Jay Kailash Namkeen coming with IPO to raise upto Rs 11.93 crore

Jay Kailash Namkeen 

• Jay Kailash Namkeen is coming out with initial public offering (IPO) of 16,33,600 shares of Rs 10 each in a price band Rs 70-73 per equity share.  
• The issue will open for subscription on March 28, 2024 and will close on April 3, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 7.00 times of its face value on the lower side and 7.30 times on the higher side.
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Anushree Vijay.

Profile of the company

The company is engaged in the business of manufacturing of packaged Indian snacks. Its range of Indian snacks includes Chana Jor Namkeen, Masala Chana Jor, Pudina Chana, Masala Mung Jor, Plain Mung Jor, Soya Sticks, Haldi Chanas, Chana dal, Sev Murmura & Garlic Sev Murmura, Bhavnagari Gathiya, Chana Dal, Sing Bhujia, Popcorn, Roasted Peanuts, etc. It has 186 SKUs of its 56 products ranging from Rs 5, Rs 10, 200 Grams, 400 Grams, 500 Grams, 5 Kgs. and 20 Kgs. packs. Its diversified product portfolio is therefore, relatively less susceptible to shifts in consumer preferences, market trends and risks of operating in a particular product segment. 

The company was initially engaged in B2B business wherein it manufactures products in bulk quantities for other well recognised companies/brands in same industry. It manufactures products and supply in the states of Assam, Bihar, Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Telangana and Uttar Pradesh. However, from April 2022 onwards it has also started B2C

It maintains hygienic norms and use quality raw materials for manufacturing of its products. With a client centric approach, the company strives hard for utmost contentment of the customers. The manufactured products are prepared completely under hygienic atmosphere by the professional makers. It has been certified by Food Safety and Standards Authority of India (FSSAI) for the quality management systems of the company in relation to its products. Also, it is ISO 9001:2015 and ISO 22000: 2018 certified company.

Proceed is being used for:

• Meeting the working capital requirement
• General corporate purpose 

Industry overview

India's food ecosystem offers huge opportunities for investments with stimulating growth in the food retail sector, favourable economic policies, and attractive fiscal incentives. Through the Ministry of Food Processing Industries (MoFPI), the Government of India is taking all necessary steps to boost investments in the food processing industry in India. Government of India has continued the umbrella PMKSY scheme with an allocation of Rs 4,600 crore till March 2026. The Ministry has also been implementing two more flagship schemes: PM Formalization of Micro Food Processing Enterprises Scheme (PMFME) for providing financial, technical, and business support for the up-gradation of existing micro food processing enterprises. The exports of agricultural and processed food products rose by 30 per cent in the first four months of the current FY 2022-23 (April-July) in comparison to the corresponding period of FY 2021-22.

India’s food processing sector is one of the largest in the world and its output is expected to reach $535 billion by 2025-26.The Food Processing sector in India has a quintessential role in linking Indian farmers to consumers in the domestic and international markets. MoFPI is making all efforts to encourage investments across the value chain. The food processing industry has a share of 12.38% (at 3-digit of NIC classification) in the employment generated in all Registered Factory sector engaging around 1.93 million people. Unregistered food processing sector supports employment to 5.1 million workers as per the NSSO 73rd Round report. Major sectors constituting the food processing industry in India are grains, sugar, edible oils, beverages, and dairy products. 

Under ‘Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), 41 Mega Food Parks, 356 Cold Chain projects, 68 Agro-Processing Clusters, 320 proposals under Creation/Expansion of Food Processing & Preservation Capacities (CEFPPC), 61 Creation of Backward and Forward Linkages Projects & 06 Operation Green projects across the country have been approved. The key sub-segments of the Food Processing industry in India are Fruits & Vegetables, Poultry & Meat processing, Fisheries, Food retail, dairy industry, etc.

Pros and strengths

Existing client relationship: It has maintained good relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help the company to get repeat business from its customers. Its existing relationship with it clients represents a competitive advantage in gaining new clients and increasing its business. 

Product packaging: The material used by the company in packaging is thick enough to protect its product from air and sun contamination and thus increases the product shelf life. Its product range has a shelf life of 9 months to 1 year for all the product ranges which have passed the trial and testing stage. 

Quality assurance: It takes pride in closely monitoring each stage of the production process to ensure that only the finest products make their way to its valued customers. With unwavering attention to detail and a commitment to excellence, it ensures that the finished products undergo a rigorous quality assessment before they leave its facility.

Risks and concerns

Dependent on top ten key customers: Its top ten customers for the period ended November 30, 2023, March 31, 2023, March 31, 2022, and March 31, 2021 have contributed to 66.59%, 73.06%, 87.75% and 69.16%, respectively of its revenue from operations. However, its top customers may vary from period to period depending on the demand and thus the composition and revenue generated from these customers might change as it continues to add new customers in normal course of business. Since its business is concentrated among relatively few significant customers, it could experience a reduction in its results of operations, cash flows and liquidity if it loses one or more of these customers or the amount of business it obtains from them is reduced for any reason.

Dependent upon few suppliers: Its top ten suppliers for the period ended November 30, 2023, March 31, 2023, March 31, 2022, and March 31, 2021, have contributed to 95.95%, 97.08%, 97.51% and 87.08% respectively of its purchases. In the event of a delay, inadequacy or default in deliveries by any of its vendors, it may not be able to source its raw material on an adequate and timely basis or on commercially acceptable terms. A major disruption to the timely and adequate supplies of its raw materials could adversely affect its business, results of operations and financial condition.

Require high working capital: It operates in a working capital-intensive industry therefore its business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

Outlook

The company is engaged in the business of manufacturing of packaged Indian snacks. Its range of Indian snacks includes Chana Jor Namkeen, Masala Chana Jor, Pudina Chana, Masala Mung Jor, Plain Mung Jor, Soya Sticks, Haldi Chanas, Chana dal, Sev Murmura & Garlic Sev Murmura, Bhavnagari Gathiya, Chana Dal, Sing Bhujia, Popcorn, Roasted Peanuts, etc. The company was initially engaged in B2B business wherein it manufactures products in bulk quantities for other well recognised companies/brands in same industry. On the concern side, it faces intense competition in the Indian snack food market, from various domestic and multinational companies in India. Its Industry has number of unorganised players in the market operating in the local vicinity. 

The company is coming out with an IPO of 16,33,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 70-73 per equity share. The aggregate size of the offer is around Rs 11.44 crore to Rs 11.93 crore based on lower and upper price band respectively. On performance front, the company's total revenue for the financial year 2022-23 is Rs 979.99 lakh. This represents a 6.05% decrease compared to the previous financial year's total income of Rs 1043.12 lakh. The decrease is due to a Shifting its focus in sales from B2B to B2C because of the low margins in B2B. Profit after Tax (PAT) is Rs 88.79 lakh for the financial year 2022-23 compared to Rs 54.58 lakh in financial year 2021- 22. Meanwhile, its goal is to build long-term sustainable business relationships with its customers to generate increasing revenues. It plans to continue to expand the scope and range of current business provided to its existing customers by continuing to build its expertise and extending its capabilities. It aims to do this by leveraging its marketing skills and relationships and further enhancing customer’s base.