Started in 2009, at Gwalior, Madhya Pradesh Prataap Snacks Limited ('PSL') is present in three major savoury snack food categories in India and all its products are sold under the Yellow Diamond brand. In Fiscal 2012, the Company acquired the snack foods business of its Group Company, Prakash Snacks Private Limited, pursuant to a business transfer agreement dated September 28, 2011. Pursuant to such arrangement, we acquired the Yellow Diamond brand and the snack foods business under such brand. For further information, see “History and Certain Corporate Matters” on page 191. We have over the years leveraged our understanding of our target markets and consumer segments, product innovation capabilities, extensive distribution network, strategically located manufacturing facilities, and have focused our marketing and promotional activities to strengthen our product brands and establish the Yellow Diamond brand across India. Their diversified product portfolio includes three categories:1. Extruded Snacks: Extruded snacks are processed, reconstituted and shaped potato or cereal based snacks.2. Chips: Chips include fried, sliced chips or crisps made from potatoes, hummus, lentils etc.3. Namkeen: Namkeen are a type of traditional savoury Indian snack which includes products such as moong dal, masala or fried nuts, sev and bhujia. PSL has set up a pan-India distribution network supported by strategically located manufacturing facilities. Their wide network of super stockists and distributors is supported by their large team of sales representatives and arrangements with various modern retail outlets. As of March 31, 2017, their distribution network included 205 super stockists across 26 States and one Union Territory in India and over 3,400 distributors. PSL owns and operates three manufacturing facilities, one located at Indore, Madhya Pradesh and the other two located at Guwahati, Assam. In addition, PSL has engaged two facilities on contract manufacturing basis, located at Bengaluru, Karnataka and at Kolkata, West Bengal. The Bengaluru facility was engaged by them on an informal, non- exclusive basis between October 1, 2011 and July 31, 2016. This facility has been engaged exclusively pursuant to the Bengaluru Contract Manufacturing Agreement with effect from August 1, 2016. These facilities have access to cost efficient transportation to their major markets and enable them to benefit from transportation cost efficiencies from reverse logistics arrangements. On performance front, for past three fiscals, PSL has (on a consolidated basis) posted turnover/net profits of Rs. 560.57 cr. / Rs. 9.90 cr. (FY15), Rs. 757.90 cr. / Rs. 27.37 cr. (FY16) and Rs. 905.46 cr. / Rs. 9.89 cr. (FY17). For FY 17 the company suffered a setback on account of steep rise in the cost of raw materials, higher depreciation provisions for capex made in the earlier years. If we attribute latest earnings of FY17 on fully diluted equity post issue then asking price is at a P/E of 222. Last three years average EPS is Rs. 7.63 and average RoNW is 7.63%. Issue is priced at a P/BV of 7.2. Thus on prima-facie it looks aggressively priced, but management is confident of improving bottom line by different actions. Peers like Britania, DFM Foods are traing at P/E of 88, 57 respectively. On BRLM’s front, three merchant bankers associated with this offer have handled 23 public issues in the past three years out of which 3 issues closed below the issue price on the listing date. As per financials, company's growth is very good (only in top-line), RoNW is 7.63% for last three fiscals and issue is very aggressively priced. But expected growth of this sector after GST looks good. So we give NEUTRAL rating to this IPO.
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