Prataap Snacks lists at 33% premium over issue price
It intends to use the IPO proceeds to expand capacity and retire the debt on its books.
The Rs 482-crore initial public offer (IPO), which was sold during September 22-26, had received good response, with investors bidding for 47.39 times the issue size. The quota limit for qualified institutional buyers (QIBs) was subscribed 76.89 times, non-institutional investors (NIIs) 101.15 times and retail investors 8.48 times.
The company makes products under the ‘Yellow Diamond’ brand. It intends to use the IPO proceeds to expand capacity, marketing and brand building activities and retire the debt on its books. Data showed Prataap Snacks has seen its revenue growing at a compounded annual growth rate of 27.34 per cent over FY13-17. The company's share in the overall organised snacks market grew to 4 per cent in 2016 from 1 per cent in 2010.
At present, the domestic organised snacks market is estimated at Rs 22,000 crore. It is estimated to grow at 14.6 per cent CAGR, over 2016-21.
Brokerage Geojit Financial Services noted that the company intends to foray into relatively untapped high margin chocolate-based confectionary, the market for which is estimated to grow at 15-18 per cent annually over the next four to five years.
That said, Centrum Broking noted that Food snack industry in India has a strong historical dominance of both MNCs such as Pepsico and Indian brands such as Haldiram’s, DFM Foods, Balaji Wafers, having deep pockets for aggressive advertisement and promotion budget makes the space highly competitive. Free cash flow for the company is negative in the last 5 years indicating weak operational efficiency, it noted.