Subdued global sentiment weighed on domestic equity markets on Friday as investors booked profits across the board, barring information technology (IT) sector. However, last hour buying in select pharma and bank stocks helped indices to settle the day in the green.
The benchmark S&P BSE Sensex settled the day at 46,961 levels, up 70 points or 0.15 per cent. The index hit a record high of 47,026 in the opening deals but erased gains on sell-off in large private banks, metals and realty stocks.
At close, Bajaj Finance, Infosys, State Bank of India (SBI), and Titan (up between 1.4 per cent and 2.4 per cent) were the top gainers while IndusInd Bank, HDFC Bank, ONGC, and Maruti Suzuki ended the day as top laggards.
The Nifty50 index, on the other hand, ended at 13,760.5 levels, up 20 points or 0.14 per cent.
The broader markets ended in the red for the second straight day. The S&P BSE MidCap index closed at 63 points, or 0.35 per cent, lower at 17,801 level. The S&P BSE SmallCap index, too, dipped 42 points, or 0.2 per cent, at 17,769 levels.
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- BFSL is one of the leading players in biscuits and bakery product segments.
- The company supplied its products under two brands “CREMICA” and “ENGLISH OVEN”.
- Its financial performance for the last three fiscal was almost static.
- Super performance for the FY21 first half amidst COVID-19 pandemic is a bit surprising.
BFSL has paid a yearly dividend of 7.5% for the last three fiscals.
ABOUT COMPANY:
Mrs Bectors Food Specialities Ltd. (BFSL) is one of the leading companies in the premium and mid-premium biscuits segment and the premium bakery segment in North India, according to the Technopak Report. The company manufactures and markets a range of our biscuits such as cookies, creams, crackers; digestives and glucose under our flagship brand ‘Mrs. Bector’s Cremica’. It also manufactures and market bakery products in savoury and sweet categories which include breads, buns, pizza bases and cakes under our brand ‘English Oven’. BFSL supplies its products to retail consumers in 26 states within India, as well as to reputed institutional customers with pan-India presence and to 64 countries across six continents during the Financial Year ended March 31, 2020. The company has six manufacturing units – 2 in Punjab and 1 each in Himachal Pradesh, Uttar Pradesh, Maharashtra and Karnataka.
According to Technopak Report, ‘Mrs. Bector’s Cremica’ is one of the leading biscuit brands in the premium and mid-premium segment in Punjab, Himachal Pradesh, Jammu and Kashmir and Ladakh and ‘English Oven’ is one of the largest selling brands in the premium bakery segment in Delhi NCR, Mumbai and Bengaluru. BFSL is the largest supplier of buns in India to reputed QSR chains such as Burger King India Limited, Connaught Plaza Restaurants Private Limited, Hardcastle Restaurants Private Limited, and Yum! Restaurants (India) Private Limited (Source: Technopak Report).
Recently, it has introduced new products such as sub breads, pizzas, garlic breads, cheese garlic bun fills, and frozen cookies for retail as well as institutional customers and during period April 1, 2020, to September 30, 2020, its diversified product portfolio for bakery segment consists of 118 SKUs.
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The domestic equity market ended Friday’s volatile session on a positive note amid healthy buying in financial, oil and gas, metal, and FMCG stocks.
The benchmark S&P BSE Sensex ended at 46,099, up 139 points, or 0.3 per cent while NSE’s Nifty ended at 13,514, up 36 points, or 0.26 per cent.
During the day, Sensex hit a record high of 46,309.63 while Nifty scaled an all-time high of 13,579.35.
Shares of Hinduja Global Solutions soared 17 per cent to Rs 1,148 on the BSE in intra-day trade on Thursday after the company’s subsidiary, HGS AxisPoint Health, partnered with Parkland Community Health Plan (PCHP) to provide disease management services to approximately 195,000 Medicaid beneficiaries in a seven-county area in North Texas.
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The bulls continued to be in the driver’s seat on Friday as the benchmark indices scaled fresh all-time highs after the Reserve Bank of India (RBI) revised upwards the economic growth projections for the fiscal year 2020-21 (FY21) and assured ample liquidity for the stressed sectors.
The S&P BSE Sensex hit a new milestone today as the index breached the crucial 45,000 level for the first time ever to end at 45,080 levels, up 447 points, or 1 per cent. On similar lines, NSE’s Nifty ended at 13,259, up 125 points, or 0.95 per cent. Volatility index, India VIX, dropped over 5 per cent to 18 levels.
On a weekly basis, Nifty gained 2.2 per cent while Sensex added 2 per cent.
In the broader market, the S&P BSE MidCap index ended 0.44 per cent higher at 17,389 levels while the S&P BSE SmallCap index settled at 17,317, up 72 points, or 0.42 per cent.
On the NSE, all sectoral indices ended in the green with Nifty Bank surging the most – up 2 per cent or 604 points to 30,052 levels.
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- BKIL is growing international QSR Chains in India.
- “BURGER KING”, “POPEYES”, “TIM HORTONS” are the world brands.
- The company has suffered losses for reported financial periods.
- On PE and P/BV parameters, the issue is priced aggressively.
- 97% of owned outlets is the prime positive factor at present.
- Changing lifestyle, shifting preference of habits posse’s big concerns.
ABOUT COMPANY:
Burger King India Ltd. (BKIL) is one of the fastest-growing international QSR chains in India during the first five years of operations based on the number of restaurants. (Source: Technopak) As the national master franchisee of the BURGER KING® brand in India, it has exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India. Company’s master franchisee arrangement provides with the ability to use Burger King’s globally recognised brand name to grow its business in India while leveraging the technical, marketing and operational expertise associated with the global Burger King brand.
The globally recognised Burger King brand, also known as the “HOME OF THE WHOPPER®”, was founded in 1954 in the United States and is owned by Burger King Corporation, a subsidiary of Restaurant Brands International Inc., which holds a portfolio of fast-food brands that are recognized around the world that include the BURGER KING®, POPEYES® and TIM HORTONS® brands. The Burger King brand is the second-largest fast-food burger brand globally as measured by the total number of restaurants, with a global network of 18,675 restaurants in more than 100 countries and U.S. territories as at September 30, 2020.
BKIL’s customer proposition focuses on value leadership, offering customers variety through innovative new food offerings at different dayparts, catering to the local Indian palate, offering a wide range of vegetarian meal options, and its taste advantage and flame grilling expertise.
Following fancy for ready to eat and lavish lifestyle, BKIL was able to reach a milestone of 200 outlets in India in the first five years of operations. All was going well till FY20, but then COVID-19 pandemic played a spoil sport and the company faced the music with a severe setback in the first half of the current fiscal. With the sudden change in lifestyle and awareness of healthy food habits to survive in the pandemic is a big concern for this chain of stores.
As of September 30, 2020, BKIL had 261 restaurants, including eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India. Of our 261 restaurants as of September 30, 2020, 226 were operational. As at the date of this Red Herring Prospectus, it had 259 Company-owned Burger King Restaurants and nine Sub-Franchised Burger King Restaurants, of which 249 were operational; including two sub-franchised Burger King Restaurant.
BKIL plans to continue to build its restaurant network using a cluster approach and penetration strategy with the objective to provide greater convenience and accessibility for customers across relevant geographies. BKIL owns around 97% of the total outlets in India. Management is confident of achieving the target of opening 700 outlets PAN India by extended timeframe up to December 2026 despite current slowdown witnessed following a pandemic.
ISSUE DETAILS / CAPITAL HISTORY:
To part finance its plans for repayment/prepayment of outstanding borrowings (Rs.164.98 cr.), capital expenditure for own outlets (Rs. 177.00 cr.) and general corpus fund needs, BKIL is coming out with a maiden combo offer of fresh equity issue worth Rs. 450 cr. and offer for sale of 60000000 equity shares of Rs. 10 each to mobilize Rs. 810.00 cr. (at the upper price band). BKIL has fixed a price band of Rs. 59 – Rs. 60 for this book built IPO. The company will issue approx. 75000000 fresh equity shares at the upper price band of the issue. Minimum application is to be made for 250 shares and in multiples thereon, thereafter. The issue opens for subscription on December 02, 2020, and will close on December 04, 2020. Post allotment shares will be listed on BSE and NSE. The issue constitutes 35.37% of the post issue paid-up capital of the company.
The company has reserved 75% of the issue for QIBs, 15% for HNIs and 10% for Retail investors.
Having raised initial equity at par, BKIL issued further equity in the price range of Rs. 20 to Rs. 90 per share from November 2014 to November 2020 including pre-IPO placement of 13200000 shares at Rs. 44 per share by way of a rights issue to promoters in May 2020 and 15712820 shares at Rs. 58.50 each to Amansa Investment on November 18, 2020. With this issue, BKIL is looking for a market cap of approx. Rs. 2290 cr. post this issue.
The average cost of acquisition of shares by the promoters is Rs. 23.11 per share. Post issue, BKIL’s current paid-up equity capital of Rs. 306.65 cr. will stand enhanced to Rs. 381.65 cr.
The issue is jointly lead managed by Kotak Mahindra Capital Co. Ltd., CLSA India Pvt. Ltd., Edelweiss Financial Services Ltd. and J M Financial Ltd. While Link Intime India Pvt. Ltd. is the registrar to the issue.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, BKIL has posted turnover/net profit (loss) of Rs. 388.74 cr. / Rs. – (82.23) cr. (FY18), Rs. 644.13 cr. / Rs. – (38.28) cr. (FY19) and Rs. 846.83 cr. / Rs. – (76.57) cr. (FY20). Thus while the top line has shown rising trends, bottom line expressed negative earnings with inconsistency.
For the first half of the current FY21, it has posted a loss of Rs. – (118.95) cr. on a turnover of Rs. 151.65 cr. verses loss of Rs. – (17.43) cr. on a turnover of Rs. 425.37 cr. for the corresponding previous period. The company suffered a severe setback for the first half of the current fiscal on account of COVID-19 pandemic. Management clarified that the company is generating cash surplus, but due to accounting provisioning, it posted losses for all these years.
For the last three fiscals, BKIL has posted an average EPS of Rs. – (2.43) and an average RoNW of – (23.78%). Thus the issue is expressing negative P/E. The issue is priced at a P/BV of 7.87 based on its NAV of Rs. 7.62 (against FV of Rs. 10) as on September 30, 2020. The issue is priced at a P/BV of 3.01 on the basis of post-issue NAV of Rs. 19.93 (at the upper cap)
COMPARISION WITH PEERS:
As per offer documents, BKIL has shown Jubilant Foodworks and Westlife Developments as its listed peers. They are currently trading at a P/Es of around 229.66 and 00 (at the close of November 27, 2020, at BSE). However, they are not strictly comparable on an apple to apple basis.
MERCHANT BANKER’S TRACK RECORDS:
On BRML’s front, four lead managers associated with this issue have handled 22 public issues in the past three years out of which 9 issues closed below the issue price on listing date.
CONCLUSION / INVESTMENT STRATEGY
Burger King met with fancy among the younger generation that helped the company for speedy expansion of its footprint. But in the current situation of COVID-19 pandemic and changing lifestyle habits and shifting preference with rising awareness of immunity diet, Burger King will find it difficult to maintain the progress made in the last five fiscals. Company has huge carried forward losses that are represented in its NAV of Rs. 7.62 (against face value of Rs. 10) as on September 30, 2020. Thus issue appears aggressively priced. Due to its carried forward losses, BKIL has reserved 75% quota for QIBs and they may support the issue for smooth sailing. Extended gestation period may take long to wipe out accumulated losses. The segment is crowded with many organized/unorganized players and posing tough competition. Once normalcy restores, BKIL may achieve the targeted plans. Considering all these, cash surplus, risk savvy investors may consider investing in this issue with a long term perspective.
The original review was written by Dilip Davda, appears on chittorgarh.com and is available here.
The benchmark indices ended Friday’s volatile session in the negative territory ahead of the release of gross domestic product (GDP) numbers for the second quarter of the current fiscal (July-September period) due later in the day.
The S&P BSE Sensex slipped 110 points, or 0.25 per cent to 44,150 levels and the Nifty50 index ended at 12,969, down 18 points, or 0.14 per cent. Power Grid, HCL Tech, and ONGC (all down around 2 per cent) were the top Sensex laggards.
Shares of gas transmission companies rallied up to 19 per cent on the BSE during the day after oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) notified regulations for unified gas transmission tariff structure.
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Buying in financial counters such as HDFC Bank, Bajaj Finance, and Bajaj Finserv helped benchmark indices settle over 0.6 per cent higher on Friday.
The S&P BSE Sensex ended 282 points, or 0.65 per cent higher at 43,882 levels while NSE’s Nifty ended at 12,859, down 87 points, or 0.68 per cent.
Bajaj Finserv ended as the biggest gainer on Sensex – up over 9 per cent to Rs 8,536.50 while Reliance Industries (down nearly 4 per cent) was the top loser. Of 30 constituents, 23 advanced and 7 declined.
Wockhdart was locked in upper circuit of 20 per cent at Rs 393 on the BSE. The stock of pharmaceutical company was trading close to its 52-week high of Rs 412 touched in February 2020. The trading volume jumped over three-fold with a combined 6.3 million shares changing hands. There were pending buy orders for 250,000 shares on the BSE and NSE, exchange data show.
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The domestic equity market ended Friday’s session, the last trading day of Samvat 2076 on a positive note after oscillating between gains and losses during the day. The S&P BSE Sensex today gained 86 points, or 0.2 per cent to settle at 43,443 levels. With today’s gain, the index rallied 10.68 per cent during Samvat 2076.
NSE’s Nifty ended Friday’s session at 12,720, up 29 points, or 0.23 per cent. India VIX fell around 4.5 per cent to 19.7 levels.
On a weekly basis, both Sensex and Nifty gained 3.7 per cent each.
Meanwhile, market will open for one hour on Saturday, November 14 for the auspicious “Muhurat Trading session, which will start at 06:15 pm. However, it will remain closed on Monday, November 16 on account of Diwali-Balipratipada.
In the broader market, the S&P BSE MidCap index rose 0.86 per cent to 15,876 levels while the S&P BSE SmallCap index advanced over 1 per cent to 15,639 points.
Sectorally, all the indices but Nifty FMCG, and Nifty Media settled in the green.
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Team StockArchitect wishes all of you a very Happy Diwali and a very Prosperous New Year ahead
stockarchitect
November 14, 2020
- GPL has a major stake (74%) from China-based Fosun Pharma.
- IPO constitutes 26.45% of the post issue paid-up equity.
- Issue appears fully priced based on P/E and P/BV parameters.
- The company has not paid any dividend in the last three fiscal.
- Negative sentiment for China connection globally raises major concern.
PREFACE:
Gland Pharma has been the talk of the town ever since it filed DRHP for its mega maiden float in pharma segment. It has a very interesting story of its existence. The company formed by PVN Raju in 1978 found a big stakeholder in the form of Fosun Pharma of China that acquired 74% stake in October 2017. Thereafter, the company marked tremendous growth in top and bottom line till FY20. However, ever since COVID-19 pandemic, China is facing a trade war and boycott from the world over and thus this company with major China stake is at the centre stage for the Indian capital market.
As we know not only the Government of India, but even countries like the US, UK, Germany, Japan have started cutting their business deals with China. As this process has been aggravated since April/May 2020, it would be of major concern for the future outlook of this pharma company. According to market circles, unless some big Indian or other multinational stakeholder jumps in to acquire the stake, it will be very difficult to presume the fate of this company in the near term.
In the past, we have seen pharma/healthcare sector IPOs of Eris Life (Rs. 1741.16 cr.), Alkem Lab (Rs. 1349.61 cr.), Laurus Lab (Rs. 1331.80 cr.), Metropolis (Rs. 1204.29 cr.), Aster DM (Rs. 980.14 cr.) and thus, this is the biggest ever IPO in pharma sector for Indian capital market history so far. So on this count too this IPO is a talk of the town.
It’s a known fact that over 80% raw material for pharma business is coming in India from China and it dominates this space globally. But in the present context of negative sentiment for China connections globally post COVID-19 pandemic, once again this IPO is drawing the attention of one and all in regard to responding it. This is indicative from the GMP as it started with a big bang even when formal pricing announcement was missing. And now that pricing announcement is made, it has witnessed a big slide in GMP quotes. If market circles to be believed, this IPO may see a re-run of SBI Card that created fancy before IPO and marked dull listing on debut day.
ABOUT COMPANY:
Gland Pharma Ltd. (GPL) is one of the fastest-growing generic injectables-focused companies by revenue in the United States from 2014 to 2019 (Source: IQVIA Report). It sells products primarily under a business to business (“B2B”) model in over 60 countries as of June 30, 2020, including the United States, Europe, Canada, Australia, India and the Rest of the world. The company has a consistent compliance track record with a range of regulatory regimes across these markets. It also has an extensive track record in complex injectables development, manufacturing and marketing and a close understanding of the related sophisticated scientific, technical and regulatory processes.
It has expanded from liquid parenterals to cover other elements of the injectables value chain, including contract development, own development, dossier preparation and filing, technology transfer and manufacturing across a range of delivery systems. Its promoter, Shanghai Fosun Pharma, is a global pharmaceutical major.
GPL is focused on meeting diverse injectables needs with a stable supply of affordable and high-quality products. It has established a portfolio of injectable products across various therapeutic areas and delivery systems. GPL is also present in sterile injectables, oncology and ophthalmics, and focus on complex injectables, NCE-1s, First-to-File products and 505(b) (2) filings. GPL’s delivery systems include liquid vials, lyophilized vials, pre-filled syringes, ampoules, bags and drops. The company is expanding development and manufacturing capabilities in complex injectables such as peptides, long-acting injectables, suspensions and hormonal products as well as new delivery systems such as pens and cartridges.
GPL is currently following the B2B segment and has up the sleeve B2C market as well. The company has seven manufacturing facilities in India, comprising four finished formulations facilities with a total of 22 production lines and three API facilities. As of June 30, 2020, it had manufacturing capacity for finished formulations of approximately 755 million units per annum.
As of June 30, 2020, it had a sales force of over 200 employees and an extensive countrywide distribution network to ensure coverage in approximately 2,000 corporate hospitals, nursing homes and Government facilities. On the same date, GPL had a workforce of 3766 excluding contract labourers.
As of June 30, 2020, the group had 267 ANDA filings in the United States, of which 215 were approved and 52 were pending approval. The 267 ANDA filings comprise 189 ANDA filings for sterile injectables, 50 for oncology and 26 for ophthalmics related products. Out of these 267 ANDA filings, 101 represent ANDAs owned by it, of which 71 ANDA filings are approved and 30 are pending approval. As of the same date, the group had a total of 1,427 product registrations, comprising 371 product registrations in the United States, Europe, Canada and Australia, 54 in India and 1002 in the Rest of the world.
ISSUE DETAILS / CAPITAL HISTORY:
To finance its needs of working capital (Rs. 769.50 cr.), capital Expenditure (Rs. 168.00 cr.), general corpus fund (SHALL NOT EXCEED 25% OF THE NET ISSUE PROCEEDS) GPL is coming out with a maiden IPO of combo offer of fresh equity issue (Rs. 1250.00 cr.) and offer for sale (Rs. xx cr.). It consists fresh equity issue of approx 8333335 shares of Re. 1 each (at the upper price band) and offer for sale of 34863635 shares. Thus the overall issue will be for approx. 43196970 equity shares. The issue opens for subscription on November 09, 2020, and will close on November 11, 2020. The company has fixed the price band of Rs. 1490 – Rs. 1500 per share. Minimum application is to be made for 10 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. GPL mulls mobilizing Rs. 6436.35 cr. – Rs. 6479.55 cr. (Based on lower and upper price bands) through this IPO. The issue constitutes 26.46% of the post issue paid-up capital of the company.
Having issued/converted initial equity at par, the company raised further equity in the price range of Rs. 2.50 to Rs. 48.69 between January 1996 and December 2007. The company also bought back shares in the price range of Rs. 139.81 – Rs. 344.81 between July 2014 and October 2017. It has also issued bonus shares in the ratio of 1 for 1 in February 1994, 1 for 2 in October 1994. (Based on FV of Re. 1 per share).
The average cost of acquisition of shares by the promoters/ other selling stakeholders is Rs. NIL, Rs. 30.12 and 605.12 per share. Post issue, GPL’s current paid-up equity capital of Rs. 15.50 cr. will stand enhanced to Rs. 16.33 cr. With this issue, the company is looking for a market cap of Rs. 24492.42 cr.
The issue is jointly lead managed by Kotak Mahindra Capital Co. Ltd., Citigroup Global Markets India Pvt. Ltd., Haitong Securities India Pvt. Ltd. and Nomura Financial Advisory & Securities (India) Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue.
FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, GPL has posted total income/net profits of Rs. 1671.68 cr. / Rs. 321.05 cr. (FY18), Rs. 2129.77 cr. / Rs. 451.86 cr. (FY19) and Rs. 2772.41 cr. / Rs. 772.86 cr. (FY20). For Q1 of FY21, it has posted a net profit of Rs. 313.90 cr. on a total income of Rs. 916.29 cr. Currently, around 67% revenue comes from exports to the US, and as known about US-China trade war imbroglio, added tension following Corona pandemic, it is difficult to assume the sustainability of this export business.
For the last three fiscals, GPL has posted an average EPS of Rs. 38.11 and an average RoNW of 18.08%. The issue is priced at a P/BV of 5.86 based on its NAV of Rs. 255.79 as on June 30, 2020, and at a P/BV of 4.70 based on post issue NAV of Rs. 319.29. (Based on upper price band).
GPL has posted CAGR of 27.38% in revenue, EBITDA of 36.90%, restated profits of 55.15% from fiscal 2018 to 2020. Its debt-equity ratio was 0.001 as on June 30, 2020.
For the last three fiscals, GPL has not declared any dividend payouts. (Refer page 185 of RHP).
If we attribute the latest earnings on a fully diluted equity post issue, then asking price is at a P/E of around 19.5. Based on FY20 performance, the asking price is at a P/E of 31.7. Thus prima facie issue is fully priced. The prime concern is the sustainability of Q1 performance in the present context of opposing China connected goods/technology/tie-ups/investments.
BRLM’s TRACK RECORD:
The four Book Running Lead Managers associated with this issue have handled 15 public issues in the past three years, out of which 5 issues closed below the issue price on listing date.
COMPARISION WITH LISTED PEERS:
As per offer documents, GPL has no listed peers to compare with.
Conclusion / Investment Strategy
No doubt that currently, the pharma sector is attracting investors following COVID-19 pandemic and the search of remedies for it globally. This company has posted good performance for the last three fiscals and spectacular numbers for Q1 of FY21, but will it sustain going forward is a major concern in the present context of negative sentiment for China connections globally. Based on P/BV and P/E parameters, the issue appears fully priced. Considering all these, though it sounds lucrative bet for the long term, risk savvy, cash surplus investors may consider investment at their own risk in this China connected IPO.
The original review is written by Dilip Davda and appears on Chittorgarh.com. It is available here.
