Steeppricing gives bitter taste!
Between 2011 and 2014 private equity firm SAIF Partners picked up about 30% of Manpasand’s equity for Rs 45 cr, average cost being Rs 80.45, at an earnings multiple of less than 30. The same stock is now being priced Rs 290-320 at an exorbitant multiple of 88-95! What’s more, Rs 174 cr public money is earmarked for a new manufacturing facility in Haryana and a new corporate office in Vadodara which are only in nascent stage and could run into cost and time overrun.
|
OFFER AT A GLANCE |
|
|
Name |
Manpasand Beverages Ltd |
|
Public Offer |
125 to 137.8 lakh shares of Rs 10 each |
|
Offer % on Total Equity |
25% to 27% on Rs 50.05 cr to Rs 51.35 cr |
|
Post-IPO Promoter Stake |
49.16% to 50.43% |
|
Offer Price |
Between Rs 290 and Rs 320 |
|
Offer Amount |
Rs 400 cr |
|
Application Quantity |
45 & Multiples of 45 |
|
Bid/Offer Opens |
June 24, 2015 |
|
Bid/Offer Closes |
June 26, 2015 |
|
Listing |
BSE and NSE |
|
Rating |
Nil |
|
Book Running Lead Managers |
Kotak Mahindra, IIFL Holdings, ICICI Sec |
|
Registrars |
Karvy Computershare |
The IPO
The present public offer is a fresh issue of Rs 400 cr from the company. The offer is being made through the book-building route with a price band of Rs 290-320. The issue quantum amounts to 125 to 137.8 lakh shares which constitute 25 to 27% of the post-issue capital (Rs 50-51.35 cr).
IPO Object
The company proposes to utilize the issue amount for a) Setting-up of a new manufacturing facility in the state of Haryana Rs 153 cr; b) Modernization of existing manufacturing facilities at Vadodara and Varanasi Rs 39 cr; c) Setting-up of a new corporate office at Vadodara Rs 23 cr and d) Repayment of borrowings to the tune of Rs 101 cr. The balance proceeds net of issue expenses is earmarked for general corporate purposes.
Grading
The company has not sought rating for its IPO.
Lineage
The Vadodara-registered Manpasand Beverages Ltd (MBL) has been promoted by Dhirendra Singh (53) who holds a bachelor‘s degree in arts from Gorakhpur Vishvidhyalaya, Varanasi. He was previously employed at the PSUs ONGC and Petrofils. The genesis of MBL dates back to 1997 when a proprietorship in the name Manpasand Agro Food was formed by the promoter and launched fruit drinks under the brand `SIP‘. He reportedly set up a manufacturing plant at Vadodara in 2005 and created an additional line in 2007 to produce Tetra Pak fruit drinks. The proprietorship was converted into a partnership in 2010 and towards the end of that year MBL was formed to take over the business of the partnership firm.
In 2011 MBL raised capital by way of allotment of 1,000 Equity Shares and 899,000 CCPS to private equity firm SAIF Partners (SPIL) and set up a new manufacturing plant at Varanasi. Same year, the company inducted B.M. Vyas, ex-managing director of Gujarat Co-operative Milk Marketing Federation, the dairy company selling the Amul brand, as an independent director.
During 2012 and 2013 MBL increased installed capacities at Vadodara and Varanasi and signed Sunny Deol as brand ambassador for `Mango SIP’. In 2014 it launched new brands `Fruits up’, `Manpasand ORS’ and `Pure Sip’ and roped in Mary Kom as brand ambassador for `Manpasand ORS’. Same year MBL raised further capital by way of allotment of 218,600 CCPS to SPIL and 112,500 equity shares to Aditya Birla Trustee Company and acquired the facility at Dehradun. In 2015, the company commenced production at its Vadodara-2 unit.
MBL is essentially a fruit drink company with a primary focus on mango fruit. The combined installed capacity of its manufacturing facilities is said to be 40,000 Tetra Pak Cases a day and 65,000 PET Bottle Cases a day for fruit drinks and 15,000 PET Bottle Cases a day for carbonated fruit drinks.
Financial Performance
After graduating from partnership to limited liability company MBL’s top line leapt from Rs 86 cr in FY12 to Rs 294 cr in FY14. In the first nine months of FY15, the company’s revenue stood at Rs 239 cr. MBL’s operating margin, which was at 16.3% in FY12, has marginally dipped to 15.5% in FY14. Though the top line has grown consistently, the company’s bottom line has been fluctuating. Net profit vaulted from Rs 6 cr in FY12 to Rs 22 cr in FY13 but, dropped to Rs 20 cr next year. In the first nine months of FY15, the profit stood at Rs 12.69 cr. More importantly, the company has enjoyed positive cash flows from operations in the last three years.
The company’s productive assets have more than doubled to Rs 195 cr in fiscal 2015 whereas its borrowings have gone up by only Rs 23 cr. MBL made a bumper 9 for 1 bonus issue last year which enlarged the capital from just Rs 2.5 cr to Rs 37.55 cr in 2015. The company joined the dividend list in 2013 with a modest rate of 10% which was maintained in 2014.
|
FINANCIAL TRACK RECORD OF MANPASAND BEVERAGES |
||||
|
(Rs in Lakh) |
Dec-14 |
Mar-14 |
Mar-13 |
Mar-12 |
|
Operating Revenue |
23910 |
29431 |
24024 |
8573 |
|
Other Income |
37 |
5 |
32 |
41 |
|
Gross Revenue |
23947 |
29436 |
24056 |
8614 |
|
Operating Profit |
3674 |
4575 |
3904 |
1438 |
|
Operating Margin % |
15.2 |
15.5 |
16.1 |
16.3 |
|
Finance Cost |
776 |
771 |
428 |
301 |
|
Depreciation |
1491 |
1489 |
1016 |
455 |
|
Tax |
139 |
271 |
218 |
74 |
|
Net Profit |
1269 |
2043 |
2242 |
608 |
|
Net Operating Cash-flow |
5114 |
230 |
3191 |
-1395 |
|
Net Worth |
18486 |
9478 |
7469 |
5267 |
|
Equity Capital |
3755 |
250 |
250 |
250 |
|
Net Block |
18476 |
9194 |
9265 |
3990 |
|
Long Term Borrowings |
3854 |
2587 |
2998 |
1700 |
|
Short Term Borrowings |
5000 |
3918 |
1749 |
1039 |
|
Total Borrowings |
8854 |
6505 |
4747 |
2739 |
Valuation & Perception
MBL is asking for a market cap of Rs 1600 cr for a business whose current turnover is less than Rs 325 cr. The company says that there was no comparable peer in the listed domain. While MBL’s predecessors in the mango fruit drink market (makers of Frooti & Jumpin) have not gone public, there are many domestic players in the branded food and beverage segment currently quoted on the trading screen. These scrips are discounted between 12 and 69 times their earnings and less than 2 times their revenue. As compared to this, MBL’s price band is certainly too steep. MBL asks for a P/E of more than 88x and P/R of around 5x. Can such an exorbitant discounting be justified for a business which involves no great technology?
Here it is worth noting that the promoters would be holding nearly a half of the post-issue large equity of over Rs 50 cr at a cost of just Rs 2.91 a share! The private equity fund, SPIL, will hold 22% equity at a cost of only Rs 80.45 a piece and Aditya Birla Trustee will have a stake of 2% at Rs 233 a share. As such, once the lock-in lapses, one may find a lot of selling pressure.
The promoter of MBL is new to the investors. Will he live up to the expectation of the investors who are going to invest at such a high price? It is too early to comment. Nevertheless, the disclosure made in the offer document regarding the corporate governance practiced by the management does not exude much optimism.
The company’s statutory auditors have qualified that the company’s internal control system regarding purchase of inventory, fixed assets and sale of goods & services need to be strengthened in commensurate with the size of the company. Also, they had to say that the company had not been regular in depositing statutory dues like PF, Income Tax, Sales Tax, Service Tax, etc!
|
HOW MANPASAND COMPARES WITH DOMESTIC FOOD BRANDS |
||||||||
|
CO_NAME |
M-CAP |
EQ |
P/E |
P/R |
P/NB |
OPM |
YLD |
PRICE |
|
|
(Rs Cr) |
(x) |
(%) |
(Rs) |
||||
|
DFM Foods |
489 |
10.00 |
68.9 |
1.9 |
5.4 |
8.6 |
0.5 |
489 |
|
Tasty Bite |
282 |
2.57 |
26.1 |
1.6 |
4.6 |
14.0 |
0.1 |
1,098 |
|
ADF Foods |
143 |
22.38 |
11.5 |
1.1 |
1.9 |
16.8 |
2.4 |
64 |
|
Bambino Agro |
77 |
8.01 |
24.6 |
0.3 |
1.7 |
8.9 |
1.6 |
96 |
|
Chordia Food |
34 |
2.98 |
20.6 |
1.0 |
3.1 |
11.2 |
0.0 |
115 |
|
Orient Beverages |
23 |
2.16 |
18.3 |
1.0 |
2.9 |
11.4 |
0.5 |
107 |
|
MANPASAND |
1602 |
50.05 |
94.7 |
5.0 |
8.7 |
15.2 |
0.3 |
320 |
|
|
1489 |
51.35 |
88.0 |
4.7 |
8.1 |
15.2 |
0.3 |
290 |
Lead Managers’ Track
For the Rs 400 cr IPO, MBL has hired the services of three investment bankers namely, Kotak Mahindra Capital, IIFL Holdings and ICICI Securities. Big names may effectively help marketing the public issue but, will they ensure decent returns to the investors? The track record of some of the IPOs advised by these investment bankers is frightening.
In recent years, Kotak Mahindra associated with three public issues in as many years and all the three are currently quoting at a discount. The offer documents do not reveal the investment banker’s record beyond three years. Since 2010, Kotak has handled as many as 23 IPOs of which 11 are currently quoting below the offer price. While jubilant, priced at 140, has fetched fabulous returns (1163%) in five years, Techpro Systems and Vascon Engineers, offered at Rs 355 and Rs 165 respectively, have inflicted a capital loss of 97% and 91% on the investors.
|
KOTAK MAHINDRA CAPITAL-MANAGED IPOs |
||||
|
COMPANY NAME |
IPO |
IPO |
CURNT |
GAIN |
|
|
DATE |
PRICE |
PRICE |
% |
|
Adlabs Entertainment |
10-Mar-15 |
180 |
166.50 |
-8 |
|
Ortel Communications |
3-Mar-15 |
181 |
168.10 |
-7 |
|
Speciality Restaurant |
16-May-12 |
150 |
140.70 |
-6 |
|
Future Consumer |
25-Apr-11 |
10 |
12.01 |
20 |
|
Muthoot Finance |
18-Apr-11 |
175 |
187.30 |
7 |
|
Tata Steel |
19-Jan-11 |
610 |
310.40 |
-49 |
|
Coal India |
18-Oct-10 |
245 |
399.75 |
63 |
|
Prestige Estates |
12-Oct-10 |
183 |
250.35 |
37 |
|
Oberoi Realty |
6-Oct-10 |
260 |
296.15 |
14 |
|
Tecpro Systems |
23-Sep-10 |
355 |
9.39 |
-97 |
|
Eros International |
17-Sep-10 |
175 |
517.55 |
196 |
|
Gujarat Pipavav |
23-Aug-10 |
46 |
219.45 |
377 |
|
Bajaj Corp |
2-Aug-10 |
132 |
429.70 |
226 |
|
SKS Microfinance |
28-Jul-10 |
985 |
461.80 |
-53 |
|
Hindustan Media |
5-Jul-10 |
166 |
210.60 |
27 |
|
Jaypee Infra |
29-Apr-10 |
102 |
12.65 |
-88 |
|
Nitesh Estates |
23-Apr-10 |
54 |
16.45 |
-70 |
|
NMDC |
10-Mar-10 |
300 |
119.80 |
-60 |
|
Rural Electrificat |
19-Feb-10 |
203 |
285.90 |
41 |
|
Hathway Cable |
9-Feb-10 |
48 |
49.05 |
2 |
|
NTPC |
3-Feb-10 |
201 |
137.10 |
-32 |
|
Vascon Engineers |
27-Jan-10 |
165 |
15.10 |
-91 |
|
Jubilant Foodworks |
18-Jan-10 |
145 |
1,831.10 |
1163 |
SEBI’s disclosure norms might have helped IIFL Holdings to hide its past. MBL’s offer document claims that IIFL did not manage any IPOs in last three years. However, the fact is, in its previous avatar, India Infoline, the same invest banker handled 5 public issues between July 2007 and April 2010. Of these only Talwalkars’ record is worth speaking about. Nu Tek India and Omnitech Infosolutions managed by IIFL are currently quoting at a loss of 99% and 95% respectively.
|
IIFL HOLDINGS-MANAGED IPOs |
||||
|
COMPANY NAME |
IPO |
IPO |
CURNT |
GAIN |
|
|
DATE |
PRICE |
PRICE |
% |
|
Talwalkars Better |
21-Apr-10 |
128 |
317.80 |
148.3 |
|
Infinite Computer |
11-Jan-10 |
165 |
167.70 |
1.6 |
|
Cox & Kings |
18-Nov-09 |
165 |
257.85 |
56.3 |
|
Nu Tek India |
29-Jul-08 |
48 |
0.50 |
-99.0 |
|
Omnitech Infosol |
19-Jul-07 |
105 |
5.75 |
-94.5 |
In the case of ICICI Securities, in last two years the investment bankers have associated with four public issues and all the four are currently quoting above the offer price. Nevertheless, the post-issue performance of the IPOs handled by ICICI Sec in the year 2010 is pathetic. The investment banker lead managed as many as 13 public issues in that year of which 11 are quoting below the investment cost. Of these, A2Z Infra and Shree Ganesh Jewel are languishing at more than 95% discount! Three more scrips have lost in excess of 80% of the investment value.
|
ICICI SECURITIES-ASSOCIATED IPOs |
||||
|
COMPANY NAME |
IPO |
IPO |
CURNT |
GAIN |
|
|
DATE |
PRICE |
PRICE |
% |
|
PNC Infratech |
8-May-15 |
378 |
380.20 |
0.6 |
|
VRL Logistics |
15-Apr-15 |
205 |
311.10 |
51.8 |
|
Shemaroo Entertainment |
16-Sep-14 |
170 |
237.40 |
39.6 |
|
Wonderla Holidays |
21-Apr-14 |
125 |
255.55 |
104.4 |
|
Power Finance Corp |
10-May-11 |
203 |
271.50 |
33.7 |
|
Future Consumer Ent |
25-Apr-11 |
10 |
12.01 |
20.1 |
|
Muthoot Finance |
18-Apr-11 |
175 |
187.30 |
7.0 |
|
PTC India Financial |
16-Mar-11 |
28 |
45.05 |
60.9 |
|
Punjab & Sind Bank |
13-Dec-10 |
120 |
42.85 |
-64.3 |
|
A2Z Infra Engineering |
8-Dec-10 |
400 |
14.33 |
-96.4 |
|
Shipping Corporation |
30-Nov-10 |
140 |
48.75 |
-65.2 |
|
Claris Lifesciences |
24-Nov-10 |
228 |
249.80 |
9.6 |
|
Power Grid Corporat |
9-N ov-10 |
90 |
141.25 |
56.9 |
|
Commercial Engineers |
30-Sep-10 |
127 |
19.20 |
-84.9 |
|
Engineers India |
27-Jul-10 |
290 |
222.35 |
-23.3 |
|
Parabolic Drugs |
14-Jun-10 |
75 |
8.01 |
-89.3 |
|
Jaypee Infra |
29-Apr-10 |
102 |
12.65 |
-87.6 |
|
Nitesh Estates |
23-Apr-10 |
54 |
16.45 |
-69.5 |
|
Shree Ganesh Jewel |
19-Mar-10 |
260 |
12.94 |
-95.0 |
|
Rural Electrificat |
19-Feb-10 |
203 |
285.90 |
40.8 |
|
NTPC |
3-Feb-10 |
201 |
137.10 |
-31.8 |