Sheetal Universal coming with IPO to raise Rs 23.80 crore

Sheetal Universal 

• Sheetal Universal is coming out with an initial public offering (IPO) of 34,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 70 per equity share.
• The issue will open for subscription on December 4, 2023 and will close on December 6, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 7.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Khushbu Kalpit Shah.

Profile of the company

The company was incorporated with the object of Sourcing, processing and supply in agriculture commodities like peanut, sesame seeds, spice and grains to cater the manufacturer of peanut butter, biscuits, cakes, chocolate and food products. Within short span, it recognized as Category One Star Export House Exporter by Ministry of Commerce and Industry due to its performance in exports later on in May 2023 the company was categorised as Two Star Export House. Its manufacturing facility employs an extensive and stringent quality control mechanism at each stage of the process to ensure that its finished product conforms to the exact requirement of its customers. It is also the member of Agricultural & Processed Food Products Export Development Authority and Indian Oil Seeds& Produce Export Promotion Council.

Its manufacturing unit at Jamnagar, Gujarat certified from Government of India with FSSAI-2006 and obtained other certification & approval need for processing & sale of products in India as well as in international market. The Company’s motto is to provide quality product with maintaining safe & hygienic environmental operational condition. The company recognized as a leading processor and exporter of diverse range of spices, peanut, sesame seeds and pulses and other agro products. Since inception it is dedicated to procures, process & supply high quality food ingredients from India. It can offers organic as well as conventional Indian origin products as per client requirement with good quality and purity levels with a strict adherence to delivery schedule.

Proceed is being used for:

• Funding capital expenditure
• Working capital requirement
• General corporate purpose
• Meeting public issue expenses

Industry overview

India has great potential to become a global processed food export powerhouse as it includes a rich agricultural resource base, strategic geographic location and proximity to food-importing nations and an extensive network of food processing training, academic, and research facilities. The Indian food processing industry has grown rapidly with an average annual growth rate of 8.3% in the past 5 years. With a market size of $866 billion in 2022, the food industry will play a vital role in the economy's growth. The domestic food market is projected to grow by over 47% between 2022 and 2027, reaching $1,274 billion. In 2023, the food market will generate $963 billion in revenue and the market is anticipated to expand at a CAGR of 7.23% between 2023-27.

India's agricultural exports surged by nearly one-fifth (19.92%), crossing the $50 billion milestones, covering 50% of the world’s rice market in FY22. Exports of processed food climbed from $8.56 billion in 2020-21 to $10.42 billion in 2021-22. Furthermore, in 2021-22, processed food exports accounted for 22.6% of the overall agri-food exports. The Indian food processing sector has attracted more than $6 billion worth of foreign direct investment (FDI) since 2014-15. Moreover, the food processing industry has attracted FDI equity worth $709.72 million during 2021-22. The total FDI received in the food processing sector is $11.79 billion from April 2000 till December 2022.

Due to social media and digital knowledge, the Covid-19 pandemic has expanded the acceptability of processed foods and customer demand for more ethical and environmentally friendly products is expanding. Agriculture and allied activities are the backbone of the Indian economy. More than half of the Indian population depends on it for a living. Thus, increasing the gross value addition in the agricultural industry will be a critical lever in improving the country's socioeconomic conditions. India has the potential to become the global food supply hub and boost its export share in the post-Covid-19 future. For the sector to remain competitive, it is essential to have scale, quality and cost-effective export capabilities that meet international certification criteria December 2022.

Pros and strengths

Timely delivery of products: Its promoter has excellent record of delivering the products in specified time period which makes the company unique from its competitors. The company focuses significantly on the timely delivery of materials as is need due to nature of products & its self-life.

Well-defined organizational structure: The Company has experienced management team empowered to take timely decision which makes the operations of its business smoother and ensures efficiency in all aspects of its operations. It recruits talented employees, facilitating their integration into its organization culture and encouraging the development of their skills and expertise for becoming the next generation leaders. 

Scalable Business Model: Its business model is customer centric and order driven and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to its understanding of the consumer needs. The progress to be achieved by it will be largely due to its ability to address and exceed customer satisfaction. The company focuses on attaining highest level of customer satisfaction.

Risks and concerns

Dependent on few numbers of customers: Business of the company is dependent on few numbers of customers. Its top ten customers Contributes 72.41%, 66.07%, 56.16% and 79.28% of its total sales for the period ended on August 31, 2023 and year ended March 31, 2023, March 31, 2022, and 2021 respectively on Restated Consolidated Basis. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It shall generate 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.

Geographical concentration: It generates a major portion of sales from its operations in certain geographical regions especially exports outside India, such geographical concentration of its business heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions which may adversely affect its business prospects, financial conditions and results of operations. In addition, as it enters new markets and geographical areas, it is likely to compete not only with international players, but also local players who might have an established local presence, are more familiar with local regulations, business practices and industry needs, have stronger relationships with local distributors, dealers, relevant government authorities, suppliers or are in a stronger financial position than it, all of which may give them a competitive advantage over it.

Working capital requirements: Its business requires a significant amount of working capital. Any delay in the receipt of payments from its customers may increase its working capital requirement. Further, if a customer defaults in making payment for the goods and services provided by it, on which it have devoted significant resources, it could affect its profitability and liquidity and decrease the capital reserves that are otherwise available for other uses. In general, it take provisions for bad debts, including those arising from such defaults based primarily on ageing and other factors such as special circumstances relating to special customers. There can be no assurance that such payments will be remitted by its clients to it on a timely basis. All of these factors may result, or have resulted, in increase in the amount of receivables. Continued increase in working capital requirements may adversely affect its financial condition and results of operations.

Outlook

The company is mainly engaged in the business of processing and packaging of agri products. The company was incorporated with the object of Sourcing, processing and supply in agriculture commodities like peanut, sesame seeds, spice and grains to cater the manufacturer of peanut butter, biscuits, cakes, chocolate and food products. On the concern side, its business requires a significant amount of working capital. Any delay in the receipt of payments from its customers may increase its working capital requirement. Continued increase in working capital requirements may adversely affect its financial condition and results of operations.

The company is coming out with an IPO of 34,00,000 equity shares of Rs 10 each at a fixed price of Rs 70 per share to mobilize Rs 23.80 crore. On performance front, the total revenue from operations for the year ended on FY 2022-23 was Rs 128.81 crore as compared to Rs 38.69 crore during the FY 2021-22. Revenue from operations mainly includes revenue from Sale of Indian Groundnut Kernel and Indian Hulled Sesame Seeds in domestic as well as foreign market. Revenue from operations increased by 232.95%. Profit after tax (PAT) increased to Rs 1.98 crore in FY 2022-23 from Rs 0.28 crore in the FY 2021-22. Meanwhile, it intends to continue to enhance scale in existing sales and product mix across high end and mid segment to capitalize on the opportunity to cater rising acceptance and demand. Its wide products portfolio provides its competitive edge over its competitors. In order to maintain its competitive edge, it will continue to keep providing quality supply.