In comparison, the FMCG sector was hit by poor consumer demand and massive destocking in retail and wholesale channels following the sucking out of high-value currency notes.

Now, the snack maker is seeking to tingle the taste buds of a new set of consumers beyond Rajasthan, its home turf, besides Bihar and Assam. However, the expansion plan is likely to ride on its proposed initial public offering that may mop up Rs 600-700 crore, and may involve a stake sale by private equity investor Lighthouse Funds.

The leading FMCG player, which sells its snacks, such as bhujia, papad, namkeen and sweets, under the Bikaji brand, aims to achieve 25% in revenue growth in 2017-18.

Promoted by Shiv Ratan Agarwal, Bikaji Foods, formerly Shivdeep Industries Ltd, was established in 1986 as a partnership concern. In 1995, it pivoted into a limited company. At present, it is run by the founder’s son Deepak, who is also the joint managing director of the company.

However, Bikaji Foods has its roots in another snacking major, the Haldiram Group. Shiv Ratan Agarwal was the grandson of Gangabhisan ‘Haldiram’ Bhujiawala, who started his business from a small shop in Bikaner in the 1930s. Nagpur-headquartered Haldiram Foods International Pvt. Ltd was founded later.

Bikaji Foods used to sell its products under the Haldiram brand till 1993. Ensuing a legal battle over the use of the trademark, the family split into smaller groups, and established different centres to avoid turf war within India and in overseas markets.

Fundraising

In its first round of private equity investment, Bikaji Foods had raised $15 million (Rs 90 crore) from Lighthouse Advisors in March 2014. As part of the deal, the mid-market-focused private equity firm had picked up a 12.5% stake (https://www.vccircle.com/lighthouse-picks-125- snacks-maker-bikaji-foods-15m/) in the company.

The investment had valued the company at $ 117 million, or Rs 720 crore, according to VCCEdge, the data research platform of News Corp VCCircle.

Naveen Gupta, the then CMO at Bikaji Foods had told VCCircle that the proceeds would be used to expand its distribution to markets outside North India. “We are not in any rush to raise further capital and are capable of funding our expansion plans through internal accruals. We will be exploring an IPO opportunity as an when we feel the need.”

However, VCCircle had recently reported that Lighthouse Advisors is finalising plans for Bikaji Foods’ public offering and may divest its stake (https://www.vccircle.com/exclusive-lighthouse- backed-bikaji-foods-firming-up-ipo-plans/) in the company during the public float.

Financials and peers

The company’s total income stood at Rs 612.6 crore in 2016-17, up 11% from Rs 552.6 crore in the preceding fiscal year. It posted net profit of Rs 43.7 crore compared with Rs 41 crore during the period under consideration.

The company’s revenue has grown 1.5 times from Rs 401 crore in 2012-13, when Lighthouse had infused money into Bikaji Foods, while its net profit has almost doubled from Rs 24.8 crore in the last four fiscal years.

Even in the face of the 8 November, 2016, demonetisation move, the company witnessed improved sales in the fourth quarter of 2016-17, and is hopeful to clock revenue growth of around 25% in 2017-18.

It has made capital investment of Rs 223 crore during the year ended March 2017. It has also set up a manufacturing plant at Karni industrial area with a production capacity of 250 tonnes of snacks per day.

This, at a time, when most of its competitors saw decline in profits and revenue growth. Bikaji Foods competes with Haldiram’s, Balaji Wafers, Prataap Snacks, Bikanervala and DFM Foods, besides MNCs such as PepsiCo.

Haldiram has three distinct areas of operations – while Haldiram Snacks and Ethnic Foods caters to northern states, Nagpur-based Haldiram Foods International operates in western and southern markets. Haldiram Bhujiawala runs its snacks business in the eastern region.

Though the latest financials for Haldiram Foods International and Haldiram Snacks and Ethnic Foods are not available, Haldiram Bhujiawala had witnessed 53% dip in net profit during 2016-17, according to the company’s RoC filings.

Similarly, listed peers such as DFM Foods and Prataap Snacks had also seen its profits slide by 12% and 63%, respectively, during the period.

What the future holds

According to a recent report by market research firm Technopack, the branded snacks market in India is estimated to be worth Rs 10,000 crore ($1.68 billion), and is projected to grow at a compounded annual growth rate of 15-18% over the next few years.

According to industry observers, these are momentous times with many structural changes happening in legislation, economy and business environment. With the onset of GST, more and more players in the unorganised sector are coming into the formal organised economy, and is expected to benefit the players in the organised sector, such as Bikaji Foods.

“Apart from the transition of unorganised players, because of the unified tax structure the movement of stock has also become seamless and is helping us expanding other geographies as well,” said Gupta. “Distribution remains the key for any retail brand, and strengthening our distribution network and expanding our retail reach are the focus areas.”

“Now, we are focusing on exploring new geographies. The company already has a strong hold in Rajasthan, Bihar, Assam and Haryana. We are expanding our presence in UP, Punjab, Odisha, Madhya Pradesh and Chhattisgarh. We have a cosmetic presence in Southern part of India as well, but we are not very keen on expanding there, at-least not in the next two or three years,” he said.

The company is also looking to expand its offerings both in ethnic and western snacks segments, besides healthier snacking options. It is also looking forward to ramp up its presence in international markets.

Exports currently contribute around 4% to Bikaji Foods’ overall revenue, but it is likely to increase substantially over the next two or three years. In last three years, It has already beefed up its presence across 14 countries from just three. “Our frozen food segment, which comprises 40% of our exports, has got good response overseas,” said Gupta.

It has also entered South Africa and is looking to expand in the US, West Asia, Indonesia and the UK. “We are getting a lot of references through our private equity partner for overseas expansion,” Gupta said.

(As published in vccircle.com on Mon, March 26 2018. )