CM RATING

40/100

Manpasand Beverages, promoted by Dhirendra Singh, is a fruit drink manufacturer focusing on mango. Mango-based fruit drink, Mango Sip, is theflagship brand, which is strategically aimed at customers in semi urban and rural markets. In addition, it also offers fruit drink in apple flavor, Apple Sip.

In July 2014, the product portfolio was expanded with the launch of two new brands, Fruits Up and Manpasand ORS. The Fruits Up brand comprises fruit drink and carbonated fruit drink in different flavours. Fruits Up is available in mango, apple, guava, litchi, orange and mixed fruit flavours. Fruits Up carbonated drink is available in grape, orange and lemon flavours. The Manpasand ORS brand consistes of apple and orange flavours, with energy replenishing qualities, targeted at North-East India.

To gain a foothold in the growing bottled water market, Pure Sip brand of bottled water has been launched. It is processed at a third party facility. Pure Sip is distributed free along with Mango Sip in select markets.

In addition to fruit drinks, a premium fruit juice drink,Fons, with a relatively high fruit content in different flavours as well as carbonated drinks,Sip, are being selectively distributed.

There are four manufacturing facilities spread over Vadodara in Gujarat and Varanasi and Dehradun in Uttar Pradesh. A second facility at Vadodara began operations from April 2015. Currently no production is being carried out at the Dehradun facility. The combined installed capacity of the manufacturing facilities is 40,000 tetrapak cases per day and 65,000 Pet bottle cases per day of fruit drink and 15,000 Pet bottle cases per day of carbonated fruit drink.

The wide distribution network comprise 73 consignee agents and 654 distributors in 24 states. In addition, consignee agents and distributors engage a number of super stockists, other distributors and sub-distributors. The distribution network focuses on select semi-urban and rural markets. In addition, for the Fruits Up products, a separate and exclusive distribution network having dedicated distributors with innovative schemes is being set up. In addition to sale through the distribution network, products are sold directly to Indian Railway Catering and Tourism Organization-approved vendors.

Financial Highlights

Net sales have increased 23% to Rs 294.31 crore in the fiscal ended March 2014 (FY 2014) over a year ago. Mango Sip sales increased 22% to Rs 285.04 crore, contributing 97% of total sales. The business is seasonal in nature, with Q1 and Q4 contributing 60-65% of sales. The rural-to-urban sales ratio is 80:20.The operating profit margin (OPM) decreased by 60 basis points (bps) to 15.1% due to increase in mango pulp cost. Operating profit (OP) increased 18% to Rs 45.69 crore. Profit before tax (PBT) declined 6% to Rs 23.15 crore due to increase in interest cost and depreciation. Net profit fell 8% to Rs 20.50 crore.

Net sales stood at Rs 239.1 crore, OPM 15.2%, OP Rs 36.37 crore, PBT Rs 14.08 crore and net profit Rs 12.64 crore in the nine months of FY 2015 over a year ago.

Issues Size and Purpose

The initial public offering (IPO) amounts to Rs 400 crore at an price band of Rs 290 - 320 per share of face value Rs 10 each. The funds will be utilised to set up new manufacturing facility in Haryana at a cost of Rs 153 crore. Commercial production is expected to commence by January 2017. Modernizing existing manufacturing facilities at Vadodara and Varanasi facility will amount to Rs 38.9 crore. A new corporate office in Vadodara will cost Rs 22.14 crore. Certain borrowings amounting at Rs 100.9 crore will be repayed. Remaining funds will be used for general corporate proposes.

Strengths

• Strong brand identity of flagship brand Mango Sip, especially in the underpenetrated semi-urban and rural markets.

• According to the Euromonitor Report, the Indian off-trade (which covers sales at retail outlets) soft drink industry is likely to reach 29,131.5 million litres (worth Rs 65770 crore) by calendar year (CY) 2019. This implies a CAGR of 16% by volume and 14% by value at constant 2014 terms over the five year period to CY 2019, with the growth likely to be the highest in the juice segment, followed by bottled water and sports and energy drinks.

Weaknesses

• Highly depended on flagship brand Mango Sip. It contributed 98% of sales in FY2013, 97% in FY2014 and 87% in the nine months of FY 2015.

• The business is seasonal. Q1 and Q4 contribute around 60-65% of total sales. Adverse weather conditions during the peak season can affect growth.

• Mango Sip competes with Frooti (Parle Agro), Maaza (Coca Cola) and Slice (Pepsi), which are established players.

• The company enjoyed tax benefits and claimed deduction for 100% of its profit for the first five years of operation at its Vadodara plant in FY 2011-2015. Similarly, it can claim 100% of profit derived from its Varanasi plant in FY2012-2016. However, it is eligible to claim deduction of only 30% of the profit from the Vadodara and Varanasi plants in FY 2016-2020 and FY2017-2021, respectively. The second facility at Vadodara, commissioned in April 2015, is also eligible for 100% deduction of profit for the first five years of operation and deduction of 30% of profit for the next five years. Going forward, the fading away of tax benefits might increase the tax liability, affecting the bottom line.

• Increase in costs or a shortfall in availability of raw materials will have a material adverse effect on sales and profitability.

• The business is susceptible to adverse publicity if shortcomings are found in quality or tightening of public health reqirement.

• Operations are working capital intensive.

• Some of the group entities, Manpasand Snacks and Beverages and Xcite Nutritious Pvt Ltd, are authorized to engage in a similar line of business, which could create conflict of interest.

Valuation

At the lower price band of Rs 290 per equity share of Rs 10 face value, the P/E works out to 72.6 times the annualized EPS of Rs 4 (on post-IPO equity) for FY2014. At the upper band of Rs 320, P/E works out to 78.1 times the annualized EPS of Rs 4.1 (on post-IPO equity) for FY 2014. There is no strictly comparable listed player, but the asking price seems very high. Manpasand Beverages is certainly not Coke or Pepsi or even home-grown Parle Agro. While it can give market players some handle to play on the prospects of the soft and fruit drink market on the bourses, Manpasand Beverages is too small a player to get excited about.

Manpasand Beverages: IPO Highlights
Sector	FMCG
Offer Size (Rs cr)	400
No. of shares on offer at Rs 290 per share(crore)	1.37
No. of shares on offer at Rs 320 per share (crore)	1.25
Price band (Rs)	290-320
Post- issue equity at Rs 290 per share(Rs crore)	51.35
Post-issue equity at Rs 320 per share(Rs crore)	50.05
Post-issue promoter and promoter group stake at Rs 290 per share (%)	49.16%
Post-issue promoter and promoter group stake at Rs 320 per share (%)	50.43%
Issue open date	24-Jun-15
Issue close date	26-Jun-15
Listing	NSE & BSE
Rating	40/100

Manpasand Beverages: Financials
Particulars	1412(09)	1403(12)	1303(12)	From 17 Dec. 2010 to 31st March 2012
Net Sales	239.10	294.31	240.24	85.73
OPM (%)	15.2	15.5	16.1	16.3
OP	36.37	45.69	38.72	13.97
Other Income	0.37	0.05	0.32	0.41
PBDIT	36.74	45.75	39.04	14.38
Interest	7.76	7.71	4.28	3.01
PBDT	28.98	38.04	34.75	11.37
Depreciation and Amortization	14.91	14.89	10.16	4.55
PBT	14.08	23.15	24.60	6.82
Tax	1.43	2.65	2.23	0.73
Net Profit	12.64	20.50	22.37	6.10
EPS (Rs)*	#	4.0	4.4	-
EPS (Rs)**	#	4.1	4.5	-
* Annualised on post-issue equity of Rs 51.35 crore; Face value Rs 10 (issue price Rs 290) ** Annualised on post-issue equity of Rs 50.02 crore; Face value Rs 10 (issue price Rs 320) # Not annualized due to seasonality nature of business Figures in crore Source:Capitaline Corporate Database

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