Manpasand beverages Ltd is a leading fruit drink manufacturing company, it primarily focuses on mango based fruit drink sold under its flagship brand, ‘Mango Sip’. The Company’s flagship brand is strategically focused towards customers primarily based in semi urban and rural markets. Over the years, it has evolved from a single product proprietary firm into a multi brand company, involved in the manufacturing and marketing of carbonated and non-carbonated fruit drinks.
The Company has four brands in its kitty – Mango Sip, Fruits Up, Manpasand ORS and Pure Sip. Under the ‘Fruits Up’ brand, it offers differentiated carbonated fruit drinks (with relatively higher fruit content) . Under the Pure Sip and ‘Manpasand ORS’ brands, it offers bottled mineral water and fruit drinks with energy replenishing qualities respectively. Recently, it forayed into the coconut drink segment by launching the Coco Sip brand. The Company has presence in 24 states through more than 200,000 retailers, over 2,000 distributers and over 200 super stockists. It also sells directly to Indian Railways Catering and Tourism Organization (IRCTC) approved vendors.
In 2015, the Company raised Rs 400 Crore through IPO to set up a manufacturing facility in Haryana (Rs 152 Crore), modernization of existing plants (Rs 39 Crore) and repay the entire long-term debt (Rs 100 Crore).
The sweet truth about India’s sweet tooth
Mango is not only the king of fruits in India, it has also become the king of processed food and beverages across categories from candies to cocktails. The market for mango-based products in India is currently valued at Rs 8,000 Crore.
Indian consumers are shifting towards natural beverages from regular cola drinks. This trend offers tremendous scope for companies like Manpasand to grow, but the competition is getting tougher as only one flavour (mango) dominates the entire natural beverages business and all big brands are fighting for the same pie leading to erosion pricing power and margins. Companies like Manpasand are working towards market development through category expansion. Its competitor firm, Paper Boat is also deploying the same strategy.
Manpasand continues to outpace the industry growth
Manpasand though being a small player has consistently outperformed the industry due to the rapidly expanding market share of its flagship brand, ‘Mango Sip’. During FY 12-15, the Company’s total revenues and EBITDA have grown at a CAGR of 61% and 66%, respectively, beating the industry growth rate of 23% during the same period.
The strong brand identity of its flagship brand ‘Mango Sip, especially in the underpenetrated semi-urban and rural markets and timely capacity addition to capture untapped markets has helped it in transforming from a mid size player to the fourth largest player in the branded juice industry. The Company is expected to hold 7.5% market share in the INR 13,200 Crore fruit juice market by 2018.
Two-pronged strategy to penetrate the untapped markets
The management is following a well defined, two-pronged strategy for fast-paced growth. While it continues to further increase its significant presence in rural and semi-rural markets, it has also started to tap the urban markets aggressively, where its presence was minimal. Recently, the Company entered into a tie up with German wholesale and trading major, Metro Cash & Carry. It also entered into tie ups with ice cream majors like Havmor Ice Cream and Baskin-Robbins. Baskin-Robbins runs over 550 stores across 150 cities and towns, making it one of the largest ice cream retail chains in India. Such tie ups are expected to boost the brand visibility and distribution of Manpasand’s product line.
Capacity expansion to aid future growth
As per the industry estimates, India’s per capita consumption of soft drinks currently stands at 3 litres, while it is about 90 litres in USA and 16 litres in Pakistan. Hence, the potential size of the market is humongous. Even if the consumption increases from 3 litres to just over 6 litres in the next few years, it would be really difficult to meet the demand with current existing capacities.
Going ahead, Manpasand plans to expand its capacities by 80% over FY16-18 into north and south India. This strategic move will not only address the supply side issues but also help to reduce the logistics cost. At present, the Company has two manufacturing facilities in Vadodara (Gujrat) and one each in Varanasi (UP) and Dehradun (Uttaranchal). It is setting up a new manufacturing facility in Ambala (Haryana) with a total capex of Rs 150 Crore. This facility is expected to be commissioned by June, 2016. After commissioning the facility at Ambala, it plans to enhance capacity of its existing plants in Varanasi and Vadodara. The debt free status of the Company further supports its growth aspirations.
Manpasand is currently trading at (INR 519.80) a PE of 30x/19x FY17/18E EPS. Experts are valuing the stock at P/E of 25-27x on its FY18E EPS, which translates into the target price of INR 676 i.e. 34% upside from the CMP of INR 519.80. Although the stock has limited price history, considering its compelling growth potential (new product launches, rising distribution network, strategic alliances with global brands leading to enhanced visibility), the stock can easily command premium valuations.
Note: Experts have recently questioned the rags to riches growth story of Manpasand. Several concerns have been raised about the revenue figures, market share, distribution network, promoter’s competing interest etc. The concerns raised by the experts seem quite appealing as the allegations are backed by evidence.
This report is strictly meant for educational purpose and it may be of interest to researchers as well as students. The Astute Investor acknowledges the fact that a couple of estimates/figures provided in this report have been sourced from various financial news websites (Reuters, Money Control, 4-traders) and research reports available in the public domain.