Mrs Border Food Specialties Ltd will present its three-day initial public offering of Rs 541 crore on Tuesday as the biscuit and bread maker aims to raise funds to expand its production capacity and investors want to exit partially.
The first offer includes a new equity issue of Rs 40.5 crore and an offer of Rs 500 crore for sale by Linus Pvt. Ltd., Mabel Pvt. Ltd., GW Crown Pte. Ltd. and GW Confectionery Pte. Ltd. According to its red herring prospectus, the price band for selling shares has been fixed at Rs 286-288. The average cost of acquisition for the selling shareholders is around Rs 175.
Calculated on the basis of Bloombergquint’s price band, the shares on offer would be between 1.89 crore and 1.87 crore, giving the company an estimated market capitalization of Rs 1,680-1,692 crore.
- Issue opens: 15 December
- Points close: 17 December
- Face value: Rs 10
- Minimum bid: 50 shares
- Mrs Sector plans to use the proceeds to expand its biscuit factory in Rajpura, Punjab, managing director Anoop Bector told Bloombergquint last week, as the company strengthens its presence in northern India.
ICICI Securities Limited, SBI Capital Markets Limited and IIFL Securities Limited are the lead managers running the book on the issue.
Share holding
The promoters held a 52.39% stake in the SMT sector prior to the issue, and the rest was with the public. However, the public shareholding will be 48.87% after the IPO.
business
SMT Sector is one of the leading manufacturers of premium and mid-premium biscuits and premium bakery products in Punjab, Himachal Pradesh, Jammu and Kashmir and Ladakh. The company s its major brand. Mrs. Manufactures and markets cookies, creams, crackers, digesters and glucose. Bector’s Cremica ‘, according to its red herring prospectus.
It also manufactures and markets savory and sweet products including bread, buns, pizza base and cakes, one of the best-selling brands in the premium bakery segment in Delhi-NCR, Mumbai and Bengaluru.
SMT Sector is one of the largest suppliers of biscuits to the Government of India canteen stores department spread across 33 locations. It is also, an approved and listed supplier to the Indian Railways, with a strong presence in railway station canteens and their stores in North India.
The company is the largest supplier of buns to quick-service restaurant chains including Burger King India, McDonald’s and Yum! KFC and Pizza Hut have restaurants in the country. It manufactures Oreo and Chocobek cookies on a contract with Mondelez India Foods Private Limited.
All the company’s products are manufactured at its six manufacturing facilities located at Phillaur and Rajpura in Punjab, Tahliwal in Himachal Pradesh, Greater Noida in Uttar Pradesh, Khopoli in Maharashtra and Bengaluru in Karnataka.
Peer comparison
The Rs 38,000-crore Indian biscuit space is dominated by Britannia Industries Limited, Parle Products Limited and ITC Limited, which collectively own 65% of the market. SMT sector accounts for 1% of the biscuit segment. Parle derives a large part of its revenue from the mass product Parle-G, while Britannia’s top line is led by its mid-premium and premium products.
Key risk
- Kovid-19 Continuous Impact of Pandemic
- Inability to anticipate, react to, and meet tastes, preferences or consumers’ inability to accurately predict consistent quality needs or to successfully adapt to changes in market demand or consumer preference
- Restrictions on the use of brand names and any negative publicity of products
- The company has incurred indebtedness and may incur additional debt in the future, exposing it to interest rate fluctuations, and restricting its operating flexibility in certain ways.
- Dismantling or shutdown of manufacturing operations or under-utilization of its manufacturing facilities or failure to successfully commission new facilities or lack or non-availability of fuel, electricity or water
- It has no long-term contracts with QSR customers and any disruption in business operations with its QSR customers will adversely affect business, financial condition and results of operations.
- Inability to manage its inventory and accurate demand for products for future periods may adversely affect its reputation, business, results of operations and its financial performance.
- May not be able to successfully grow its premium biscuits and bakery segment
- Any contamination or deterioration of its products can lead to legal liability, damage to its reputation.
- Concerns over the nutritional values of its products may reduce demand or increase the cost of its products
