Harshdeep Hortico
- Harshdeep Hortico is coming out with initial public offering (IPO) of 42,42,000 shares of Rs 10 each in a price band Rs 42-45 per equity share.
- The issue will open on January 29, 2024 and will close on January 31, 2024.
- The shares will be listed on BSE SME platform.
- The face value of the share is Rs 10 and is priced 4.20 times of its face value on the lower side and 4.50 times on the higher side.
- Book running lead manager to the issue is HEM Securities.
- Compliance Officer for the issue is Shreya Gandhi.
Profile of the company
Harshdeep Hortico is primarily engaged in the business of designing, developing, manufacturing and supplying of various types of pots and planters like: plastic Indoor Planters, Outdoor Planters, Illuminated Planters, Decorative Planters, Roto Moulded Planters, Fiber Reinforced Plastic (FRP) Planters, Eco series Planters etc. along with related accessories like Garden Hose Pipe & Water Can. Apart from this recently it has also entered into the field of Roto Moulded Outdoor Furniture. The company has accreditation with ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 for quality management system from Sigma Certification Pty Ltd. The company’s product portfolio comprises of more than 500 different variants of pots, planters and related accessories which are available in multiple size and color.
Currently, the company has two manufacturing units, one is situated at Elkunde, Bhiwandi, Thane, spreading in an area of 93769 sq. ft. and the other one is situated at Boriaind, Daund, Pune, spreading in an area of 40000 sq. ft., along with three stores located in Delhi, Pune (Maharashtra) and Rajahmundry (Andhra Pradesh). Apart from these manufacturing units and stores, it has 04 Distributors at Hyderabad, Kolkata, Chandigarh and Visakhapatnam, who are exclusively dealing in its products. The company provides an Omni-channel experience to customers through its website, various online marketplaces such as Amazon and Flipkart, as well as, social media platforms like Facebook and Instagram to promote its products.
Currently, the company markets its products to around 27 states & Union Territories in India of which majority portion of the revenue comes from the state of Maharashtra. The company had also exported its products from its Proprietorship concern- M/s Harshdeep Agro Products in past to countries such as Djibouti, East Africa, United Kingdom, Nepal etc. The company’s revenue from exports for fiscal 2023 and 2022 was Rs 75.58 lakh and Rs 70.25 lakh respectively which constituted 1.85% and 2.02% of its revenue from operations for the respective fiscal.
Proceed is being used for:
- Repayment and/or pre-payment, in full or part, of certain borrowings availed by the company.
- Meeting working capital requirements.
- General corporate purpose.
Industry Overview
In the last few decades Floriculture in India has seen phenomenal growth. Due to the exceptional performance of the sector, it is expected to grow to $5.9 billion by 2030 with a CAGR of 7.4% (2021-2030). Floriculture is an ancient farming method that now has become a major agri-business in more than 140 countries. The floriculture industry essentially includes - the cut flower trade, loose flower trade, cut foliage trade, potted plants, nursery plants, micro-propagation, and extraction of essential oils too. The floriculture industry is one of the most profitable sectors that can provide an avalanche of income and employment to many Indian farmers. The Indian floriculture market is projected to reach Rs 47200 crore by 2022. The recent popularity and acceptance of an environment-friendly lifestyle have expanded the scope of the floriculture industry. Many farmers and garden enthusiasts from all over the globe have started growing and marketing flowers with much interest and passion. There is a yearning need of spreading awareness about floriculture among farmers as Floriculture can provide 5 times more return than traditional crops.
There is no doubt about the potential of this industry but there are a few challenges that exist in the market and are unfavourable to the growth and development of the industry. As India’s floriculture sector has an abundant and varied production base and has huge potential, it can easily annihilate all the challenges. Multiple factors including environment, infrastructure, and marketing are some constraints behind the decline in the export of floriculture products. Lack of information regarding new varieties and new cultivation techniques is the reason why farmers practising garden farming are unaware of the generative results of floriculture. Though India has diverse agro-climatic and edaphic conditions, and rich plant diversity, it shares only 0.6 % of the global floriculture market. At least 1200-million-dollar worth of floriculture products are being imported by India every year from different countries.5There are multiple challenges in the flower industry but rapid urbanization, better flower transportation facilities and other measures have aided the floriculture industry in India and have helped in maintaining the high growth rate of the sector.
Green technologies are favourable for the improvement in flower growth and trade but lack of infrastructure leads to poor performance of the industry. At the production level the industry is facing challenges mostly related to the availability of basic inputs including quality seeds and planting materials, efficient irrigation systems, and skilled manpower hence floriculture industry requires sufficient investment to resolve all these issues. To deal with these mainstream obstacles Government of India has initiated the CSIR floriculture mission. It has been implemented in 21 states and union territories wherein available knowledgebase in CSIR Institutes will be utilized and leveraged to help Indian farmers and industry re-position themselves to meet the import requirements.
Pros and strengths
Diverse range of products across consumer preferences: The company has diverse product portfolio across various segments of pots and planters which includes Roto Moulded Series, Grower Series, Indoor Series, FRP Series, Illuminated Planters etc. along with related accessories. The company deals in a wide range of products, which enables it to cater widespread customer base across various states in India and also expand its reach in international locations. The company has necessary resources and experience that can be customized and leveraged to cater to wider range of planters as per requirements of the customers. Recently, it has also entered into the field of Roto Moulded Outdoor Furniture that designs outdoor illuminated furniture for gardens keeping in mind customer’s outdoor living area, offering options to accommodate gardens of any size or shape.
Revenue from multiple geographies: The company has diversified revenue from multiple geographical locations from various states in India. For the period from April 01, 2023 to July 31, 2023 it has generated around 88.93% of its total revenue from sales in top 10 geographical regions in India. In this period, it had sold its products to around 27 states & Union Territories in India of which majority portion of the revenue comes from the state of Maharashtra which contributes 41.99% of total revenue followed by Andhra Pradesh which contributed 11.34% of total revenue. Apart from this, Karnataka contributed 7.78%, Delhi contributed 7.45%, Tamil Nadu contributed 5.57% and Gujrat contributed 5.45% of its total revenue from operations. The other 21 states and Union territories such as Haryana, Rajasthan, Madhya Pradesh, Kerala, Punjab, Telangana, Odisha, West-Bengal, Chhattisgarh etc. contributed approx. 20% of total revenue from operations. The company’s expanded geographical outreach in India, it has the ability to quickly respond to changing consumer preferences and constantly fluctuating demand.
In-house manufacturing capabilities: The company has two manufacturing units, one is situated in Thane, spreading in an area of 93769 sq. ft. and the other one is situated in Pune, spreading in an area of 40000 sq. ft. The land where its manufacturing facilities have been established is owned by third parties and the same has been licensed out to the company by them. The in-house manufacturing operations enable it to stream line inventory management and production process resulting into maintenance of quality production standards, minimizing production time and bringing cost effectiveness. The company currently operates a total of 20 Injection Molding Machines, 4 Roto molding machines and 1 blow extrusion machine. These machines are complemented by various handling equipment that streamlines the manufacturing process at both its production locations.
Risks and concerns
Notable portion of revenue comes from limited number of customer: Notable portion of the company’s revenues has been dependent upon few customers. For instance, its top ten customers for the four months’ period ended July, 2023, accounted for 21.91% of its revenue from operations for the said period. The company’s reliance on a selected group of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its customers, failure to negotiate favorable terms or the loss of these customers, all of which could affect financial position and future prospects of the company. Further, the company has not entered into any definitive agreements with its customers and the success of its business is dependent on maintaining good relationship with them. There is no guarantee that it will retain the business of its existing key customers or maintain the current level of business with each of these customers. The deterioration of the financial position or business prospects of these customers could reduce their requirement of its products and result in a decrease in the revenues it derives from these customers.
Very short span of operating history: The company was incorporated on December 30, 2022 as a public limited company with an object of taking over the running business of its erstwhile proprietorship concern- M/s Harshdeep Agro Products with effect from April 03, 2023. Thus, the company’s operating history as company is less than one year. However, the Promoter of the Company has transferred his running business M/s Harshdeep Agro Products, which has a long experience since year 2002. Short span of its operating history, makes it difficult to assess its future prospects and historic growth rates or results of operations and which may not be representative or reliable indicators of its future performance. While the company intends to continue to expand its operations, it may not be able to sustain historic growth levels and may not be able to leverage its experience in its existing markets in order to grow its business in new markets.
Dependent upon few key suppliers for procurement of raw material: The company procures a large portion of raw material from a few key suppliers, with whom it does not have any long-term supply contracts and therefore, it cannot assure that it shall always have a steady supply of raw material at prices favourable to it. The principal raw materials used in its manufacturing process are Reprocess Granules, Linear low-density polyethylene (LLDPE) powder, Biomass, Polypropylene etc. Major portion of its purchases for the period ending July 31, 2023 is from the state of Maharashtra which is 95.98% of the total purchases. It does not have long term agreements with any of its suppliers and it acquires raw materials pursuant to its purchase orders from suppliers. Purchases of raw material made from its top 10 suppliers for the four months’ period ended July 31, 2023 were Rs 886.74 lakh representing 85.15%, total raw material purchases for the said period. There can be no assurance that demand, capacity limitations or other problems experienced by its suppliers will not result in occasional shortages or delays in their supply of raw materials. As a result, it may lose customers which could have a material adverse effect on its business, financial condition and results of operations.
Outlook
Harshdeep Hortico designs, manufactures, and supplies pots and planters for indoor and outdoor use. The company's product portfolio includes indoor plastic planters, outdoor planters, illuminated planters, decorative planters, roto-moulded planters, fiber-reinforced plastic (FRP) planters, eco-series planters, etc. and related accessories such as garden hose pipes and water canisters. Recently, the company also entered the field of Roto Moulded Outdoor Furniture. On the concern side, the company is primarily dependent upon few key suppliers within limited geographical location for procurement of raw materials. Any disruption in the supply of the raw materials or fluctuations in their prices could have a material adverse effect on its business operations and financial conditions.
The company is coming out with an IPO of 42,42,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 42-45 per equity share. The aggregate size of the offer is around Rs 17.82 crore to Rs 19.09 crore based on lower and upper price band respectively. Meanwhile, the company has been incorporated in December 30, 2022. However, the Company had taken over the proprietary running business of promoter viz. Harshdeep Agro Products. Total income for the period ended July 31, 2023 stood at Rs 1,482.84 lakh, which comprises of revenue from products manufactured by the issuer (net of excise Duty) and other incomes i.e. Packing Charges. Moreover, the company reported restated profit after tax for the period ended July 31, 2023 at Rs 177.24 lakh.
The company places a strong focus on maintaining high-quality product standards. This strategy involves regularly reviewing its products and promptly taking corrective actions if it notices any quality issues. The company’s goal is to consistently provide products of the desired quality, which is essential for building trust with its customers, fostering long-lasting relationships, and encouraging brand loyalty. By doing so, it aims to increase its brand's visibility and strengthen its position in the industry. Elevating its quality standards through this strategy sets it apart from its competitors, making it a trusted choice and gaining it more recognition in the market. Moreover, its product portfolio consists of various segments of synthetic planters like: plastic Indoor Planters, Outdoor Planters, Illuminated Planters, Decorative Planters, Roto Moulded Planters, Fiber Reinforced Plastic (FRP) Pot, Eco series Planters etc. along with related accessories like Garden Hose Pipe & Water Can. The company’s product portfolio comprises of more than 500 products and accessories. This diverse range of products will attract and help to retain customers and increase revenue streams.
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