Upsurge Seeds of Agriculture
Upsurge Seeds of Agriculture has come out with an initial public offering (IPO) of 19,00,800 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share.
The issue will open for subscription on July 29, 2022 and will close on August 02, 2022.
The shares will be listed on NSE Emerge Platform.
The share is priced 12 times higher to its face value of Rs 10.
Book running lead manager to the issue is Finshore Management Services.
Compliance Officer for the issue is Tanishka Anilbhai Dhamejani.
Profile of the company
It is a technology driven seeds manufacturing company engaged in business of growing, developing, processing and marketing of variety of seeds for a range of field crops and vegetables. It is primarily involved in seed processing wherein the improved genetic materials of the breeder seed is grown and multiplied into foundation seed. Thereafter, the foundation seed undergoes next level of processing in which the foundation seed is grown and multiplied into commercial seeds, which is then sold in market for crop production. It has different variants of seeds being sold for each crop depending upon suitability of its seeds for varying agro-climatic conditions, such as water availability, crop duration and soil attributes, across different geographic regions in India. Breeder seeds are genetically pure seed with physical purity produced from basic nucleus seed stock and procured from original breeder. Some of the state Government agricultural universities from which it procure breeder seeds include Mahatma Phule Krishi Vidapeeth, Rajasthan Agricultural Research Institute, Indian Agricultural Research Institute etc.
The company enters into seed grower production agreement with seed growing farmers for leasing their land on lease rentals to develop and produce the foundation and commercial seeds. Under these agreements, the farmer is engaged to carry out agricultural operations over the leased agricultural land, however the ownership of the entire crop and the risk of crop failure is retained with company. The farmers are compensated for their services of producing such seeds and for all production expenses such as land preparation, irrigation, sowing, fertilization, combat against pests and diseases, weeding, harvesting, thrashing etc. During large scale production, it monitor the crops under given field conditions and have the farmers carry out all the required steps until maturity to produce the seeds to be sold at the desired levels of quality. It choose the location for production of the seeds to be sold based on the agro-climatic conditions required for different crops, availability of skilled labour and other related infrastructure etc. Such grown commercial seeds are then processed at its processing unit, which is equipped with modern technology and is spread across an area of more than 45,000 sq. feet, situated at Kuvadva, Rajkot.
Proceed is being used for:
Industry overview
Indian Seed industry is a sub-sector within Agri-input sector of Agriculture and allied industry. Seed is the primary input in agriculture, which encapsulates the genetics of plant variety. At the core of Indian Seed Industry is plant variety development through conventional plant breeding in the process of genetic improvement of crops. Plant variety therefore is the key product of seed industry, with each new variety showing incremental advantage over pre-existing varieties. The seeds of such identified best varieties are evaluated for their suitability for specific agro-climatic conditions before commercialization and then multiplied through standard seed production process, tested for genetic purity and seed quality standards, processed and then marketed to farmers across various distribution channels. The seed industry is structured based on different functions of the overall production process.
Another important dimension of seed industry is seeds being self-replicating entities based on their nature of reproduction which is a natural life process. In most of the self-pollinated crops like foodgrains, pulses, oilseeds and certain vegetable crops, forage crops, fruit crops, sugarcane, potatoes, etc., seeds can be directly produced by farmers from the agricultural output produced by them. Such seed is called Farm Saved Seed (FSS), which is widely prevalent in many of the crops mentioned above. However, there is an increased trend of farmers replacing the FSS with newly purchased seed once in every 2-3 years. The Indian seeds is expected to grow at a CAGR of 13.6% during 2019-2024, reaching a value of US$ 9.1 Billion by 2024. Coupled with increasing domestic demand and demand for quality seeds in various foreign countries, mainly the South East Asian countries, seed industry in India is witnessing new paradigms of growth and development. The use of hybrid seeds has silently but consistently witnessed growth along with several other driving factors like increasing middle class and increasing disposable income, growth in the food processing sector, increasing seed replacement ratio and other allied factors.
Pros and strengths
Wide range of seeds and its variants: The company offers a wide range of seeds that includes Groundnut, Sesame, Wheat, Gram, Cumin, Mung, Rajka, Onion, Coriander Seeds and Spinach etc. Its product portfolio allow its customers to source all seeds related products, which helps it to expand its business to existing customers as well as to potential new customers. Further, it has necessary resources, experience, and network that can be customized and leveraged to produce even wider range of products at a later stage.
Quality assurance: The company is dedicated towards quality of its products, processes and input raw material. The company had been accredited with ‘ISO 9001:2015’ Certification for Manufacturer, Importer, Exporter of all type of agriculture seeds issued by TQV. Delivering quality products on time is one of its prime objective. It dedicates resources for quality assurance to ensure that quality norms are continually met. It also has quality control checks before any consignment of raw material is accepted since it has a direct impact on the quality of Finished Product. The company is also equipped with in-house testing laboratories.
Customer satisfaction: Customer satisfaction is very important for the growth of any business. It develops and produces best quality seeds to meet the full potential in order to make the optimum utilization of available resources. It has developed a significant and mutually beneficial business relationship with its customers and it can be reflected in the repeat orders it get from the farmers. This indicates their level of confidence in its ability to deliver its products because of the trust of its customers it has been able to grow its revenue on year to year basis.
Risks and concerns
Business is seasonal in nature: The company’s business is seasonal in nature and as a result, its operating results may fluctuate. Since its business is influenced by the traditional crop season in India, its production as well as the demand for its products may be affected by seasonal factors such as weather conditions, irrigation facilities, availability of credit to farmers and overall agricultural production. The company’s revenues recorded during planting and harvesting seasons are typically lower as compared to revenues recorded during the periods preceding these crop seasons. During periods of low sales activity, it continue to incur substantial operating expenses in connection with, among other things, product promotion expenses which are not reduced significantly during such periods, while its revenues remain reduced. It also experience significant fluctuations in its working capital requirements during the planting and harvesting cycles.
Highly dependent on sale of groundnut seeds: The sale of Groundnut seeds is the largest contributor towards its total revenue, and contributed 72.90%, 83.14% and 78.64% to its revenue from operations in Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. As a result, its business is exposed to risks related to product concentration. Its inability to produce sufficient quantities of its existing products in a timely manner or at all, its failure to develop new products that meet the evolving demands of its end consumers or to obtain the regulatory approvals for such products, the development of successful products by its competitors and general economic conditions. It cannot assure that the performance of its groundnut seeds will continue to meet its customers’ expectations. In addition, its business, financial condition, results of operations and prospects could be materially and adversely affected if one or more of these uncertainties or disruptions occur. Highly dependent on markets in the state of Gujarat
Geographical concentration: The total contribution from Gujarat was 87.99%, 81.68% and 73.80% respectively, to its revenue from operations in Fiscal 2022, Fiscal 2021 and Fiscal 2020. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region, which may adversely affect its business prospects, financial conditions and results of operations. It cannot assure that it will be able to reduce its dependence on operations in state of Gujarat, or that such dependence will not increase in the future. Its inability to expand into other areas may adversely affect its business prospects, financial conditions and results of operations. The company has requisite expertise and vision to grow and mark its presence in other markets going forward, investors should consider its business and prospects in light of the risks, losses and challenges that it face and should not rely on its results of operations for any prior periods as an indication of its future performance.
Outlook
Incorporated in 2017, Upsurge Seeds of Agriculture (USA) is a seeds manufacturing company engaged in business of growing, developing, processing and marketing of variety of seeds for a range of field crops and vegetables. The company has a processing unit, which is equipped with modern technology and is spread across an area of more than 45,000 sq. feet, situated at Kuvadva, Rajkot. The company's product portfolio includes crop seeds for Groundnut, Wheat, Cumin, Green Gram, Black Gram and vegetable seeds for Onion, Coriander Seeds, Fenugreek etc. Accredited with ISO 9001:2015, the company sells its seeds under the brand name ‘USA seeds’. The sole focus of the company is to deliver ‘Quality Seeds to the Farmer’ and the commitment to quality has resulted in USA Seeds being recognised as a premium brand by the farmers. Since its incorporation it has been continuously working on and improving its quality to serve its clients better. On the concern side, the company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. It does not have an in-house transportation facility and it rely on third party transportation and other logistic facilities at every stage of its business activity including for procurement of products from its suppliers and for transportation of its finished products to its customers.
The company is coming out with an IPO of 19,00,800 equity shares of Rs 10 each at a fixed price of Rs 120 per equity share to mobilize Rs 22.81 crore. On the performance front, total income for the financial year 2021-22 stood at Rs 7577.15 lakh whereas in Financial Year 2020-2021 the same stood at Rs 6290.13 lakh representing an increase of 20.46%. The company reported Restated profit after tax for the financial year 2021-22 of Rs 396.44 lakh in comparison to Rs 85.31 lakh in the financial year 2020-21. Meanwhile, the company intends to cater to the increasing demand of its existing customers and also to increase its existing customer base by enhancing the distribution reach of its products in different parts of the country. It intends to continue to develop new varieties and hybrids of seeds which address these changing requirements. It intends to establish new storage and conditioned storage facilities to support its expanded distribution network and recruit additional sales and marketing personnel to expand its marketing operations in these regions.
