Jeyyam Global Foods coming with IPO to raise Rs 81.94 crore

Jeyyam Global Foods

• Jeyyam Global Foods is coming out with an initial public offering (IPO) of 1,34,32,000 equity shares in a price band Rs 59-61 per equity share.
• The issue will open on September 02, 2024 and will close on September 04, 2024.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 5 and is priced 11.80 times of its face value on the lower side and 12.20 times on the higher side.
• Book running lead manager to the issue is Corpwis Advisors.
• Compliance Officer for the issue is Ritika Agarwa.

Profile of the company

Over more than 15 years in food industry, the company specializes in manufacturing and/or processing and supply of Bengal Gram (locally known as ‘Chana’), Fried Gram, and Besan Flour to wide variety of market like Distributors, Large Retailers, Hotels, Restaurants, Caterers, Branded Supermarkets and Wholesalers. The company is continuously engaged in undertaking research and development and is ready to enter into the B2C business of spices and masala, ready to cook and ready to eat foods, salt, sugar, soya and vermicelli, among others.

Jeyyam brand is known best for its quality. The brand has earned the trust, and loyalty of its distributors, retailers, and customers solely for its quality through complete transparency. The company adheres to standard practices and strictly abides by statutory norms. The company has obtained FSSAI License for both of its Factory locations and ensures that ISO 9001:2015 and ISO 22000:2018 standards are followed in both of its Factory location and have obtained the ISO Certification for Factory situated in Salem.

The company’s focus on quality ensures that every step of the process, from procurement, processing to packaging, is carried out to the highest standards. Its manufacturing facilities, coupled with a supply chain, enables it to deliver products that meet the evolving needs of its customers. Jeyyam is a brand that is synonymous with quality, trust, and innovation. It is dedicated to the Chana industry and it is committed to driving growth and transformation in this sector. With deep expertise in chana, a strong team and leverage to anchor and establish the entire Chana value chain, it is on its way to become a Pan-India Chana brand. Jeyyam is a brand with a focus in the Chana industry. Its experience in setting up and operating chana product manufacturing units has helped the company to understand and build a thriving supply chain ecosystem. It is proud to have set up a model of forward and backward integration in the chana value chain, driving value for every player in the ecosystem.

Proceed is being used for:

• Working capital requirements
• Capital expenditures
• General corporate purposes

Industry Overview

The Indian food processing industry is among the largest in the nation in terms of growth, production, consumption and exports. The industry produces several food products such as meat, poultry, fisheries, fruits, vegetables, spices, milk and milk products, alcoholic beverages, plantations and grains. It also manufactures cocoa products and chocolates, confectionery, mineral water, soya-based items and high-protein foods. Since the liberalisation in August 1991, the government proposed and accepted multiple projects, for instance, creating foreign collaborations, joint ventures, 100% export-oriented units and industrial licenses to encourage growth and investment in the food processing industry. Foreign direct investment (FDI) in India was estimated at Rs 2,934.1 crore ($368.8 million) in FY21. The export goal for agricultural and processed food products for the fiscal years 2022–23 was set at $23.6 billion, of which $19.694 billion i.e., 84%, had been accomplished by December 2022. 

India is the world's largest dairy producer, but it ranks 46th in terms of export. Similarly, India is the second largest producer of vegetables but ranks 15th in the global industry. In terms of worldwide exports, the processed food category is increasing far faster than the unprocessed food category - secondary and higher processed foods are growing at 5-6% CAGR, while unprocessed and primary foods are growing at 1-3% CAGR. The demand for processed food products is being driven by increased urbanisation, higher disposable incomes, the growth of nuclear families, and a preference for convenience food goods. Furthermore, selling food in processed form allows to charge a greater price and hence capture a larger economic value. For instance, according to an estimate by the RBI, manufacturing prepared meals adds 30% value to the product whereas processing meat adds 12.7%.

The food processing sector constitutes around 10.7% and 8.8% of the gross value added in the agriculture and manufacturing sector, respectively. As per the Annual Survey of Industries 2018-19, the food products industry accounted for 15.8% of the factories, 8.9% of wages to workers and 11.2% of workers. The output of the Indian food industry is forecast to reach $535 billion by FY26. Increasing urbanisation, growth in household income and growth of the organised retail sector are major growth drivers for this industry. India ranks first in the production of milk, spices and livestock, and second in the production of food, vegetables, fruits and fish. The Indian food processing industry is evolving rapidly. Industry players have encountered several changes due to changing consumption patterns, rising urbanisation, changes in the gender composition of employees and increase in food consumption. Indians now like to experience multiple food cuisines in addition to traditional Indian cuisines. Due to these factors, the food industry in India is expected to reach $1.2 trillion in revenue by FY26.

Pros and strengths

Chana focused manufacturing: The company specializes in manufacturing and/or processing Bengal Gram, Fried Gram, and Besan flour with its significant Research and Development on processing. The company does not have a major competitor focused solely on Chana-related products.

Diverse product portfolio and Distribution: The company's portfolio spans B2B products, catering to bulk purchasers, consumer-friendly packaging, and health-conscious individuals. Currently, the main focus of the company involves cleaning and grading of Chana, processing and packaging of Fried Gram (Split and Whole) and Gram Flour and polishing of Chana. The brand’s distribution channels are expansive, encompassing key accounts, wholesalers, retailers, showcasing its adaptability to diverse market needs.

Wide range of customers in B2B segment: The company’s costumers in B2B Segment include, supermarkets, wholesalers, retailers, restaurants, hotel, caterers, institutions, importers.

Risks and concerns 

Maximum revenue comes from sale of chana and related products: The company’s future business prospects are dependent on the demand for its products in Indian markets. Its financial performance is dependent primarily on the sale of certain of its products i.e., chana. The company has garnered topline of 99%, 72% and 96% from sale of chana and related products in FY24, FY23 and FY22. Any decrease in demand for these chana and related products can have an adverse impact on its business, results of operations, financial conditions and cash flows. Further, any disruption in the supply chain for these products, such as delays in delivery or quality issues, may impact its ability to meet customer demand and result in loss of sales.

Significant portion of revenues comes from core market of Tamil Nadu and Karnataka: Sale of the company’s products is majorly concentrated in the state of Tamil Nadu and Karnataka. The company generate 93.76%, 98.51% and 98.95% of the revenue from the state of Tamil Nadu and Karnataka in FY24, FY23 and FY22. Due to the geographic concentration of the sale of its products in Tamil Nadu and Karnataka, its operations are susceptible to local and regional factors, such as economic and weather conditions, natural disasters, demographic changes, and other unforeseen events and circumstances. Consequently, any significant social, political or economic disruption, or natural calamities or civil disruptions in this region, or changes in policies of the state or local governments or the government of India or adverse developments related to competition in this region, may adversely affect its business, results of operations, financial condition and cash flows. While the company has not experienced any of the above risks that had an adverse impact on its business operations and financial conditions in the last three Fiscals, it cannot assure that these risks will not arise in the future.

Topline depends significantly on few customers: For the Financial year ended March 31, 2024 & March 31, 2023, the company’s revenue from operations from its top 10 customers contributes to 63% & 46% of its revenues from operations as per its Restated Financial Statements. The company is primarily engaged in business of chana and related products. Few clients may represent a larger part of its customer portfolio, increasing the potential volatility of its results. It cannot assure that 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. However, the composition and revenue generated from these customers might change as it continues to add new customers in the normal course of business. While it shall not face challenges in finding new customers in the ordinary course of business, its results of operations and financial condition may be adversely affected if it remains dependent on few customers. While it has not experienced any of the above risks that had an adverse impact on its business operations and financial conditions in the last three Fiscals, it cannot assure that these risks will not arise in the future.

Outlook

Jeyyam Global Foods produces and/or processes Bengali chickpeas (locally known as ‘chana'), Fried Gram, and Besan Flour and supplies these to a variety of markets such as distributors, large retailers, hotels, restaurants, caterers, branded supermarkets and wholesalers. The company specialises in the production in Chana and related products. The company has made substantial investment in the research and development in the kitchen essential products. The company has also launched a pivot project to sell certain researched products in B2C segment to ascertain the market acceptance and demand for the said products. On the concern side, the company is significantly dependent on the sale of its products namely, chana, and related products. Its aggregate revenue from sale of chana and related products accounted for 99%, 72% and 96% of its revenue from operations in FY 2024, FY 2023 and FY 2022, respectively. An inability to anticipate and adapt to evolving consumer preferences and demand for particular products, or ensure product quality may adversely impact demand for its products, brand loyalty and consequently its business, results of operations, financial condition and cash flows. 

The company is coming out with a maiden IPO of 1,34,32,000 equity shares of Rs 5 each. The issue has been offered in a price band of Rs 59-61 per equity share. The aggregate size of the offer is around Rs 79.25 crore to Rs 81.94 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 64.80% to Rs 62,981 lakh for Fiscal 2024 from Rs 38,217 lakh for Fiscal 2023. The surge in revenue generation can be primarily attributed to increase in the demand and consumption of chana due to shift in the customer preference for more nutrient dense foods. Moreover, profit after tax has increased by 91.81% from Rs 786.80 lakh for Fiscal 2023 to Rs 1,509.11 lakh for Fiscal 2024. The rise in Profit after Tax can be attributed to the faster growth of revenue from operations compared to the increase in the company’s expenditures. The company is planning to allocate resources to brand building, Above the line & Below the line marking activities, promotions in new markets, enhancing customer experiences, and local programs. Additionally, distribution channel expansion, onboarding and support for distributors, retail activations, and distribution management expenses are earmarked for growth and business support. Going forward, the company is analyzing and evaluating the possibilities in the global market. It plans to export chana in the global market after analyzing the demand from the international market and cost benefit analysis.