Bikaji Foods had a brisk opening as shares opened 7.5% above IPO price
Snacks company Bikaji Foods made a solid start to the bourses on November 16 as the stock hit its IPO price of Rs. 300, trading 7.6 per cent higher at Rs 321.15 on BSE and Rs 322.80 on NSE.
The Rs 881 crore initial public offering (IPO) was oversubscribed 26.67 times during the November 3-7 period backed by qualified institutional buyers. QIBs subscribed more than 80 times their allocation of shares, while high net worth individuals subscribed more than seven times. The portions reserved for retail investors and employees were subscribed 4.77 and 4.38 times respectively.
Ethnic Snacks has set a price target of Rs 285-300 per share.
Analysts like that the company is a leader in its key states (Rajasthan, Assam and Bihar) and boasts an international footprint, healthy top-line and a strong management team.
Speaking to CNBC-TV18, Rishabh Jain, CFO, Bikaji Foods said, “We are expecting a double-digit margin in the second half of this year. We don’t need huge capex for the next 3-4 years. Core markets account for 72 percent of the total business and we will focus on growing that. Uttar Pradesh is the biggest market for us.
Revenue for the current financial year increased by 22.90 percent to Rs 1,610.96 crore. However, net profit declined to Rs 76.03 crore in the fiscal from Rs 90 crore in the fiscal due to higher input costs. “Sustainability of margins going forward amid intense competition raises concerns,” said Manoj Dalmiya, founder and director, Proficient Equities.
Bikaji Foods competes with Haldiram, the market leader in traditional condiments and snacks in India. The owners of Haldram are related to the promoters of Bikaji Foods. Other players in this segment include Bikanerwala Foods, Bikaji Wafers, Pratap Snacks, TFM Foods, Pepsi and ITC.
“With a P/E (price-to-earnings) ratio of 95.2, the stock looks overpriced. Hence, we advise investors to list the gains and only aggressive investors should consider a long-term commitment to the company,” said Pravesh Gur, senior technical analyst at Swastika Investmart.
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