Jay Patel
The initial public offering of Burger King India got oversubscribed within a few hours of opening for subscription and another IPO of the same sector and at time of writing this, Mrs Bectors got oversubscribed 199 times; highest in 2020. With this, the issue became one of the most subscribed IPO ever. It also trumped the subscription of Burger King India, Happiest Minds Technologies and Mazagon Dock Shipbuilders that came earlier in the year.
This movement in the market has created a fresh wave of excitement and hope in investors. The positive news of vaccination trials and rollout across the world has brought the stock market back to the focus of serious investors. Declined Gold price reflected this sentiment and this time Fresh IPOs are in Demand again.
Market is flooding with New Investors: The new batch of investors has entered the market during the Lockdown. Most of them are trying their luck on a fresh IPO due to less risk involved. The public issue of Burger King was subscribed 68.15 times in the retail category. Whereas the public issue of Bector’s Cremica was subscribed 29.33 times in the retail category.
Nearly 1.3 million new demat accounts were added in September. A demat account is used to hold shares and securities in an electronic form rather than physically on paper. There was a surge in retail participation in the stock market after people were forced to stay home since the outbreak of the coronavirus pandemic. Retail investors continue flocking to equities. Industry data showed that a million new de-materialized or demat accounts was opened for a fifth straight month in October, taking the total tally to 47.6 million.
Almost 4.9 million new demat accounts were opened during financial year 2020, the maximum in decades, after 4 million accounts were added in the previous year. Besides, on an average, 4.3 million new accounts have been opened over the past three years. The newly opened accounts are from tier II and III cities, which are a positive sign, say brokerage firms. More demat accounts in non-metros reflect deeper penetrations of equity markets.
There are several reasons for the growing interest of retail investors in equities. The lockdown gave people time to think and understand the market and invest. Falling interest rates and the March crash made equities attractive.
Edelweiss Wealth Management, the second largest non-bank, wealth management firm in India, announced a 70 percent year on year (YoY) increase in its user base in India for Edelweiss Mobile Trader (EMT), its trading application.
IPOs made 2020 ends in Good way: Investing in initial public offerings (IPOs) in 2020 has been very profitable for investors despite the Covid-19 pandemic. After the initial panic that gripped the markets, the primary market revived soon after the secondary market showed signs of a sustained pick-up. From September onwards, companies such as Rossari Biotech, Route Mobile, Happiest Minds Technologies and Burger King, along with many others, have tapped the market very successfully with returns ranging between 10% and 125%.
Out of the 12 IPOs that the primary markets have seen so far, only three have listed with the negative gains. They are UTI Asset Management Company, Angel Broking and Equitas Small Finance Bank, which were down by 13.9%, 8.9% and 0.76% on their listing day, data from Prime Database show. The top four IPOs of this year are: Rossari Biotech, Route Mobile, Happiest Minds Technologies and Burger King India, which have from the date of their listing gained 94%, 221.6%, 94.7%, and 232.1%.
Burger King India made a strong debut on the bourses on Monday, closing at Rs 138.40 — a 130 per cent premium over its issue price of Rs 60. This has been the strongest closing on the listing day since December 2017, when Astron Paper & Board Mill ended up 139.4 per cent over its issue price on its listing day on December 29, 2017.
The quick service restaurant chain has 259 owned Burger King Restaurants and nine sub-franchised Burger King Restaurants as per the prospectus filed with the SEBI. Burger King has a target to increase its number of restaurants to 700 by the end of December 2026.
The IPO of Mrs Bectors Food: A supplier of buns to quick-service restaurant (QSR) chains such as McDonald’s, KFC, Burger King and Carl’s Jr among others, comes in the wake of stellar response to Burger King IPO whose shares doubled on the day of their listing on Monday. The funds raised through the IPO will be utilized for expansion of the company’s Rajpura manufacturing unit and establishing a new production line.
Rajni Bector started the business in a backyard with an investment of just Rs 20,000. Today it is a household name in North India and has grown into a Rs 1,000 crore business exporting its products to 60 countries and employing over 4,000 people. Their big break came in the mid-1990s, when Cremica was chosen by McDonald’s, which had just entered India, to supply it with buns and liquid condiments.
Business continued as usual and by 2006, Bector Food Specialties was clocking revenues of Rs 100 crore, at 30 percent year-on-year growth. That year, global investment banking firm Goldman Sachs, through its Mauritius-based unit Jade Dragon, picked up a 10 percent stake in the company for 50 crore, which valued the company at 500 crore.
According to an IPO report from Anand Rathi, the company’s revenues from operations have increased from Rs 693 crore in FY18 to Rs 762 crore in FY20 and it is today almost a Rs 1,000 crore company.
Today, Mrs Bector Food Specialties is one of the leading companies in the premium and mid-premium biscuits and bakery segment in North India.
Bottom Line: The overall structure of the market continues to remain positive given consistent FPI inflows, RBI’s strong support towards the economy and developments on the vaccine front. “Sustenance of the demand recovery after the festive season would be a key to watch out for. Globally, investors would track progress on US stimulus which is again gaining momentum.
photo credit: bector.jpg
