
Issue Type: Book building
Issue Size: 540 Cr.
Lot Size: 50 Shares
Issue Price: ₹ 286-288 Per Equity Share
Listing At: NSE,BSE
Listing Date: Dec 28 2020

Promoters And Management:

The Company was founded by Mrs. Rajni Bector, and the recipes are inspired by the original recipes created by her. The Company is promoted by Mr. Anoop Bector who has over 25 years of industry experience. He is also the Managing Director of the Company and in addition to his overall supervision of the business operations, he also heads the business development and manages relationships with our key institutional customers, distributors, and suppliers. Mr. Ishaan Bector, our whole-time director, heads the bread business under the brand ‘English Oven’ and is responsible for the overall supervision, development, and expansion of the branded bread and bakery business.

Financials of Bector Foods Limited or Cremica IPO:

(Fig. In Crores) A) Balance Sheet
Particulars(in Cr) Mar-18 Mar-19 Mar-20
Sources of Funds
Share Capital 57.2 57.2 57.2
Reserves 209 237 262
Long- Term Debt 94 107 86
Short-Term Debt 26 32 18
Trade payable 38 48 47
other liability 87 96 95
Total Liabilities 511 577 565
Application of Funds
Fixed Assets 240 344 337
CWIP 92 15 6
Investments 4 4 4
Trade receivables 69 100 75
Inventories 0 0 0
Other Assets 106 114 143
Total Assets 511 577 565
B) Profit and Loss Statement
Particulars(in Cr) Mar-18 Mar-19 Mar-20 3MFY20 3MFY21
Revenue 693 783 762 175 202
COGS 377 406 411 94 106
Stock in Trade 11 13 0.3 0.1 0
Employee Cost 91 109 117 27 29
Other Expense 131 153 143 34 33
EBITDA 83 102 91 20 34
OPM 12% 13% 12% 11% 17%
Other Income 2 2 3 1 0
Interest Cost 6 12 15 4 3
Depreciation 28 35 41 10 11
Profit before tax 51 57 38 7 20
Tax 16 17 8 2 5
Net Profit 35 40 30 5 15
NPM 5% 5% 4% 3% 7%
Shares 5.72 5.72 5.72 5.72 5.72
EPS in Rs 6 7 5 1 3

Comparison With Peers:

In our point of view, the best peer is Britannia as they are in the same business as that of biscuits and bread. Britannia in the last 3 years has shown a revenue growth of 8% while Bector food has shown 4%. This has more to do with the brand value of Britannia. Valuation wise; 1. Bector food is available at P/E of 48x based on average EPS of 2018, 2019 and 2020. And Britannia is available at P/E of 76x. 2. Mcap of Britannia is 90000 Cr and Revenue of FY20 is 11000 Cr. Mcap/Revenue = 8x Mr. Bector food Mcap is 1700 Crores and Revenue of FY20 is 762 Crores. Mcap/Revenue = 2.23x. So, valuation wise Bector food is cheap. However, while calculating valuation based on financials, we have to add valuation of brand as well and Britannia is way upper in that.  

Recommendation on Bector Foods Limited or Cremica IPO:

With established brand of Cremica and English Oven to carry out the business of selling biscuit and bread augur well for the company. The sector has huge potential. Recently, they have forayed into high margin products to improve the bottom-line. In our point of view , the valuation wise it is looking on higher side. However, as far as GMP is concerned listing gain of 50% is on the cards.

Lead Manager of Bector Foods Limited or Cremica IPO:

  1. ICICI Securities Limited
  2. SBI Capital Markets Limited

Registrar of Bector Foods Limited or Cremica IPO:

  1. Link Intime India Private Limited

Discussion on Bector Foods Limited or Cremica IPO:

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