TGIF Agribusiness coming with IPO to raise Rs 6.39 crore

TGIF Agribusiness

• TGIF Agribusiness is coming out with an initial public offering (IPO) of 6,87,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 93 per equity share. 
• The issue will open for subscription on May 8, 2024 and will close on May 10, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 9.30 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Sapan Smitesh Dalal.

Profile of the company

The company is primarily a horticulture company engaged in open farming of certain fruits and vegetables. The company is mainly engaged in the farming of pomegranate which contributes to more than 95% of its revenue from operations. Apart from the farming of pomegranate it is also engaged in the farming and cultivation of dragon fruits and Sagwan trees. It follows different farming practices so as to produce quality fruits such as fruit thinning, wherein some portion of fruit crop from the tree is removed before its maturity, in order to improve the general size and quality of the remaining crop, leaf vegetative growth practice to reduce tolerance level of external appearance, protecting fruit with protection material, measuring soil moisture to determine the water application. Under its farming model, wherein it generally employ farmers and workers in the vicinity of its farms. 

It also engages its selves in to supervision of farmers and croppers to constantly monitor the quantity and quality of crops. With the growing consumer knowledge, interest, and purchasing power the demand for the fruits have also increased. This, in turn, played an important role in increasing its product demand in the market. It maintains adherence to quality and safety standards including plant quality, product quality, use of plant nutrients, fertilizers, pesticides to safeguard the plants and produce etc. This steps ensures the fulfilment of food safety and quality control and helps it in increasing the farm produce. It uses drip irrigation systems for each of its farms to ensure proper irrigation of the farms and also minimise time spent on irrigation activity. The post-harvest facility has been designed to avoid contamination and to maintain food hygiene in the process. The products are packed as per individual client requirement and delivered to the customers.

It currently sells majority of its products to retailers, wholesalers, retail chain stores, hypermarkets and mandis. Under the B2B model all these customers visit the farms for evaluating the farm and the produce and based on price negotiations prices are finalized with the customers. It also have plans to sell its produce through its B2C model under the name of Direct2home service, where the local customers can place the order and the products will be picked, packed from the farm and delivered to the customer home directly.

Proceed is being used for:

• Purchase of agricultural equipments & irrigation system
• Meeting working capital requirements 
• General corporate purpose

Industry overview

India is one of the major players in the agriculture sector worldwide and it is the primary source of livelihood for around 55% of India’s population. India has the world's largest cattle herd (buffaloes), the largest area planted for wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar. The agriculture sector in India holds the record for second-largest agricultural land in the world generating employment for about half of the country’s population. Thus, farmers become an integral part of the sector to provide it with a means of sustenance.

According to Inc42, the Indian agricultural sector is predicted to increase to $24 billion by 2025. Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. India’s agricultural and processed food products exports stood at $43.37 billion in FY23 (April 2022-January 2023). As per third Advance Estimates for FY23 (Kharif only), total food grain production in the country is estimated at 330.5 million tonnes. As per the Second Advance Estimates of National Income, the share of GVA of agriculture and allied sectors in the total economy in 2022-23 was 18.3%, with a growth rate of 3.3%.

As per the Union Budget 2023-24, A new sub-scheme of PM Matsya Sampada Yojana with the targeted investment of Rs 6,000 crore ($729 million) to be launched to further enable activities of fishermen, fish vendors, and micro & small enterprises, improve value chain efficiencies, and expand the market. Digital Public Infrastructure for Agriculture: agriculture will be built as an open source, open standard, and interoperable public good. this will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for the growth of the Agri-tech industry and start-ups.

Pros and strengths

Product selection and quality control: It employs quality control mechanism starting from the plantation to the harvest stage and packaging of the product to ensure the produce are free from contamination and provide greater freshness to the farm produce. It has implemented internal procedures to ensure quality control at various stages of production, such as use of fertilizers, pesticides to safeguard the plants and produce etc. This step ensures the fulfilment of food safety and quality control and helps it in increasing the farm produce. It uses drip irrigation system in order to maintain proper watering of the farm. These levels of quality checks ensure maintenance of its brand value for quality of products. 

Diversified product range: It is primarily a horticulture company engaged in farming of certain fruits and vegetables. The company is mainly engaged in the farming of pomegranate accounts for around 95% of its revenue from operations. Apart from the farming of pomegranate it is also engaged in the farming and cultivation of dragon fruits and Sagwan trees. In the last three financial years, i.e. F.Y. 2020-21, 2021-22 and 2022-23, apart from pomegranate, which has remained its main crop, it has also harvested lemon, water melon and chilly.

Experienced Management team: Its Promoter Niraj Chhaganraj Gemawat have an overall experience of around 26 years in the field of business development and management of finance functions and its Managing Director Bharat Bhupendrakumar Thaker has an experience of 25 years in Business Operations Management, Accounting, Administration, Strategic Analytics and overall Management. Further, its promoter and Managing Director have an experience of around 9 years in farming and agricultural industry. Thus its management possesses business intellect in activities such as farming, product cultivation, marketing and related activities and it is well placed to capitalize their knowledge and experience which has been instrumental in the growth of the Company. Their advisory services and inputs are a value addition to its performance, compliance and overall operations.

Risks and concerns

Depend on top customers: Its top 5 customers contribute majority of its revenues from operations i.e. 87%, 99%, 89% and 73% for the period November 30, 2023, Fiscal year 2023, 2022 and 2021 respectively. Further, its top customer, generate over 80% of its revenue from operations for the Fiscal years 2023 & 2022 and over 67% in the fiscal 2021 and generate 55% of its revenue from operations for the period ended November 30, 2023 respectively as per the Restated Financial Statements respectively. Such concentration of its business on few clients may have an adverse effect on its results of operations and result in a significant reduction in the revenue from operations which could also adversely effect on its business if it does not achieve its expected revenues from such clients. It cannot assure that it shall generates the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.

Operate in limited geographies: It currently operates from its registered office located in Gujarat and farms located in Rajasthan. Most of its farm produce are currently being sold in the state of Gujarat and Rajasthan. Also, all of its farms are located in the state of Rajasthan. Expanding its customers and farms where it grows it produces to new geographies and with other different mandis and retails chain stores may not be as profitable as its current customers. This may have a material adverse effect on its business, results of operations and financial condition. 

High working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards operating expenses, trade receivables and cash and cash equivalents. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Outlook

TGIF Agribusiness is primarily a horticulture company engaged in open farming of certain fruits and vegetables. The company is mainly engaged in the farming of pomegranate which contributes to more than 95% of its revenue from operations. Apart from the farming of pomegranate it is also engaged in the farming and cultivation of dragon fruits and Sagwan trees. It currently sells majority of its products to retailers, wholesalers, retail chain stores, hypermarkets and mandis. On the concern side, the fruits and vegetables which it produces are perishable in nature, any delay in the packaging and dispatch of the same to the customers may affect the quality of the produce. Hence, it has to ensure that right quantity and quality of its farm produce reach the markets in a timely manner. Any interruption in supply of its fruits or vegetables to the various markets, due to any reason including those not within its control, could have a material adverse effect on its business, results of operation and financial condition.

The company is coming out with an IPO of 6,87,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 93 per equity share to mobilize Rs 6.39 crore. On performance front, total income for the financial year 2022-23 stood at Rs 232.27 lakh whereas in Financial Year 2021-22 the same stood at Rs 207.14 lakh representing an increase of 12.13%. The company reported Restated Profit after tax for the financial year 2022-23 stood at Rs 130.07 lakh as comparison to Rs 115.48 lakh in the financial year 2021-22 representing a gain of 12.64%. Meanwhile, to expand its business, it intends to aggressively penetrate in the domestic markets and expand its domestic market presence by expanding its sales network. To augment its efforts in increase in sales of its products, it intends to deploy additional sales and marketing representatives who shall meet its customers/ prospective customers to market its product. Further, it will identify and focus on increasing its sale of products through wholesale, retail store and retail supply chain network through direct contact with the mandi and store network.