Manpasand Beverages IPO – Natural but Expensive

  • Date 25th June 2015
  • Price range: Rs. 290-320 and IPO Period:  24-26th June 2015
  • Small Cap with Rs 1600 cr Mkt Cap 
  • Industry – FMCG
  • Advice: High Risk, Expensive, Avoid

Manpasand Beverages is a small fruit drinks manufacturer based in Vadodara. It had FY14 revenues of Rs 294 crores and profits 20.4 cr. The market potential of this segment looks attractive. However, the segment is dominated by well-known Indian and MNC brands. The challenges extend to capacity creation and launch of several new brands and products. IPO pricing is aggressive (PE of 86-95 times) and leaves little on the table for investors in the short to medium term. Investors can avoid this IPO.

Here is a note on the Manpasand Beverages (MAP) IPO.

IPO highlights

  • The IPO is open from 24-26th June 2015 with Issue Price band: Rs. 290-320 per share
  • It’s a fresh Issue of 1.25 cr. shares of Face Value: Rs.10 per share
  • Each lot size is 45 shares and it can be bought in multiples of 45 shares
  • Shares offered as portion of equity post issue: ~25%. Post IPO the mkt cap will be ~1600 cr.
  • The promoter will sell 17% stake, while SAIF Partners and Aditya Birla Equity will sell 7% and 1%.
  • The amount proposed to be raised is Rs.400 cr. The IPO proceeds will be used for:
    • A new mfg. facility in Haryana for Rs 153.3 cr.,
    • Repayment of borrowings of Rs 100.9 cr
    • Modernization of mfg facilities at Vadodra and Varanasi at a cost of Rs.38.8 cr.
    • The rest is for a new corporate office at Vadodara, Gujarat, corporate purposes and exits by investors.


  • Manpasand Beverages is a manufacturer and seller of fruit drinks based in Vadodra, Gujarat.
  • FY14 revenues were Rs 294 crores and profits 20.4 cr.
  • The mango based fruit drink ‘Mango Sip’ is the flagship brand and contributes 87% of sales. It caters to customers from semi urban and rural markets.
  • The distribution network of MAP includes 73 consignee agents and 654 distributors spread across 24 states. Also, MAP sells directly to Indian Railways Catering and Tourism Organization (IRCTC).
  • Dhirendra Singh, Chairman of MAP has 15 years experience in this industry. He is the also on the board for group entities like Manpasand Snacks and Beverages Ltd and Xcite Nutrition’s Private Ltd.
  • Recently the company launched two new brands, “Fruits Up” and “Manpasand ORS”. Manpasand ORS was launched with a view to capture the North East market.
JainMatrix Investments, Manpasand Beverages

Fig 1a – Revenue Segments (above) and Fig 1b – Brands

Business and News Updates  

  • Capacity: MAP has three factories that are currently manufacturing its products located in Vadodara and Varanasi including a new facility in Vadodara commencing production this April. The combined capacity for manufacturing is 40,000 Tetra Pak Cases/ day and 65,000 PET Bottle Cases/ day for fruit drinks and 15,000 PET Bottle Cases/ day for carbonated fruit drinks.
  • MAP has acquired and signed an MoU for a manufacturing facility at Dehradun. However it is yet to commence production.
  • MAP would require efficient working capital management as the soft drinks industry requires enough working capital to be able to procure and process payments for raw materials.
  • The MAP IPO has seen a 5% subscription on day 1.

Industry Outlook

  • The overall soft drinks market in India saw aggregate sales worth Rs 65,330 crores in the year 2014. The main segments constituting the soft drinks market in India are carbonates, juices and bottled water, which together accounted for over 99% of the total volumes sold in 2014.
  • About 75% of the total mango drinks market is controlled by Coca-Cola’s Maaza, Pepsico’s Slice and Parle Agro’s Frooti. Other players are Hershey’s India (Jumpin), Dabur (Real), Hector Beverages (Paperboat Aamras), Surya Food and Agro (Priyagold) and Scandic Foods (Sil).
  • Based on the industry data, MAP has a 3% market share of the packaged juices market of India.

Financials of Manpasand beverages

  • Revenues and EBITDA have been growing consistently, see Fig 2.
  • However PAT and EPS have been declining since Mar 2013.
  • Note – Mar-15 results are a simple projection of actual 9 month financials reported by MAP.
  • MAP is a profit making operation as of today but does not have free cash flows since the last few years. See Fig 3.
  • Profits and Free Cash flows appear to be stretched due to high competition, expansion costs and high capital expenditure.
JainMatrix Investments, Manpasand Beverages IPO

Fig 2 – Manpasand Beverages Financials

JainMatrix Investments, Manpasand Beverages

Fig 3 – Manpasand Cash Flows and Debt

Positives for Manpasand Beverages/ IPO offering

  • MAP is focusing on a market which is not well served i.e. semi urban and rural areas. Hence the company could see a good rise in the sales in the upcoming years
  • Rising Income Levels – In the last decade, Indian economy has progressed rapidly. With the progress of the economy, India’s per capita GDP (constant price) has gone up from Rs. 32,037 in 2005-06 to Rs. 46,555 in 2011-12, fuelling a consumption boom in the country. (Source: CARE Report). Thus demand for MAP products should continue to grow.
  • MAP has achieved net profit margins (5% approx) which would help them sustain in the long run in the FMCG sector.
  • MAP is building its own brands and this can be a powerful asset for long term growth.
  • They are growing beyond their flagship ‘Mango Sip’ product and launching a clutch of new products, which may grow their business rapidly in future.

Internal Risks

  • MAP heavily depends on its mango based fruit drink “Mango Sip‟ product which contributed 87% of its net sales for FY2014.
  • MAP had negative free cash flows in the past and this may continue in the next few years. MAP’s operations are cash intensive, and business is worse off due to high working capital needs.
  • A few group entities like Manpasand Snacks and Beverages and Xcite Nutrition’s Pvt have incurred losses in the preceding fiscal years which could be a drain on MAP’s resources.
  • MAP’s business is affected by seasonal variations like reduced demand in winter, and peak sales in summer. These variations could worsen due to a cool summer or a bad monsoon season.
  • MAP sources their tin can packaged products and 500 ml PET packaged “Fruits Up‟ drink from third party facilities and so MAP needs to maintain stringent quality controls with these partner/ vendors.

External Risks

  • A slowdown in economic growth in India could adversely impact MAP’s business.
  • The recent Nestle Maggie events highlight challenges in food packaging and labelling, and govt approvals. Compliance on these matters has to be ensured.
  • There is intense competition in this category with the presence of MNCs and large Indian business houses in the drinks segments. MAP as a small player has to build its niche and not directly compete.


JainMatrix Investments, Manpasand Beverages

Fig 4 – Manpasand Beverages Benchmarking

  • PE and P/B valuations look stretched even compared to industry leaders like Britannia and Nestle.
  • Sales and profit growth look impressive. Net profit margin for MAP is almost at par with Britannia Industries, which indicates the company’s long term sustainability within the FMCG sector.
  • Overall, for a small company starting off, MAP is doing well, but needs to sustain its momentum.

Overall Opinion

  • The consumption theme in India is very powerful, and will play out over the next few years as income and education levels improve. Within this overall consumption theme, the food segment stands out as both a daily essential as well as an aspirational category.
  • Fruit based drinks is certainly a high potential consumption area with good prospects. Demand is likely to grow faster for fruit drinks than for colas and non-natural drink products.
  • MAP even with its niche rural and semi urban market, today faces intense competition, high costs of brand launches and planned capacity expansion.
  • It may take another 3-4 years to have free positive cash flows from operations.
  • Pricing of the IPO is aggressive, and the high valuations in terms of P/E (86-95 times) and P/B leaves little on the table for investors.
  • Investors should avoid this IPO.



This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. JM has no known financial interests in Manpasand Beverages Ltd or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. JM has been publishing equity research reports since Nov 2012. JM has applied for certification under SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at