Prataap Snacks lists at 25% over issue price in debut trade

The listing of the Sequoia-backed snacks food company proves that the market has a huge appetite for IPOs

Published: Oct 5, 2017

The financial markets generate a lot of number on a per second basis. There are people who have made it a profession to convert this information into trends, buy-sell signals, charts and pivot tables. Over the last 18 years of financial journalism, I have realised that every number has a story to tell. And these numbers as a trend normally never lie. I am forever looking for these trends.

g_100073_bgrtx236yccopy_280x210.jpgImage: Shailesh Andrade/ Reuters

Prataap Snacks debuted on the stock markets at a price of Rs 1,250 and closed at Rs 1,178 a piece, up by 25 percent over its issue price. This shows that the company's initial offer for sale was oversubscribed by 47 times has been a huge success. The QIB (qualified institutional buyer) portion was subscribed by 77 times and the retail part was subscribed by 7.9 times. The total size of the issue works out to Rs 482 crore comprising an offer for sale of Rs 282 crore and fresh equity issue of Rs 200 crore. The offer for sale includes sale of shares by Sequoia to the tune of 2.2 million shares. The private equity company has invested Rs 265 crore into Prataap snacks through various tranches over the last six years.

The maker of Yellow Diamond chips which is endorsed by actor Salman Khan, plans to use the proceeds of the issue for repayment of borrowing and funding the capacity expansion plans of the company. The IPO was in the news because the issue was priced at a P/E of 200 times its historical earnings of Rs 4 per share for FY17. The company also has a low ROE of 4.3 percent as compared to its peers (DFM Foods - 22 percent and Manpasand - 8.2 percent).

Prataap Snacks is an Indore-based snacks food company and is ranked amongst the top six companies in terms of revenues. The company’s products include both western as well as Indian snacks. The company is a market leader in the rings segment and between 2010 and 2016, the market share of the company in this segment has moved up from 1 percent to 4 percent.

According to a report from Geojit, a broking firm,” Prataap Snacks has seen high growth over the last few years and has successfully garnered market share from larger companies such as PepsiCo and ITC. It has a strong presence in Northern and Western markets and is increasing penetration in the Southern markets as well. Prataap Snacks is the market leader in the rings segment in 2015 - 16 (part of extruded snacks), and its share in the overall organised snacks market has grown from 1 percent to 4 percent from 2010 to 2016. Also, in the organized extruded snack market in 2016, Prataap is the fourth largest player with a market share of 8 percent and in the organised chips segment, Prataap's market share as of 2016 is 3 percent”.

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