Bikaji Foods slips 6% to hit new low since listing, trades near issue price

Shares of Bikaji Foods International slipped 6 per cent to Rs 303, hitting their lowest level since listing on the National Stock Exchange (NSE) in Friday’s intra-day trade. The stock made its debut on Wednesday, November 16. 

With today’s fall, the stock has declined 9.5 per cent from its high of Rs 334.70, touched on the listing day. It is now trading close to its issue price of Rs 300 per share.

Bikaji Foods International made a steady debut on the bourses with its shares listing at an 8 per cent premium to its issue price on the NSE. On November 16, Goldman Sachs Funds - Goldman Sachs India Equity Portfolio had purchased 1.74 million equity shares of Bikaji Foods at a price of Rs 324.50 per share via open the market, the NSE bulk deal data showed. The name of the seller was not disclosed.

Bikaji Foods is the third largest ethnic snacks company in India along with a presence in international markets. It is also the second fastest growing company in the Indian organised snacks market.

Over FY20-22, Bikaji’s revenue, EBITDA, PAT grew at a CAGR of 21.4 per cent, 14.4 per cent,15.2 per cent to Rs 1,611 crore, Rs 140 crore, Rs 78 crore, respectively, while its EBITDA and PAT margins declined by 169 bps (to 8.7 per cent) and 81 bps (to 4.8 per cent), respectively.

With the new capacities in place and upcoming facilities in Rajasthan and Bihar, the management is upbeat about maintaining more than 20 per cent revenue CAGR in the next 3-4 years. In addition, lower capex requirements and price hikes to protect gross margins at 30 per cent are expected to maintain healthy profitability and cash flow.

“At the higher price band, Bikaji is demanding an EV/Sales multiple of 4.5x, which is at a premium to the peer average. The food market in which the company is operating is normally dominated by unorganized players. This might be the reason for lower operating margin for Bikaji, despite so much value addition. In the current inflationary environment, we are cautiously optimistic on the sustainability of the profitability margins,” Choice Equity Broking had said in an IPO note.

At the IPO price, the stock was available at 98x FY22 EPS. Though FY22 earnings were depressed due to high commodity prices, even on normalised earnings, the valuation multiple is at apremium to peers, as per an IPO note of ICICI Securities. 

The raw material volatility could continue to pressurise margins, sales concentrated in small number of states, high competitive intensity and high dependence on wholesale network are key risks & concerns, the brokerage said.