Mrs. Bectors Food Specialities IPO: Information Analysis

The largest supplier of buns to quick service restaurant (QSR) chains like McDonald's, Burger King, KFC and others in India, Mrs. Bectors Food Specialties (Mrs Bectors) is coming out with its IPO. Mrs Bectors belongs to the Punjab-based Cremica group. The group deals with a range of food products like sauces, snacks, jams, spreads, syrups, biscuits, bakery and others. In 2013-14, group businesses were divided among three brothers, with Mr Anoop Bector heading Mrs Bectors. Primarily involved in manufacturing premium and mid-premium biscuits (65 per cent of FY20 revenue) and premium bakery (34 per cent) products, Mrs Bectors sells a range of biscuits, such as cookies, creams, crackers, digestives and glucose under the parent brand Mrs Bector's Cremica. On the other hand, its bakery division sells bread, buns, pizza bases and cakes under the English Oven brand in Delhi NCR, Mumbai, Pune and Bengaluru. Bakery products are sold to both retail and institutional customers, including QSR chains. The company also exports biscuits to around 64 countries, which accounted for 22 per cent of the FY20 revenue. With its focus mainly in North India, Mrs Bectors has a distribution reach of 458,000 retail outlets under the biscuits division and over 14,000 retail outlets under its bakery division. The company is still a minnow compared to other big players. In FY20, it had a market share of just 4.5 per cent in the premium and mid-premium biscuits segment in North India, whereas its market share in the branded bread market was just 5 per cent. The company has aggressive plans to pursue growth in other parts of the country and is planning to go for a Rs 100 crore greenfield project in Madhya Pradesh in 2023. The company's growth story looks promising, now it's the execution that would matter. The Issue The total size of the issue is Rs 540.54 crore. Majority part of the issue is offer for sale aggregating Rs 500 crore by Linus Private Limited, Mabel Private Limited, GW Crown PTE. Ltd and GW Confectionary PTE. Ltd. On the other hand, the proceeds from a fresh issue of Rs 40.54 crore will be used to finance the project costs of its Rajpura expansion plan, which is aimed at establishing a new production line for biscuits. Strengths Quality control through in-house manufacturing: The company has six in-house manufacturing facilities across five states. It has quality certifications from various regulatory bodies, such as FSSC 22000, the US FDA, the British Retail Consortium and others. Strong relationship with institutional and QSR players: The company has been associated with McDonald's since 1996 and is its sole supplier of buns in India. Besides, it is the largest supplier of buns to other QSR chains like Burger King, KFC, Carl's Jr and others. Its relationship with multinational companies has helped the company maintain high-end product quality control and standardisation. Strong brand image: The company sells its biscuits under the brand name 'Mrs. Bector's Cremica'. Although it is restricted to use this brand name only for biscuits, the Cremica brand is associated with a range of food products like sauces, snacks, jams, spreads, syrups and others. This umbrella of various brands provides better visibility to the company. Risks/Concerns The company is vulnerable to political and regulatory changes. It exports its biscuits to around 64 countries, including to Af