Budget 2020

Mrs Bectors IPO: Key takeaways from analyst meet

NEW DELHI: Mrs Bectors Food Specialities’ Rs 541 crore IPO is all set to hit the market on Tuesday.

The IPO of premium biscuit-maker and leading supplier of buns to fast-food chains comprises an offer for sale of Rs 500 crore and a fresh issue worth Rs 40.5 crore. The price band for the same is set at Rs 286-288 apiece.

The company plans to use the IPO proceeds for financing its Rajpura expansion project by establishing a new production line for biscuits and for general corporate purposes.

The FMCG firm recently organised a virtual analyst meet, which was attended by Nirmal Bang Institutional Equities. The meet was represented by MD Anoop Bector, whole-time director Ishaan Bector, CFO Parveen Kumar Goel (CFO) and Head – Finance & Strategy Deepak Kumar Jain. Here are Nirmal Bang’s key takeaways from the analyst meet:

Biscuit business
The management noted that the domestic biscuit business has grown at a compounded annual growth rate of 7.5 per cent over FY18-FY20 despite capacity constraints in FY18 and some part of FY19.

Nirmal Bang said that the company has a strong presence in north India, which it intends to leverage to expand presence in the other regions of India.

“The company has a presence at 458,000 retail outlets across India, which are serviced through an in-house sales team of 250 personnel. It is also one of the largest suppliers of biscuits to the CSDs, supplying in 33 locations across India. Within the biscuit (exports) business, the company has realigned its focus on developed markets and emerging markets. Post this realignment, the exports segment has grown by 39 per cent YoY in H1FY21,” Nirmal Bang reported the company as saying.

As per Technopak, Mrs Bectors’ market share in the Indian biscuit export market is nearly 12 per cent.

Breads business
The branded breads business of the company has grown at a CAGR of 29 per cent over FY18-20 with realisation improving to R s22.10 per pack in H1FY21 from Rs 18.50 per pack in FY18 . The company is the largest selling brand in Delhi NCR, Mumbai and Bengaluru.

Going forward, growth will be based on product distribution and product innovation, Nirmal Bang reported the management as saying.

“For the branded breads & bakery products, the company will focus on metro and Tier 1 cities, where consumption is higher and the premiumisation can play out. Within the Institutional business, MBFSL has the capacity to produce 1.2 million burger buns per day,” the management said.

The company has also started producing value-added products, including garlic breads and calzones. Despite a 61 per cent YoY decline in H1FY21 — sales to QSRs were affected due to Covid-19 related lockdown, the management is very confident about its institutional business, given the fact that the QSR market is likely to grow by 22.7 per cent over FY20-FY25.

The company began its capex journey in 2017 and has invested Rs 260 crore between FY18 and Q2FY21.

In 2017, it expanded capacities at its Greater Noida facility. In 2018, it made a greenfield investment at its Rajpura facility and introduced a new bread line at its Greater Noida facility. It also established a new production line for breads at the Bengaluru facility and acquired land at Dhar, Madhya Pradesh for further expansion.

In 2020, the company has proposed expansion of the Rajpura manufacturing facility, which is likely to get commercialised by the end of 2022. It is also looking to add 14,000 tonnes of additional capacity for biscuits.

The capacity utilisation for biscuits, which stood at 93 per cent in FY18, decreased to 72 per cent in FY20 post the aforementioned capacity expansion, the management said.

“Going forward, the company is likely to invest Rs 100 crore, from internal accruals, for a new facility in Dhar, Madhya Pradesh, which will start production in FY24. That facility will cater to the West, South and East markets of India,” the management said.

Recent launches
In H1FY21, Mrs Bectors’ product portfolio consisted of 384 Stock keeping units (SKUs) in the biscuits category and 118 SKUs in the bakery category.

Recent launches in the biscuits segment include ‘Trufills’, ‘Premium Sugar and Classic Crackers’, ‘Pista Almond Cookies’, ‘Choco Chip Cookies’ and ‘Honey Oatmeal Cookies’.

Recent launches, for retail as well as institutional customers, include sub-breads, pizzas, garlic breads, cheese garlic bun fills and frozen cookies.

Here’s the detailed commentary in points:

Commentary on operational metrics

  • Due to focus on high margin/premium products, overall gross margins have increased from 44 per cent in FY18 to 47 per cent in FY20. If not for lost sales in the domestic business, exports business and provision of Rs 70 million made for exports receivables, the operating margin in FY20 would have been higher than the reported 12 per cent.
  • Dividend payout ratio has ranged 15-18 per cent in the last 3 years.
  • Return ratios have fallen over FY18-FY20 due to capex investments.
  • The management believes that H1FY21 sales are sustainable, as despite 3 months of lost CSD sales (sales to Canteen Stores Department of government) and QSR business taking a hit, the company managed to post 18 per cent overall topline growth.
  • Collection period for export business ranges between 50 days and 60 days.
  • There is no fixed timing of implementing price hikes; it will be dependent on inflation and will be taken either through grammage reduction or increase in absolute price.
  • The company does not procure directly from the farmer and has both long-term and short-term contracts for commodities.

Product/segment specific commentary

  • Mrs Bectors is looking to roll out new products soon (allied, frozen etc.) and as per the management, the company always has 5-7 products in the pipeline.
  • Share of non-white breads, which is a faster growing category, is larger than white breads.
  • The company has recently launched ‘English Oven’ in Mumbai.


  • As on 1HFY21, the company distributed its biscuits across 23 states in India through a network of 196 super stockists and 748 distributors, supplying to 458,000 retail outlets (400,000 in north India).
  • It also supplies to CSDs in 33 locations across India and is an approved & listed supplier for Indian Railways, having presence across Railway Station Canteens & their stores in north India.
  • For its bakery products sold under ‘English Oven’, the company has 191 distributors, supplying to over 14,000 retail outlets 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.
  • Sales through CPOs (Cremica Preferred Outlets) are 5-6 times of a normal outlet. The company is adding CPOs on a continuous basis.
  • Within modern trade, MBFSL is introducing larger and mid-sized packs of existing high selling products based on buying patterns and regional preferences.
  • The e-commerce business is very small and the company started selling through this channel only after the onset of the Covid-19 pandemic.


  • As per the management, innovation, premiumization, supply chain efficiencies, institutional business, significantly high capacities, market leadership in many English Oven products (footlong, panini) and large market share in exports tend to provide competitive edge.
  • 95-96 per cent of retail domestic sales come from north India, while the balance nearly 5 per cent is from Maharashtra and Madhya Pradesh. The company is also looking to grow further in markets like Rajasthan and Uttar Pradesh.
  • The company aims to become a major player by adding more outlets and selling more products in existing outlets.