Should You Subscribe to Bikaji Foods IPO? Bikaji Foods IPO- Positives and Negatives

4 min read

One of the largest ethnic snack companies- Bikaji Foods International Limited (BFIL) has come with its IPO which is open for subscription between November 3 to November 7, 2022. Is this IPO good for long-term investment and should you subscribe to this IPO or not? Know the important positives and negatives of this IPO in this article as we move ahead.


1) Expensive Valuation:

  • At the upper price band of Rs 300, P/E works out to 95.23, which is demanding premium valuation to its peers like DFM Foods, Prataap Snacks, Nestle India, and Britannia.
  • At a higher price band, Bikaji is demanding an EV/Sales multiple of 4.5x, which is premium to the peer average. The food market in which the company is operating is normally dominated by unorganized players.

2) Purely Offer for Sale:

  • Bikaji IPO which is around Rs. 881 Cr. is purely an offer for sale.
  • Promoters and Private Equity Investors are taking an exit.
  • Promoters are selling a 2% stake.
  • Also, the other institutional investors mainly IIFL Special Opportunities Fund (Series I-V), India 2020 Maharaja, Limited, Intensive Softshare Private Limited, and Avendus Future Leaders Fund I are selling their stake in this IPO.
Promoter’s & Promoter’s Group Shareholding

3) Intense Competition:

  • Bikaji faces intense competition in the Indian snack food market, from various domestic and MNCs in India.
  • Some of the key competitors include Haldiram Foods International Pvt Ltd, Bikanerwala, Prataap Snacks Ltd, Balaji Wafers Pvt Ltd, ITC, PepsiCo India Holdings Pvt Ltd, and DFM Foods Ltd.

4) Weak Return Ratio:

  • ROCE & ROE as of FY22 stands at 13.9% and 9.5% respectively- Low as compared to Peers & FMCG Industry.
  • Debt/Equity Ratio of 0.2- Higher as Compared to Peers

5) Regional Concentration:

  • Bikaji derives a significant portion of its revenues from the core markets of Rajasthan, Assam, and Bihar. The contribution of this market as of Q1FY23 stands at around 74.7%.
  • The company is significantly dependent on the sale of its bhujia products. Bhujia product forms around 41% of the total sales of the company as of Q1FY23


1) Strong Brand Name- Bikaji

  • The company is having Strong Brand Ambassador. They have recently launched Bikaji Café and Bikaji Funkeen brands to promote their western snack segment.
  • The company has a total reach of 85,000 outlets and aims to scale it to 1.3 Lakh outlets over the next 2-3 years.
  • Bikaji has developed a large pan-India distribution network. As of June 30, 2022, they had 6 depots, 38 super-stockists, 416 direct, and 1,956 indirect distributors that work with their super-stockists.

2) Strong Market Share:

  • Bikaji sells all its products under its well-established brand “Bikaji” focusing on a diverse range of quality products, authentic ethnic Indian taste, innovative packaging, and effective pricing strategies covering all key price point
  • The company offers a diversified range of 250+ products across Namkeen, Bhujia, Frozen Food, Western Snacks, and Packed Sweets.
  • It is the largest producer of Bikaner Bhujia in India with an annual production of 29,380 tonnes and is the 2nd  largest producer of papad with an annual production capacity of 9,000 tonnes. Bikaji is the 3rd largest player in the organized sweets market with an annual capacity of 24,000 tonnes for packaged rasgulla, 23,040 tonnes for soan papdi, and 12,000 tonnes for gulab jamun.
  • Bikaji is the 3rd largest ethnic snacks company in India with an international footprint and 2nd fastest growing company in the Indian organized snacks market.
  • The company is the market leader in the family pack segment and recorded the highest share of 60.57% amongst its other SKUs of Rs. 5 and Rs. 10 packs during FY22.

3) Strong Financial Growth:

  • Bikaji showed steady sales growth and profitability, even during times when the COVID-19 epidemic was present.
  • BFIL has been able to maintain stable EBITDA margins at ~9% by passing on the rise in raw ingredient costs to their customers, despite the price of palm oil significantly rising in FY22.
  • Between FY20-FY22, Revenue growth stands at  22.4% while Net Profit growth is at 16.5%

4) Huge Headroom of Growth:

  • Indian Savoury Snacks (32.3% of the total packaged food retail market) market where the company majorly operates is valued at Rs. 75,100 Cr. in 2022 and is expected to reach Rs. 1,22,700 Cr. by 2026 at a CAGR of 13%.
  • The Indian Savoury Market is largely dominated by unorganized players and with tailwinds like changing lifestyles, rising incomes, and urbanization, the company might outpace the industry growth rate.

5) Healthy Balance Sheet:

  • The company is having strong reserves of around Rs. 800 Cr.
  • Healthy Free Cash Flow

6) Good Participation of Anchor Investors:

  • In the Pre-Placement Offer, many renowned domestic mutual funds and foreign investors have participated which boosts the confidence of the retail investors.
  • Some of the names of Mutual Funds are as follows: Aditya Birla Mutual Fund, Canara Robeco Mutual Fund, HDFC Mutual Fund, and other Major Mutual Fund
  • Foreign Investors’ names include Nomura Fund, Goldman Sachs, the Government of Singapore, Morgan Stanley, etc.

What should Investors Do?

Business, industry, and governance look good, but from the perspective of financials and valuations, then this IPO looks a bit expensive. The retail investors have been fully subscribed until the second day of the IPO, showing a bumper response to the IPO. This IPO is currently having a Grey Market Premium (GMP) of around 10%, showing decent demand for the IPO.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

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