Manpasand Beverages made its debut on the securities market on Wednesday with an initial public offering (IPO) of fresh issue of 1.25 crore shares in the price band of Rs 290-320. The company aims to raise around Rs 400 crore through this public offer.
The issue will close on June 26.
Minimum application is to be made for 45 shares and in multiples thereon, thereafter. Post issue, shares of the Vadodara-based company will be listed on the Bombay Stock Exchange and National Stock Exchange.
Manpasand Beverages is a fruit drink manufacturing company, with primary focus on mango flavour, the leading flavour for juice drinks in India.
Funds raised from the issue will be used for the setting-up of a new manufacturing facility in the state of Haryana and Punjab along with modernisation of existing manufacturing facilities in Vadodara and Varanasi.
Manpasand also plans to set up a new corporate office in Vadodara and pay off "certain borrowings availed by their company".
SHOULD YOU INVEST?
Angel Broking is Neutral on the issue:
Manpasand Beverages is highly dependent on a single brand (Mango Sip), which currently has rural and semi-urban focus. Going forward, for penetrating the urban markets, the company would face stiff competition from existing brands like Frooti, Slice, Mangola, Pepsi and Coca-Cola, among others.
On the price to earnings per share (EPS; post-IPO) front, the company is valued at 95x 9M FY2015 annualised numbers while close peer Dabur is trading at 44x FY2015 numbers. Further, other FMCG companies like ITC and Hindustan Unilever are also trading at a lower multiple than Manpasand Beverages inspite of bigger brands in their portfolios, wide pan-India distribution networks, and higher return on equity, coupled with their proven track records. Hence, Angel Broking is neutral on the issue due to expensive valuation.
SMC Investment and Advisors pointed out certain risk like dependence of the company on a single product, negative net cash flow from operating and investing activities and expired licence of Vadodra Facility. However, strong brand identity of flagship "Mango Sip", especially in the under-penetrated semi-urban and rural markets, wide distribution network, strong financial position and profitability, and experienced promoter and management teams are some of the key strengths of the company.
Reliance Securities says Manpasand Beverages has an unclear succession plan and valuation is looking on the higher side. The brokerage says new product launches may not be commercially successful.
"On the positive side, the company will become debt free. At prsent, Debt to Equity ratio for Manpasand Beverages stands at 0.5-0.6x and it plans to use proceeds of IPO to repay/prepay debt of Rs 100.9 crore making the company virtually debt free."
In addition to this, Reliance Securities in research report said: "The company has visionary promoters and the flagship brand, Mango Sip, was launched 17-18 years ago and currently boasts of deep distribution network in the semi-urban and rural markets of North and North-East India."