Madhusudan Masala coming with IPO to raise upto Rs 23.80 crore

Madhusudan Masala 

• Madhusudan Masala is coming out with a 100% book building; initial public offering (IPO) of 34,00,000 shares of Rs 10 each in a price band Rs 66-70 per equity share.
• The issue will open for subscription on September 18, 2023 and will close on September 21, 2023.
• The shares will be listed on NSE Emerge.
• The face value of the share is Rs 10 and is priced 6.60 times of its face value on the lower side and 7.00 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Megha Dilipkumar Madani.

Profile of the company

The company is engaged in the business of manufacturing and processing of more than 32 types of Spices under the brand names of ‘DOUBLE HATHI’ and ‘MAHARAJA’. it also sells products like: Whole Spices, Tea and Other Grocery Products like: Rajgira flour, Papad, Soya Products, Asafoetida (Hing), Achar masala (Ready to make pickle powder), Sanchar (Black salt powder), Sindhalu (Rock salt powder), Katlu powder (Food supplement), Kasuri Methi (Dry fenugreek) etc under the brand name of ‘DOUBLE HATHI’. Furthermore it also generates revenue from trading of whole spices and food grains through unbranded sales.

It operates from its manufacturing facility located at Jamnagar, Gujarat. Its manufacturing unit is situated at Industrial Area Hapa, Near Jamnagar and is strategically located near the local APMC market thus facilitating easy and quick access to raw materials which reduces the transportation costs as well. Its manufacturing facility is equipped with plant & machinery to facilitate efficient production process of cleaning, drying, grading, grinding and packaging. All spices and other products are manufactured at its unit with utmost care and by way of natural process with scientific methods so as to retain the natural properties of the food like color & odor with time. Systematic procurement of raw spices in their respected seasons helps it to provide linear quality spices for the whole year.

Proceed is being used for:

• Funding to meet working capital requirements
• General corporate purpose 

Industry overview

India is the largest producer, exporter and consumer of spices in the world and exports spices and spice products to more than 180 countries. In India, about 10.88 million tonnes of spices are produced annually. The export of spices from India accounts for around 14 per cent of the total production. India is the global hub for spice processing and the world leader in production and export of major spices like chilli, turmeric, cumin, coriander, fennel and value-added products viz. spice oils and oleoresins, curry powder etc.  

During 2021-22, India exported 15,31,154 MT of spices and spice products valued at Rs 30,576 crore ($4,102.29 million). Export of small cardamom, a mandate crop of Spices Board, scaled new heights in FY 2021-22. During 2021- 22, 10,572 MT of small cardamom, valued at Rs 1,37,570.40 lakh have been exported from the country as against 6486 MT, valued at Rs 1,10,346.58 lakh, in FY 2020-21. India's export of spices increased from 8,17,250 MT valued at Rs 13,73,539 lakh ($2,268 million) in 2013- 14 to 15,31,154 MT valued at Rs 30,57,644 lakh ($4,102.29 million) in 2021-22 registering an increase of 87% in volume, 123% in value (Rs) and 81% in value (US$).

Spices Board of India aims to support the exporter to adopt high tech processing technologies and upgrade the existing level of technology for the development of industry and to meet the changing food safety standards of the importing countries. The initiative provides benefits of infrastructure development, promoting Indian spice brands abroad, setting up infrastructure in the major spice growing centres, promoting organic spices and special programmes for north-eastern entrepreneurs.  

Pros and strengths

Diversified product portfolio: Its product portfolio comprises of more than 32 types of ground and blend spices. Over the years its brand has witnessed its survival with continued innovation and introduction of new products, including launching of innovative flavors targeted at addressing consumer taste, market trends and providing superior quality products to consumers. Its diversified product portfolio enables it to cater to a wide range of taste preferences and consumer segments.  

In house manufacturing capabilities: It grinds and blend pices at its manufacturing facility. Blended spices are the mixture of spices that is required to make a dish in its most authentic form. It is equipped with plant and machinery which enables processing, grading and packaging of manufactured spices all in a hygienic way. Its manufacturing facilities are accredited with HACCP for Hazard Analysis Critical Control Points and with FSSAI license under Food Safety and Standards Act 2006. It has installed cleaning machine and dedicated Grinding plant to grind each type of spices like Chilli, Turmeric, Cumin and Coriander into powder. Most operations are mechanized thereby minimizing manual operations.

Long standing relationship with customers:  It has been in the business of manufacturing the spices since the last four decades and have successfully developed and supplied quality products to its customers. It considers that its understanding of the Indian taste palate complements its product development capabilities and has allowed it to develop a long standing relationship with its customers. Its past experience in the supply of its products, ability to meet specific taste requirements of its customers, reputation for quality of its products and the price competitiveness of its offerings has enabled it to establish and maintain relationships with its customers. 

Risks and concerns

Face competition: It faces intense competition from other retailers that market products similar to its. It competes in various aspects, including brand recognition, value for money, product quality and pricing, supply chain management etc. Intensified competition may result in pricing pressures and reduced profitability and may impede its ability to achieve sustainable growth in its revenues or cause it to lose market share. Its competitors may also engage in aggressive and negative marketing or public relations strategies which may harm its reputation and increase its marketing expenses. Any of these events could substantially harm its results of operations.

Working capital requirements: Its business requires significant working capital including in connection with its manufacturing operations, financing its inventory, purchase of raw materials which may be adversely affected by changes in terms of credit and payment. Delays in payment or reduction of advance payments and/or accelerated payments to suppliers, could adversely affect its working capital, lower its cash flows and materially increase the amount of working capital to be funded. It may also be unable to adequately finance its working capital requirements on account of various factors, including extraneous factors such as delay in disbursements under its financing arrangements, increased interest rates, insurance or other costs, or borrowing and lending restrictions or finance its working capital requirements on commercially acceptable terms or at all, each of which may have a material adverse effect on its business, financial condition, prospects and results of operations.

Dependent on third-party vendors for supply of raw materials: It is dependent on third-party vendors for supply of raw materials for further processing to finished products. It does not have long-term contracts with any of its third party vendors for supply of raw materials. It is significantly dependent on the timely and adequate availability of raw materials. It is subject to risks of shortages or discontinuation in supply, long lead times, cost increases and quality control issues with its suppliers. Further any adverse factors including seasonality of crops, natural disasters, changes in legislation or any other force majeure events may adversely impact procurement and availability of raw materials which may adversely affect its ability to meet client commitments and consequently its sales and profitability.

Outlook

Madhusudan Masala is engaged in the business of manufacturing and processing of more than 32 types of Spices under the brand names of ‘DOUBLE HATHI’ and ‘MAHARAJA’. It also sells products like: Whole Spices, Tea and Other Grocery Products. On the concern side, it competes in various aspects, including brand recognition, value for money, product quality and pricing, supply chain management etc. Intensified competition may result in pricing pressures and reduced profitability and may impede its ability to achieve sustainable growth in its revenues or cause it to lose market share.  

The issue has been offered in a price band of Rs 66-70 per equity share. The aggregate size of the offer is Rs 22.44 crore to Rs 23.80 crore based on lower and upper price band respectively. On performance front, Total income for the financial year 22-23 stood at Rs 12,750.57 lakh whereas in Financial Year 21-22 the same stood at Rs 6,651.81 lakh representing significant increase of 91.69%. The company reported Restated profit after tax for the financial year 22-23 was Rs 575.90 lakh in comparison to Rs 81.30 lakh.  Going forward, the company intends to focus on adhering to the quality standards of the products. Quality of the product is very important for the company from both dealer and end user point of view. Continuous quality review of products and timely corrective measures in case of quality diversion are keys for maintaining quality standards of the products.