Vrundavan Plantation coming with IPO to raise Rs 14.51 crore

Vrundavan Plantation 

• Vrundavan Plantation is coming out with an initial public offering (IPO) of 13,44,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share. 
• The issue will open for subscription on October 30, 2023 and will close on November 1, 2023.
• The shares will be listed on BSE SME.
• The share is priced 10.8 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Kajal Kalwani.

Profile of the company

In the company’s nursery business segment, its product in plantation includes Big Trees, Shrubs, Ground Covers, Climber, Indoor Plants, etc. It also trade in Pots which includes plastic pots, terracotta pots, self-watering pots, hanging pots, vertical gardens including pots of different materials like brass and ceramic, etc. It also trade gardening tools along with the all neccesary accessories for the gardening. It does trade of garden inputs as well, which includes plant foods, organic pesticides, potting mixes, nutrients, etc. In its service business segment, it does lawn mowing services, brush and jungle cleaning activities, hedge trimming activity, watering on road side plants. It also takes maintenance contracts for the different organisations which also includes the government departments.

Proceed is being used for:

• Repayment of working capital and unsecured loans.
• Working capital requirement.
• General corporate purpose.
• Meeting public issue expenses.

Industry overview

Indian floriculture industry comprises flowers such as Rose, Tuberose, Glads, Anthurium, Carnations, Marigold, etc. Cultivation is undertaken in open farm conditions as well as state-of-the-art poly and greenhouses. India's total export of floriculture was Rs 771.41 crore/$103.47 Millions in 2021-22. The major importing countries were U.S.A, Netherland, Germany, U.K, United Arab EMTs, Canada and Italy. There are more than 300 export-oriented units in India. More than 50% of the floriculture products are produced in Karnataka, Andhra Pradesh and Tamil Nadu and Madhya Pradesh. With the technical collaborations from foreign companies, the Indian floriculture industry is poised to increase its share in world trade. India has also been exporting fruits and vegetable seeds and exports during 2021-22 stood at Rs 750.70 crore/$100.79 Millions. Netherland, U.S.A, Bangladesh, Thailand, United Arab EMTs and Japan were the major markets for India’s fruits and vegetable seeds.

The government of India has identified floriculture as a sunrise industry and accorded it 100% export-oriented status. Owing to the steady increase in demand for flowers, floriculture has become one of the important Commercial trades in Agriculture. Hence commercial floriculture has emerged as a hi-tech activity-taking place under controlled climatic conditions inside a greenhouse. Floriculture in India is being viewed as a high growth Industry. Commercial floriculture is becoming important from the export angle. The liberalization of industrial and trade policies paved the way for the development of export-oriented production of cut flowers. The new seed policy already made it feasible to import planting materials of international varieties. It has been found that commercial floriculture has higher potential per unit area than most field crops and is, therefore, a lucrative business. The Indian floriculture industry has been shifting from traditional flowers to cut flowers for export purposes. The liberalized economy has given an impetus to the Indian entrepreneurs for establishing export-oriented floriculture units under controlled climatic conditions.

Pros and strengths

Well diversified and specialty service offerings: The company’s operations encompass various levels of Horticulture works from nursery to polyhouse and development of projects as required by its clients. In addition to providing core development service, it is also in trading activity of Plants, Pots, Accessories, Agrochemical, Tools, FYM etc. It is investing significantly in the technology, equipment and infrastructure required to perform the most advanced procedures and to strengthen its specialty focus. Acclimatization and shifting of plants as required are its challenging job in its industry, in which it has achieve many mile stones.

Organizational stability along with management expertise: The company’s Group has an established track record of 20+ years which indicates the company’s ability to weather economic and business cycles. This indicates its ability to maintain business viability and steer the business through operational hurdles. Its promoter is the guiding force behind the operational and financial decision of the company. Its promoter is responsible for the entire business operations of the company along with an experienced team of executives who assist them.

Smooth flow of operations: The company has maintained good relationship with its major clients. It is successful in building a strong client base for its business. Its client friendly and client centric policy help it to get repeat business from more than last 10 years. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. The company’s existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business. 

Risks and concerns

Plantations and landscaping businesses are heavily dependent on weather conditions: The company’s main business activities include plantations and landscaping. It is carrying out plantations and landscaping of reputed corporates and High net worth individuals. Plantations and landscaping businesses are heavily dependent on weather conditions. Any adverse weather events such as droughts, floods, storms or frost can damage plantations and/or disrupt landscaping projects. Under such circumstances its entire investment on materials, labour etc, will be wasted and to that extent the revenue and profitability of the company will be adversely affected.

Depend on third party transportation providers: The company is purchasing fertilizers, seeds, pesticides and equipment from its suppliers. The purchased materials are delivered to it through different transport service providers. Similarly, it is using third party transport services for delivery of plantations, other materials and equipment required for land scaping. It has made necessary arrangement with the transporters for delivery of the materials to its clients. However, it has not entered in to any of the written contract/agreement with any of the transporters. Its success depends on the smooth supply and transportation of materials from its suppliers to it and supply of plantation and other materials to its buyers/clients, both of which is subject to various uncertainties and risks. In addition to this, the plants may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters and/or mishandling. There may also be delay in delivery of such materials which may also affect its business and its results of operation negatively. 

No long-term supply agreements with vendors/supplier: The company does not have written agreements with any of its vendors/suppliers and it purchases the fertilizers, seeds, pesticides and equipment as and when required from the open market on regular basis. There are no long-term supply agreements for the above materials. In absence of any such formal contract with its vendors/suppliers, it is exposed to the risks of irregular supplies or no supplies at all or delayed supplies or price variation which would materially affect its results of operations. In the event of any disruption in the supply or the non-availability of material in the required quantity and of required quality from alternate source, the supply schedule to its clients may adversely be affected impacting the sales and profitability and reputation of the Company.

Outlook

Vrundavan Plantation (VPL), the company that was operating as a proprietorship concern and engaged in nursery and plantation for sale of plants, preserve and protect the environment in the arena of deforestation and shrinking green spaces era. It also ventured in to landscaping, and gardening. With the rising demand for greenery and cleanliness, it started getting long term contracts for its services in the development of 'Clean and Green environment' and to manage its growing business, it transformed itself in a public limited company as an organized player. The company have major portion of Income from its existing clients only. It has projects from the different government authorities mainly in Ahmedabad. It has some projects from the giant industries of Indian Market, which also gives it good market reputation and helps it to expand its business geographically. On the concern side, heavy rain fall or water logging will disturb the land scaping work and also washed out the plantation work done by it. Similarly, in extremely heat waves, the plantation developed by it may get died and became waste. Even in case of cyclone or heavy wind flow, its plantation work will also be adversely affected. If any of such events take place, its business and profitability will be adversely affected.

The company is coming out with an IPO of 13,44,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share to mobilize Rs 14.51 crore. On performance front, the total Income of the company for the period ended on May 31, 2023 was Rs 180.68 lakh. Profit after tax was Rs 17.33 lakh for the period ended on May 31, 2023 which is 9.59% of the total revenue. Meanwhile, the company intends to enter in to B2C business where it will sell the products to consumers who are the end user of the products, with no middle man. B2C typically refers to online retailers who sell product to consumers through internet. To remain aggressive and capitalize a good market share, it will be able to offer competitive prices to its customers. This helps it to sustain the competition and withhold a strong position in the market. This will give benefit to both parties.