Manpasand Beverages Ltd IPO-Should you Invest?
Manpasand Beverages Ltd IPO-Should you Invest?
Manpasand Beverages IPO would open for subscription on 24th June, 2015. Manpasand Beverages is a fruit drink manufacturing company. It plans to raise Rs 400 Crores through this IPO. What are the positive factors in Manpasand Beverages Ltd IPO?. Should you invest in this Manpasand Beverages IPO? What are the risk factors to be considered before you invest in a such IPO’s?
About Manpasand Beverages Limited
Manpasand Beverages Limited, a fruit drink manufacturing company with a primary focus on mango fruit, which is the leading flavour for juice drinks in India. Their mango based fruit drink, ‘Mango Sip’, is flagship brand, which is strategically focused towards customers primarily based in semi urban and rural markets. With a view to expand the product portfolio, they have recently launched two new brands, ‘Fruits Up’ and ‘Manpasand ORS’. Under the ‘Fruits Up’ brand, they offer fruit drinks and carbonated fruit drinks in different flavours, and under the ‘Manpasand ORS’ brand, they offer fruit drinks with energy replenishing qualities with a primary focus on North East India. The Company currently offers fruit drinks in mango and other flavours and carbonated fruit drinks, in different packaging types and sizes.
Issue details of Manpasand Beverages IPO
- IPO opens: 24-Jun-2015
- IPO closes: 26-Jun-2015
- Face Value: Rs 10 per share
- Issue price band: Rs 290 to Rs 320 per share
- Minimum Shares: 45 shares and in multiples of 45 shares there-off
- Minimum amount: Rs 13,050 – Rs 14,400
- Issue size: Rs 400 Crores
- Lead Managers: Kotak Securities, IIFL and ICICI Securities Limited
- Listing: BSE and NSE
- Download Manpasand Beverages Limited IPO Prospectus from SEBI website here
Purpose of the IPO:
- Setting-up of a new manufacturing facility in the state of Haryana/Punjab.
- Modernization of existing manufacturing facilities, i.e. Vadodara 1 Facility and Varanasi Facility
- Setting-up of a new corporate office at Vadodara.
- Repayment/prepayment of certain borrowings availed by the Company and
- General corporate purposes.
- Company generated revenue of Rs 861.36 Millions for the year ended Mar-12 and Rs 2,943.58 Millions for the year ended Mar-14. It earned revenue of Rs 2,394.74 Millions for the 9 months ended Dec-14.
- Company posted a profit of Rs 60.7 Millions for the year ended Mar-12 and a Profit of Rs 204.34 Millions for the year ended Mar-2014. Its profit is Rs 126.88 Millions for the 9 months ended Dec-2014.
- Its diluted EPS for FY 2013-14 is Rs 5.66 and last 3 years Avg is Rs 5.17. Diluted EPS for nine months ended Dec-2014 is Rs 4.14.
Reasons to invest Manpasand Beverages IPO
- Good revenue growth in last 3 years. If we annualize 9 months revenue of FY 2014-15 to entire year, it would cross Rs 3,192 Millions. This indicates that company has grown almost 4 times in last 3 years.
- Good margin of 5%. Companies in such business would have low margins.
Reasons not to invest in a Manpasand Beverages IPO
- They depend heavily on their mango based fruit drink ‘Mango Sip’ product which contributed 96.85% and 97.59% of its net sales for Fiscal 2014 and Fiscal 2013, respectively, and any factor adversely affecting this product will negatively impact on profitability and results of operations.
- Increase in costs or a shortfall in the availability of its raw materials could have a material adverse effect on the Company’s sales, profitability and results of operations.
- Acceptance of its recently launched products among consumers may not be as high as they anticipate which may limit its ability to strengthen brands and have an adverse effect on its business, financial condition and results of operations.
- They may not be able to strengthen distribution network, which may have an impact on its growth plans to increase company foothold across India.
- Company’s failure to compete effectively could have an adverse effect on its business, results of operations, financial condition and future prospects.
- Its business is subject to seasonal and other variations and it may not able to accurately forecast demand for its products.
- They could be adversely affected by a change in consumer preferences, perception and spending habits. Further, if its product development efforts to cater to changing consumer preferences are not successful, its business may be restricted.
- The soft drinks industry in India could face slower growth and substitute products, which may adversely affect company sales volume and profitability.
- It may be unable to grow business in semi urban and rural markets, which may adversely affect its business and results of operations.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 12 onwards.
What company says about its growth prospects?
“As disposable income and aspirations of people continue to rise in semi urban and rural markets, we see tremendous potential in these large and fragmented markets which are under penetration. While our fruit drink brand Mango Sip is very popular, we want to grow our newly introduced carbonated fruit drink products in all these markets,” said Dhirendra Singh, Chairman and Managing Director, Manpasand Beverages Ltd.
The first generation entrepreneur said that due to demand for rural India, their company had been growing 25 to 30 per cent year-on-year and with the recent addition of carbonated fruit drink, the growth should be higher. The Indian soft drink market, which includes colas, fruit drinks and bottled water is estimated at over Rs.50,000 crore.
Recommendation / Investment strategy
- At a lower band issue price of Rs 290 and EPS for FY 2013-14 of Rs 5.66, P/E Ratio works out to be 51. At an issue price of Rs 290 and last 3 years average EPS of Rs 5.77, P/E Ratio works out to be 50.
- At a higher price band issue price of Rs 320 and EPS for FY 2013-14 of Rs 5.66, P/E Ratio works out to be 57. At an issue price of Rs 320 and last 3 years average EPS of Rs 5.77, P/E Ratio works out to be 55.
- Means company is asking for share price where P/E ratio is between 50 to 57. There is no listed company exclusively in fruit manufacturing business, hence we cannot compare whether the share price is high or low.
- Manpasand Beverages Limited revenues show good improvement in last 3 years. Margin though, looks low is justified due to the nature of business. Consumer acceptance of such fruit drinks in the future would affect the business.
- Currently, I am neutral on this IPO considering the high share price. If such IPO is available at a lower price after listing, one can enter into such IPO’s. Alternatively, if you are a high risk investor, you can still invest in such IPO’s at lower price band. Yes, I do agree that one of the best investment plans with higher returns is investing in IPO's, but you need to be little careful while investing in stocks.
Disclaimer: I have NO interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Manpasand Beverages Ltd IPO-Should you Invest