Manpasand Beverages plans to raise Rs 400 crore via IPO next week

An initial public offering (IPO) of Gujarat-based Manpasand Beverages is going to hit capital market on June 24. The company plans to raise Rs 400 crore through this public offer. The issue will close on July 26.
Kotak, IIFL, ICICI Securities and Karvy Computershare are the book running lead managers of the offer. The company has fixed a price band of Rs 290-320 per share for the issue.
The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the NSE and the BSE.

Business and Background

Manpasand Beverages (MBL) is a fruit drink manufacturing company based in Vadodara, Gujarat. Mango-based fruit drink 'Mango Sip' (with around 12-14 per cent mango pulp content) is its flagship brand which is focused towards customers primarily based in semi urban and rural markets. The company also offers fruit drinks in apple flavour (Apple Sip) under the 'Sip' brand.

In July 2014, it launched 'Fruits Up' brand to further expand its product portfolio. Under the 'Fruits Up' brand, it offers differentiated carbonated fruit drinks with real fruit content and further, it offers fruit drinks with a relatively higher fruit content (around 16-17 per cent). In July 2014, with a focus on the North Eastern market, the company launched 'Manpasand ORS' brand of fruit drink with energy replenishing attributes in apple and orange flavours (around 10 per cent fruit content) and rehydration salts. The company also commenced marketing of 'Pure Sip' brand of bottled water in July 2014 with to gain a foothold in the bottled water market.

Investment Rationale

MBL's flagship brand 'Mango Sip', has a strong brand identity, especially in the underpenetrated semi urban and rural markets in India. Sale of Mango Sip stood at Rs 84 crore, Rs 234.5 crore and Rs 285 crore for 2011-12, 2012-13 and 2013-14, respectively, growing at CAGR of 84 per cent.

According to ICICI Securities, MBL is trying to expand its product portfolio with the recently launched 'Fruits Up' and 'Manpasand ORS' brands.

Net Profit for 2013-14 stood at Rs 20.4 crore, it grew at CAGR of 83.5 per cent during FY12-14. Operating margins for MBL stood at 15.5 per cent for 2013-14. RoE for 2011-12, 2012-13 and 2013-14 was at 11.9 per cent, 30.5 per cent and 21.7 per cent, respectively.

Risk
Mango Sip brand contributes majority share to the revenues of MBL (around 97 per cent). ICICI Securities in a research note said, "Heavy dependence on 'Mango Sip' for revenues is a major concern for the company. Also, delay in acquisition of land and setting up of new facility may affect growth prospects of MBL."

Availability of spurious, look-alike and counterfeit products in the market, increase in costs of mango pulp are some other areas of concerns for the company.