1. Seeking Rich Valuation

• The company will have market cap of Rs 7500 crore (based on the upper price band) compared to FY2022 sales of Rs 1611 crore and a net profit of Rs 76 crore.
• The market cap-to-sales ratio is 4.65x and the P/E ratio is 99x, indicating no capital appreciation.
• Prataap Snacks (Brand, Diamond) has a 1.44x market cap-to-sales ratio. Advent International owns DFM Foods (Brands, Crax, and Natkhat), has a 3.19x market cap to sales ratio.

(The market cap-to-sales ratio typically evaluates this type of business)

2. Bhujia's Limited Scope

• The company wants to grow revenue in focus states but Bhujia is popular only in North India.
• Rajasthan, Assam, and Bihar could dominate company revenue for 5 years. This may hinder business growth.

3. Poor ROE

• The fiscal year 2022 ROE was 9.50%, which is low.
• Selling shareholders demand high premiums, limiting public capital appreciation.

4. Competitive Industry

• Brand building will require ongoing investment.
• Players cannot pass on rising raw material prices to end customers that reflected in Bikaji's FY2022 net profit.
• Western snacks are now preferred over ethnic ones, which may limit company growth.
• The company makes 70% of its revenue in cities, where health consciousness is growing. This may affect product sales.

5. Potential Corporate Governance issue

• Some of the group companies operate in the similar industry as Bikaji.
• In the future, this could become a corporate governance issue.

Few Haldiram companies have been classified as group companies. We could not obtain confirmation from the company as to whether the Bikaji promoters have stake in any of the companies.