IPO Analysis Research

Storage Technologies and Automation

• Storage Technologies and Automation is coming out with initial public offering (IPO) of 38,40,000 shares of Rs 10 each in a price band Rs 73-78 per equity share. 
• The issue will open for subscription on April 30, 2024 and will close on May 3, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 7.30 times of its face value on the lower side and 7.80 times on the higher side.
• Book running lead manager to the issue is Oneview Corporate Advisors.
• Compliance Officer for the issue is Theja Raju. 

Profile of the company

The company was incorporated in the year 2010 and is engaged into storage racking system. It specialises in design, manufacturing, installation services of metal storage racks, automated warehouses and other storage solutions. Its range of products and services demonstrates their commitment to providing innovative, efficient solutions for diverse warehousing needs, catering to a wide range of industries each with its own specific storage and logistical requirements, which includes oil & gas, automotive components & aerospace, food & beverages and cold storage, pharmaceutical, textile, retail, FMCG and others.

The company is a customer-centric business driven by a focus on continuing innovation and operational efficiency. It offers its clients with a wide variety of display and storage racks for commercial as well as industrial purposes. These are manufactured using qualitative raw materials. This helps in ensuring the durability and optimum strength of the finished products. It also use different grades of Mild steel (Hot rolled coils, cold rolled coils, Galvanised steel coils, PPGI coils, pipes and structural sections), powder for powder coating, Epoxy, Enamel paints and plastic for packaging as raw material. As an ISO 9001:2015 certified storage solution manufacturing company, its commitment to quality is evident. Its expansive infrastructure, spanning approximately 56,250 square feet in Singanayakanahalli, Yelahanka Hobli, Bangalore, Karnataka and approximately 56,250 square feet of storage facility supports a streamlined manufacturing process.

The company carry out product designing, manufacturing, quality checking, packaging, storing and delivery processes in various specialized segments of its infrastructure. All procedures are strictly monitored by its experienced team of quality controllers. Its manufacturing process, combined with its competitive strengths and strategic business approaches, positions it to meet the evolving needs of its clients effectively. It is dedicated to innovation, quality, and providing economically feasible solutions that don't just meet but exceed its clients' expectations.

Proceed is being used for:

• Meeting Working Capital requirements.
• General Corporate Purpose.

Industry overview

The global industrial racking systems market stood at $9 billion in 2018 and grew with 6.7% CAGR to reach $12.5 billion in 2023. India holds about 4.4% of this market and stands at $545.6 million in 2023. The Middle East & Africa region holds 5.5% of the overall market with a market size of $ 680.1 million in 2023. Thus, the India and Middle East & Africa (MEA) industrial racking systems market is evaluated to stand at $1,225.5 million in 2023 and projected to grow with significant CAGR of 8.5% during the forecast period. The market will reach $2,768.9 million by the end of 2033. Booming e-commerce sector in this region is one of the key driving factors for this impressive market growth. India holds around 45% of the overall market and expected to show high growth for industrial racking systems in coming decade.

According to the data, the number of warehouses in India is anticipated to double by the end of this decade. This will bring significant prospers to the demand for industrial racking systems in the country. During the historical period of 2018 to 2022, the market witnessed significant variations in the growth rate due to the impact of COVID-19 on the global economy. The industrial racking systems market witnessed a Y-o-Y fall of 9% in 2020 due to the shutdown in industries, disruptions in supply chains and uncertain demand from the end-use sectors. However, in 2021, the demand for industrial racking systems gained momentum showing strong recovery in post-covid market.

The India industrial racking system market is dominated by the regional players due to the presence of large number of small to medium manufacturers and their extensive network of dealers and distributors. Large players in India are Godrej & Boyce, Nilkamal, Silver Lining Storage, Storage Technologies & Automation (Racks and Rollers), Jugenheinrich AG and SSI Schaefer. Rack supported warehouse is the fasted growing product segment in India industrial racking system market. In 2022, the India market of rack supported warehouse stood at $ 2.5 million which is expected to grow to $ 9.8 million by 2033 at a CAGR of 13.2%. The market is considered to be consolidated with a few market participants accounting for more than 90% of the market share. Storage Technologies & Automation (Racks and Rollers) is by far the leading provider of rack supported warehouse solutions in the country. The company holds about 2/3rd of the market share in 2022. Godrej Group, Metafold Engineering, Jay Storage Solutions, Steefur, etc. are some of the other players operating in India rack supported warehouse market. 

Pros and strengths

Wide range of products: The company’s design process prioritizes ergonomics and economic feasibility, ensuring it deliver the best solution to its clients, not just a profitable business. Its wide range of products and ability to develop new ones based on client requirements, coupled with its extensive resources of engineers, positions it uniquely in the market.

Consistent focus on quality: The quality is a pre-requisite for a positive consumer experience and long-term brand loyalty. This philosophy has formed the foundation of the expansion and diversification of its product portfolio. Its focus on quality is maintained at all stages right from the sourcing of raw materials to the product manufacturing and assembly stage, which is subject to a rigorous review and monitoring process undertaken at its manufacturing facilities. For products which are sourced by it from third party suppliers, it has a dedicated sourcing team and quality assurance team, which closely monitors the quality of such products.

Product development and design optimisation capabilities: The company relies on its integrated location-focussed manufacturing operations, product development and design capabilities, and its focus on quality and cost-efficient manufacturing processes to achieve customer satisfaction, foster customer loyalty and accordingly, generate repeat business. The evolution of its product portfolio and its ability to provide customised manufacturing solutions to its customers have been driven by its product development and design capabilities.

Risks and concerns

Dependent on few numbers of customers: The company’s business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. 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.

Depend on availability of labour: The company’s project operations require deployment and its ability to retain labour. In case such labour workforce is unavailable, or it is unable to identify and retain such labour its business could be adversely affected. It cannot guarantee that it may be able to continue with the same on favourable terms or at all. Any such failure may impact the operations, business process and profitability. Additionally, there have been amendments in the labour and Employment related laws, which may have a direct impact on its employee costs and consequently, on its margins. Further, latest amendments in labour laws in India may be leads to increasing cost of compliance, wages, social security, Occupational Safety, Health and Working Conditions. It cannot assure that it will continue to comply with all these labour related laws and that as it continues to grow its business in the future, its labour and employee costs coupled with operating compliances and expenses will not significantly increase. Its employees are not unionized currently. However, there is no assurance that its employees will not seek unionization in the future. In the event that employees at its project sites take any steps to unionise, it may become difficult for it to maintain flexible labour policies, and may increase its costs and adversely affect its business.

Face significant competition: As the company is operating in a highly competitive industry with minimal entry barriers exposes the company to the constant threat of new entrants, fostering a landscape characterized by numerous players, both organized and unorganized. The absence of entry barriers intensifies competition, requiring it to navigate challenges from both established and emerging competitors. Its strategic focus centers on delivering standardized, uniformly high-quality products at competitive prices to its consumers. The competitive arena is regionally and product-line segmented, with the added complexity of contending with competitors boasting significantly larger capital bases and resources, offering a broader range of products. Key determinants of its competitiveness include client relationships, reputation, employee capabilities, market focus, and the perceived quality and pricing of its products. Recognizing these factors, it prioritizes consistent product quality and timely delivery at competitive prices to fortify its brand over time. Its competitive edge stems from cost-effective and integrated offerings, a dedicated focus on customer satisfaction, and a reputation for reliability coupled with a commitment to quality assurance.

Outlook

Founded in October 2010, Storage Technologies and Automation is engaged in storage racking systems. The company manufactures and installs metal storage racks, automated warehouses, and other storage solutions. The company provides storage solutions for various industries, including oil & gas, automotive, aerospace, food & beverages, pharmaceuticals, textiles, retail, and FMCG. The company is an ISO 9001:2015 certified storage solution manufacturing company. Its competent team enable it to deliver projects with precision, adhere to strict safety standards, and maintain exceptional quality, making it a reliable and trusted partner for its clients. Its services are consistent round the year. It is a quality conscious company. It constantly striving to expand its service portfolio and it always look forward to complementing projects of its clients. On the concern side, to remain competitive and efficient, modernization and technology upgradation are crucial for reducing costs and increasing output. Its business heavily relies on technology and machinery to deliver quality services. However, there is a risk of its technology and machinery becoming obsolete over time or not being upgraded timely, which can adversely impact its operations and financial condition, leading to a loss of competitive edge in the market.

The company is coming out with an IPO of 38,40,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 73-78 per equity share. The aggregate size of the offer is around Rs 28.03 crore to Rs 29.95 crore based on lower and upper price band respectively. On performance front, total income for the Fiscal year March 31, 2023 stood at Rs 8,137.12 lakh. Total income for the financial year 2021-22 stood at RS 6,989.72 lakh, representing an increase of 16.42%. The company reported Restated profit after tax for the Fiscal year 2023 stood at Rs 48.30 lakhs in comparison to loss after tax of Rs 20.49. Meanwhile, the company intends to strengthen its relationships with its existing customers and explore opportunities to grow along the value chain by expanding the array of its existing products and solutions that it supplies to its customers and to win new customer order by developing products and solutions aligned with their needs. It intends to continue enhancing its operational efficiencies, to increase economies of scale, better absorb its fixed costs, reduce its other operating costs and strengthen its competitive position. It intends to continue using other manufacturing strategies and cost reduction strategies to continue to improve its operational efficiencies. 

Amkay Products 

• Amkay Products is coming out with initial public offering (IPO) of 22,92,000 shares of Rs 10 each in a price band Rs 52-55 per equity share.  
• The issue will open for subscription on April 30, 2024 and will close on May 03, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 5.20 times of its face value on the lower side and 5.50 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Krishna Rathi.

Profile of the company

Amkay Products manufactures, assembles & markets a comprehensive portfolio of medical devices, disposables and other Healthcare Products like Face Mask, Alcohol Swabs, Lancet Needles, Nebulizer, Pulse Oximeter, surgeon cap etc. used by healthcare centers, hospitals/clinics, nursing homes etc. widely spread across India. In addition, it is also engaged in branding and marketing of some of the products like Diapers, Plastic Gloves, Suction Machines etc. The company started its operations in year 2008 with manufacturing and supply of one product in a manufacturing unit taken on rent at Vasai in Mumbai. Gradually, more products were added to its portfolio & for further product expansion, over the period, it shifted to bigger manufacturing units from where it entered into branding & trading segment also along with manufacturing. The company’s product portfolio comprises of many product including Respiratory Disease Related Medical Devices, Surgical Disposables, Home Healthcare Products and Other Healthcare Products.

Its manufacturing facilities are equipped with requisite infrastructure including machineries, testing laboratory other handling equipment to facilitate smooth manufacturing process. Further, the company has accreditation with ISO 9001:2015 for quality management system from QRO Certification LLP. The company was founded in the year 2007 by one of its Promoters, Kashyap Pravin Mody, who has experience in the associated industry. Later, in 2011, Hemanshu Kantilal Batavia joined the company as Director who has an experience in the said industry. Its promoters are involved in the critical aspects of its business, including expansion, process and plant, finance, sales and marketing. Their understanding of the consumer difficulty, intuitive entrepreneurship and involvement in key aspects of its business has helped accelerate and drive its profitable growth.

Proceed is being used for:

• Funding capital expenditure towards installation of additional machinery.
• Meeting working capital requirements.
• General corporate purpose. 

Industry overview

The healthcare and medical device sectors in India have grown significantly in the last decade. A wide range of medical devices, from consumables to implantable medical devices, are produced in India. The majority of medical devices manufactured in India are disposables like catheters, perfusion sets, extension lines, cannulas, feeding tubes, needles, and syringes, as well as implants like cardiac stents, drug-eluting stents, intraocular lenses, and orthopaedic implants. The medical devices sector is highly capital intensive, and also requires continuous training of the healthcare system providers to adapt to new technologies. 

The medical devices sector in India comprises large multinationals, small and midsized companies. The size of the Indian medical devices market is estimated at Rs 90,000 crore (in 2022 and is expected to grow to $50 billion by 2030 with a CAGR of 16.4 %. The Indian medical device market share in the global market is estimated to be 1.65%. India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally. Between 2020-30, the diagnostic imaging market is likely to expand at a CAGR of 16.4%. Export of medical devices from India stood at Rs 19, 803 crore in FY22. The exports of medical devices during April-December, 2022 stood at Rs. 20,511 crore, and are expected to rise to $10 billion by 2025. 

Policy makers in India will need to set out an action plan to reduce the country’s dependency on medical devices/technology imports. At present, NITI Aayog is reportedly drawing up a strategic road map for medical devices. Over the next few years, India might grow into a $50 billion market for medical devices. In BioAsia 2021, key stakeholders in the panel discussion on medical technologies predicted that India would become selfsufficient in domestic medical devices manufacturing by 2025-26. The panel observed that the government is taking supportive measures such as promoting indigenous manufacturing of high-tech medical devices, production-linked incentive schemes (PLIs) on medical devices, boosting new medical devices parks, etc. to boost the overall growth of the domestic medical devices market in India.

Pros and strengths

Strong portfolio and diverse range of products across consumer preferences: The company has diverse product portfolio across various segments of medical device and disposables catering to respiratory disease, home healthcare products and surgical disposables to fulfil customer’s requirement. It deals in a wide range of products, which enables the company to cater widespread customer base across India and also expand its reach in international locations like Bhutan, Nepal & Qatar.

Diversified revenue from multiple geographies: The Company has diversified revenue from multiple geographical locations across India and from places outside India. Most of its revenue is derived from Sales within India which is around 99.60%, 98.95%, 98.96% & 99.27% respectively, for the period ending December 31, 2023 and year ended March 31, 2023, March 31, 2022 & March 31, 2021. For the period ending December 31, 2023 and financial year ended March 31, 2023, March 31, 2022 & March 31, 2021 respectively, it has generated around 71.49%, 71.51 %, 70.23% and 78.25% of its total revenue from sales in top 10 geographical regions in India.

Extensive network of dealers covering major parts of India: The growth in its business operations have been made possible by its wide dealer network covering major parts of India. It sells its products through a network spread across India, it works with various dealers depending on their geographical reach, market knowledge, product and customer awareness as well as understanding of Healthcare Industry. Its sales & distribution network is aided by its capable in house sales and marketing team, which liaise with the dealers on a regular basis for customer inputs, market Amkay Products as well as positioning of its products vis-a-vis products of its competitors. Maintaining strong relationships with its dealers are essential to its business strategy and to the growth of its business. It continually strives to maintain strong relationships with its dealers in order to have uninterrupted supplies of its products to them and retain them for a long period of time.

Risks and concerns

Depend on third parties to manufacture some of products: Its business model depends on external manufacturers for some of its products. If these entities decline production, fail to comply with regulations, or miss its standards, its business is at risk. This highlights the importance of meticulous third-party selection, stringent quality control, and consistent communication. Generally, it does not have long-term contracts with its vendors committing them to supply products to the company. If its vendors are unable to manufacture its products in sufficient quantities and on a consistent basis, or if it becomes unwilling to produce that product for the company, it may not be able to supply its customers in a timely manner. 

High working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Dependent upon few customers: Since it is dependent on certain key customers for a significant portion of its sales, the loss of one or more of such customers or a reduction in demand from such customers, for any reason, including due to loss of contracts, delay in fulfilling existing orders, failure to negotiate or agree upon acceptable terms in negotiations, disputes or a loss of market share or a downturn in the spending on healthcare by them, if not suitably replaced with another customer, could adversely affect its business, financial condition and results of operations. Its revenues and profitability may also be adversely affected if there’s a significant reduction in the volume of its business with such customers, or if its customers prefer its competitors over it, and it may not remain the preferred products and solutions provider for certain of its customers.

Outlook

The company manufactures, assembles & markets a comprehensive portfolio of medical devices, disposables and other Healthcare Products like Face Mask, Alcohol Swabs, Lancet Needles, Nebulizer, Pulse Oximeter, surgeon cap etc. used by healthcare centers, hospitals/clinics, nursing homes etc. widely spread across India. In addition, it is also engaged in branding and marketing of some of the products like Diapers, Plastic Gloves, Suction Machines etc. On the concern side, its business model depends on external manufacturers for some of its products. If its vendors are unable to manufacture its products in sufficient quantities and on a consistent basis, or if it becomes unwilling to produce that product for the company, it may not be able to supply its customers in a timely manner.

The company is coming out with an IPO of 22,92,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 52-55 per equity share. The aggregate size of the offer is around Rs 11.92 crore to Rs 12.61 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 2825.05 lakh whereas in Financial Year 2021-22 the same stood at Rs 3679.45 lakh representing a decrease of 23.22%. The Company reported Restated profit after tax for the financial year 2022-23 of Rs 151.02 lakh in comparison to Rs 146.71 lakh in the financial year 2021-22. The increase of 2.94% was mainly due to decrease in the cost as nationwide Covid effect was neutralized and purchase of stock in trade and other expenses decreased. Meanwhile, it intends to cater to the increasing demand of its existing customers and also to increase its existing customer base by enhancing the reach of its products in different parts of the country and outside country. The company has constantly expanded the dealers network across the country and this continues to be one of the core strategies of the Company to further expand the dealers network. Having a wider product portfolio provides confidence to new dealers to engage with the company.

Emmforce Autotech 

• Emmforce Autotech is coming out with initial public offering (IPO) of 5,499,600 shares of Rs 10 each in a price band Rs 93-98 per equity share.  
• The issue will open for subscription on April 23, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 9.30 times of its face value on the lower side and 9.80 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Parul Gupta.

Profile of the company

The company is engaged in the business of manufacturing niche automotive drivetrain parts like Differential Housings, Differential Lockers, Differential Covers, 4WD Locking Hubs, Spindles, Axles & Shafts, Gear Shifters, Yokes, Differential Spools, Differential Tools and various differential forged / cast parts primarily for 4-wheel Drive and performance racing vehicles. The company has been engaged in exports ever since its inception. It has established itself as a manufacturer of Drivetrain Parts in India and is one stop shop for quality cost competitive drivetrain parts and providing out-of-the-box solutions to its customers through designing and development of complex / special parts. 

Huge inventory of tooling for forging and machining, jigs and fixtures for machining, extra focus on engineering gives Emmforce an edge over the competition to develop new parts in a much faster time than competition. The company helps to accelerate performance and improving profitability through faster product development, shorter lead time, on time delivery, comprehensive product range and competitive pricing. 

It offers fully integrated engineering solutions from conceptualization, development and validation to implementation and manufacturing of its products. The conceptualization stage involves acquiring market intelligence, assessing customer requirement and formulating customized strategy for individual customers. The development phase includes product designing, material procurement and processing. This is followed by the validation phase, which involves prototyping, testing and feasibility analysis. Its in-house manufacturing and implementation competencies include forging, machining, fabrications, heat treatment, surface finish, logistics, quality and testing, design and validation.

Proceed is being used for:

• Investment in Subsidiary Company i.e. Emmforce Mobility Solutions (EMSPL) in form of equity or debt for meeting the requirement of working capital and margin money for term loan of Subsidiary Company. 
• Meeting working capital requirement.
• General corporate purpose.

Industry overview

India has become the fastest-growing economy in the world in recent years. This fast growth, coupled with rising incomes, a boost in infrastructure spending and increased manufacturing incentives, has accelerated the automobile industry. The two-wheeler segment dominated the automobile industry because of the Indian middle class, with automobile sales standing at 19.45 million units in FY23. India’s auto component industry is an important sector driving macroeconomic growth and employment. The industry comprises players of all sizes, from large corporations to micro entities, spread across clusters throughout the country. The auto components industry accounted for 2.3% of India’s GDP and provided direct employment to 1.5 million people. 

The automobile component industry turnover stood at Rs 5.6 lakh crore between 2022-23 the industry had revenue growth of 32.8% as compared to 2021-22. Domestic OEM supplies contributed around 66% to the industry’s turnover, followed by domestic aftermarket (around 12%) and exports around 22.3%), in FY23. The component sales to OEMs in the domestic market grew by 39.5% to $57.62 billion. Between 2022- 23, exports of auto components grew by 5.2% to Rs 1.61 lakh crore. The aftermarket for auto components 104 grew by 15% in 2022-23 reaching Rs 85,333 crore.

The rapidly globalising world is creating newer opportunities for the transportation industry, especially while shifting towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers. To help them adjust to the shifting dynamics of the sector, the Indian government has already offered various production incentives. India is also investing heavily in electric car infrastructure. In December 2020, Power PSU JV EESL announced a plan to install about 500 EV charging stations in the country. The number of charging stations stood at 1,800 in March 2021 and is expected to reach 4 lakh by 2026. This would make it easier for the auto component industry to take advantage of the EV opportunity and expertise in EV components manufacturing, thus helping India on a global scale. The Indian government is exempting imports of capital goods and machinery essential to produce lithium-ion cells used in EV batteries from customs duty. This, coupled with the shift in global supply chains, will help the Indian global automotive component trade to expand 4-5% to $80 billion by 2026. Moreover, the Indian auto component industry is predicted to become the third largest in the world.

Pros and strengths

One stop solution for drivetrain parts: It manufactures wide variety of drivetrain parts under one roof. Buying a variety of parts from one supplier helps save a lot of logistics cost and releases the management bandwidth of the customer thus making it the preferred supplier. Its US warehouse through its Group Company strengthens product distribution further and helps in saving the customer from the hassles of importing LCLs (Less than Container Load), longer lead time and spending a lot of time and money in customs clearance. 

Engineering excellence: With in-house research, design and development along with deep knowledge of variety of materials and processes, it is able to provide out-of-the-box market driven innovative & niche automotive products that help grow the business and profitability of its customers. 

Existing client relationship: The Company has earned reputation based upon which it has been successful in retaining its reputed clients. Its existing customer relationship that goes as far as almost two decades helps the company to get repeat business from its customers. This has helped it maintains a long-term working relationship with its customers and improve its customer retention strategy. The company relationship with the existing customers represents a competitive advantage in gaining new customers and increasing its business.

Risks and concerns

Depend on third parties for supply of raw material: The main raw materials which are required by the company to manufacture auto-components are procured by it from various domestic vendors. It is dependent on third party suppliers for the supply of its raw materials. Discontinuation of production by these suppliers, a failure of these suppliers to adhere to any delivery schedule or a failure to provide materials of the requisite quality could hamper its production schedule and therefore affect its business and results of operations. This dependence may also adversely affect the availability of key materials at reasonable prices, thus affecting its margins, and may have an adverse effect on its business, results of operations and financial condition.

Defaults in client payments: it may be subject to working capital risks due to delays or defaults in payment by clients, which may restrict its ability to procure raw materials and make payments when due. In addition, any delay or failure on its part to supply the required quantity or quality of products, within the time stipulated by its agreements, to its customers may in turn cause delay in payment or refusal of payment by the customer. It typically extends credit terms to its large institutional and other customers. It also has sufficient credit risk covered against each overseas customer through Export Credit Guarantee Corporation of India through a comprehensive risk policy. Such defaults/delays by its customers in meeting their payment obligations to it may has a material effect on its business, financial condition and results of operations.

Changes in consumer preferences: Its ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis is a significant factor in its ability to remain competitive. However, there can be no assurance that it will be able to secure the necessary technological knowledge, through technical assistance agreements or otherwise, that will allow it to develop its product portfolio in this manner. If it is unable to obtain such knowledge in a timely manner, or at all, it may be unable to effectively implement its strategies, and its business and results of operations may be adversely affected. Its failure to successfully and timely develop and manufacture new products in order to cater to the requirements of its customers and industry trends could have a material adverse effect on its business, financial condition, results of operations and future prospects.

Outlook

The company is engaged in the business of manufacturing niche automotive drivetrain parts like Differential Housings, Differential Lockers, Differential Covers, 4WD Locking Hubs, Spindles, Axles & Shafts, Gear Shifters, Yokes, Differential Spools, Differential Tools and various differential forged / cast parts primarily for 4-wheel Drive and performance racing vehicles. It offers fully integrated engineering solutions from conceptualization, development and validation to implementation and manufacturing of its products. The conceptualization stage involves acquiring market intelligence, assessing customer requirement and formulating customized strategy for individual customers.  On the concern side, it faces competition in India and overseas in its business, which is based on many factors, including product quality and reliability, breadth of product range, product design and innovation, technology, manufacturing capabilities, scope and quality of service, price and brand recognition. It competes with global competitors to retain its existing business as well as to acquire new business.

The company is coming out with an IPO of 5,499,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 93-98 per equity share. The aggregate size of the offer is around Rs 51.15 crore to Rs 53.90 crore based on lower and upper price band respectively. On performance front, revenue from operations had decreased by 33.84% from Rs 6906.29 lakh in Fiscal 2022 to Rs 4569.08 lakh in Fiscal 2023. The change was primarily due to decrease in sales of products manufactured. The company reported a net profit of Rs 438.85 lakh in Fiscal 2023 as compared to a net profit of Rs 732.58 lakh in Fiscal 2022. Meanwhile, it is planning to make its products available in more countries by expanding its network and reaching new countries. It aims to do this by leveraging its marketing skills and relationships and further enhancing customer satisfaction. It plans to increase its customers by meeting orders in hand on time, maintaining its customer relationship and renewing its relationship with existing buyers.

Shivam Chemicals

• Shivam Chemicals is coming out with an initial public offering (IPO) of 45,87,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 44 per equity share. 
• The issue will open for subscription on April 23, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 4.40 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Aryaman Financial Services.
• Compliance Officer for the issue is Rishita Taparia.

Profile of the company

The company is a manufacturer of Hydrated Lime (Calcium Hydroxide) & a distributor of various products such as Poultry feed supplement (MBM), Di-Calcium Phosphate (Feed Grade), Magnesium Oxide, Limestone Powder, etc. With rich experience and knowledge it has built a well-established marketing network across India and it distributes animal feed products for various well renowned manufacture over the years. The Company is engaged in the business of wholesale sale of feed ingredient such as Di Calcium Phosphate and Mono Calcium Phosphate and Chemical Product such as Hydrated Lime (Calcium Hydroxide) and Quick lime (Calcium oxide). The company offers wide range of high-quality feed products. It consists of poultry feed, cattle feed and specialised chemical. The manufacturing activity is carried out by its wholly owned subsidiary Shivam Chemicals and Minerals and is located at Dahej, Gujarat. They are engaged in manufacturing of Hydrated lime (Calcium hydroxide) product.

The company is using complete machinery and technology which is a state-of-the-art with proprietary Italian technology from Cimprogetti Lime Technologies, Italy. y. To cater to Indian Market, they have set up Company in India in the name of Cimprogetti India Pvt. Ltd., Delhi. Due to this technology the company has achieved high production efficiency, superior quality product and reduced cost of production. Use of modern - Cimprogetti technology ensures waste reduction, efficient storage & handling & improved quality allowing it to create a - technological moat. 

Proceed is being used for:

• Funding Working capital requirements. 
• Investment in Subsidiary company Shivam Chemicals & Minerals for financing the augmentation of its working capital capabilities.
• General Corporate Purpose.

Industry overview

India currently represents one of the largest feed producers in the world. Animal feed includes various raw, processed and semi-processed products that are fed to livestock. Some of the most common feeds include pasture grasses, cereal grains, hay and silage crops, and other by-products of food crops, such as brewers’ grains, pineapple bran and sugar beet pulp. These products are carefully formulated with the help of nutritional additives, like vitamins and minerals, to maintain the overall health of animals and improve the quality of various end-products, including eggs, meat and milk. The Indian animal feed market size reached Rs 956.7 Billion in 2022. Looking forward, IMARC Group expects the market to reach Rs 1,578.2 Billion by 2028, exhibiting a growth rate (CAGR) of 8.2% during 2023-2028.

India is the leading producer of Lime globally. The major regions producing almost 80% of limes in India are Gujarat, Madhya Pradesh, Andhra Pradesh, Karnataka, and Odisha. The production of lime in India is continuously increasing due to the growing demand of foods that include lime as an ingredient (including juice, jams, bakery, and confectionery) in India. The growing demand for limes due to health benefits will drive the market during the forecast period. Lime is used as an ingredient in the production of pectin, citric acid, lime oil, lime juice and many other products. This growing markets creates a steady demand for these products throughout the year. Pectin and citric acid are two products that have witnessed a continuous demand during last few decades. India consumes the maximum portion of lime in the Asia-Pacific region.

By the end of financial year 2022, the value of India's limestone production amounted to an estimated 97.4 billion Indian rupees. This figure is estimated to have decreased to around 68.9 billion Indian rupees in financial year 2023. The India production of lime is projected to record a CAGR of 3.2% during the forecast period. According to FAO, lime production accounts for 3.14 million metric tons in 2018 as compared to last year where the production of lime accounts for 2.3 million metric tons. Production of lime is increasing in India due to an increase in the area of production which accounts for 286 thousand hectares in 2018. 

Pros and strengths

In house manufacturing through 100% owned subsidiary: Its subsidiary Shivam Chemicals and Minerals is 100% owned by the company. It is incorporated in 2019, operates a manufacturing unit specializing in hydrated lime production. The unit has a capacity of 60,000 MT per year. Hydrated lime has diverse applications in industries such as metallurgy, sugar refining, water treatment, and more. The subsidiary benefits from a substantial customer base due to these wide-ranging applications. Shivam Chemical, the holding company, has an extensive marketing network with offices throughout India, allowing them to reach a wide range of industrial consumers, dealers, and distributors of chemical products across the country.

Technological competitive advantage: The Company is using complete machinery and technology which is a state-of-the-art with proprietary Italian technology from Cimprogetti Lime Technologies, Italy. To cater to Indian Market, they have set up Company in India in the name of Cimprogetti India, Delhi. Due to this technology the company has achieved high production efficiency, superior quality product and reduced cost of production. Use of modern Cimprogetti technology ensures waste reduction, efficient storage & handling & improved quality allowing it to create a technological moat‖.

Logistic efficiency: The Company uses Bulker Truck as a medium of transportation of its products. Current it uses 8 bulker trucks on rent in its factory which has carrying capacity up to 25 tons of product per bulker. The advantage of employing a Bulker truck includes: The adoption of bulkers results in a minimum 10% reduction in operational costs; unloading with bulkers is 75% faster compared to using bags; and directly storing materials in silos effectively minimizes storage costs.

Risks and concerns

Significant working capital requirements: Its business requires significant working capital, including in connection with trading activity as well as in manufacturing activity which is carried out by its subsidiary company. The actual amount of its future working capital requirements may differ from estimates as a result of, among other factors, unanticipated expenses, and fluctuations in traded item prices, economic conditions, changes in the terms of its financing arrangements, changes in the credit terms of customers and suppliers, inventory fluctuations, additional market developments and new opportunities in the animal feed business. Its sources of additional financing, required to meet its working capital needs, may include the incurrence of debt, the issue of equity or debt securities or a combination of both. If it decides to raise additional funds through the incurrence of debt, its interest and debt repayment obligations will increase, which may have a significant effect on its profitability and cash flows.

Dependent on third party transportation providers: It relies on third party transportation providers for the supply of its products to its customer. Strikes / non-availability of transportation could have an adverse effect on its ability to deliver the same to its customer. Increase in transportation costs or unavailability of transportation services for its products, as well the extent and reliability of Indian infrastructure may have an adverse effect on its business, financial condition, results of operations and prospects.

Dependent on a few suppliers: The company is dependent on a few suppliers for procuring the trading items for supply of its products and it currently have long term contracts or exclusive supply arrangements with few of its vendor. For the financial year ended March 31, 2023, its top five suppliers and top ten suppliers accounted for approximately 62.02% and 83.22%. Its quality of purchased items, location advantage, etc. is also some of the major reasons the company prefers to procure these traded item from these supplier Any failure of the supplier to deliver this traded item in the necessary quantities or to adhere to delivery schedules or specified quality standards and technical specifications would adversely affect its business operations and its ability to deliver orders on time and at the desired level of quality. As a result, it may lose customers and incur liabilities for failure to execute orders, which could have a material adverse effect on its business financial condition and results of operations.

Outlook

Shivam Chemicals is a manufacturer of Hydrated Lime (Calcium Hydroxide) & a distributor of various products such as Poultry feed supplement (MBM), Di-Calcium Phosphate (Feed Grade), Magnesium Oxide, Limestone Powder, etc. The company offers wide range of high-quality feed products. It consists of poultry feed, cattle feed and specialised chemical. The manufacturing activity is carried out by its wholly owned subsidiary Shivam Chemicals and Minerals and is located at Dahej, Gujarat. On the concern side, the company is dependent on a few suppliers for procuring the trading items for supply of its products and it currently have long term contracts or exclusive supply arrangements with few of its vendor. Besides, it relies on third party transportation providers for the supply of its products to its customer. Strikes / non-availability of transportation could have an adverse effect on its ability to deliver the same to its customer.

The company is coming out with an IPO of 45,87,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 44 per equity share to mobilize Rs 20.18 crore. On performance front, in fiscal 2023, its revenue from operations decreased by 12.04%, from Rs 17,794.49 lakh in fiscal 2022 to Rs 15,651.68 lakh in fiscal 2023. The decrease in the year 2023 was due to decrease in prices of goods. Profit after Tax decreased by 19.44% lakhs from Rs 443.70 lakh in fiscal 2022 to Rs 357.44 lakh in fiscal 2023. Meanwhile, it aims to focus on deepening its penetration in its existing markets and thereby increase its domestic presence by expanding its customer network. At present, it sells its products in many States like Maharashtra, Uttar Pradesh, Gujarat, Telangana, Haryana, Karnataka, Uttarakhand, Punjab, Madhya Pradesh, Andhra Pradesh, West Bengal, Kerala, Tamil Nadu, Telangana, Orrisa, Bihar, Assam, etc within India. It aims to focus on increasing its customer base by exploring domestic markets other than the above states mentioned.

JNK India

• JNK India is coming out with a 100% book building; initial public offering (IPO) of 1,60,15,988 shares of Rs 2 each in a price band Rs 395-415 per equity share.  
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors. 
• The issue will open for subscription on April 23, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 197.50 times of its face value on the lower side and 207.50 times on the higher side.
• Book running lead managers to the issue are IIFL Securities and ICICI Securities.
• Compliance Officer for the issue is Ashish Soni.

Profile of the company

The company is in the business of manufacturing the process fired heaters, reformers and cracking furnaces (together, the ‘Heating Equipment’) that are required in process industries such as for oil and gas refineries, petrochemical and fertilizer industries. It has capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning Heating Equipment and cater to both domestic and overseas market. The Indian heating equipment market is closely competed among seven companies with the Company and Thermax being the most prominent and comparable players. Over the years it has diversified into flares and incinerator systems and have been developing capabilities in the renewable sector with green hydrogen. 

The company’s business model involves collaboration with its customers, from the initial consultation, specification and design stage to the final installation of the Heating Equipment. Due to its long-standing relationship with customers and its capability to provide customized solutions with a proven track record in product development and execution catering to the diverse needs of its customers, it has a competitive advantage, since there are very few competitors with similar capabilities. As of December 31, 2023, it has served 21 customers in India and 8 customers overseas. Further, 7 out of the 12 oil refining companies in India, are its customers and it has supplied or are in the process of supplying Heating Equipment to 11 of the 24 operating oil refineries across India. Some of its domestic Customers include Indian Oil Corporation, Tata Projects, Rashtriya Chemicals & Fertilizers and Numaligarh Refinery. Further it has catered to overseas customers such as a leading engineering, procurement and construction (EPC) company in Europe, a leading oil & gas exploration & production company in Oman and a middle east arm of European EPC company in oil and gas. Also it has enjoyed repeat orders from certain large domestic customers such as Rashtriya Chemical & Fertilizers, Tata Projects, Numaligarh Refinery and Indian Oil Corporation. 

Proceed is being used for:

• Funding working capital requirements.
• General corporate purposes.

Industry overview

The demand potential for the heating equipment i.e., process fired heaters, reformers, and cracking furnaces have been estimated for Oil & Gas downstream segments only. Overall demand for heating equipment from Indian refineries, petrochemicals and fertilizer (Urea) segments between Fiscal 2024 and Fiscal 2029 is estimated at Rs 270,890 million i.e., approximate Rs 45,000 million on an annualized basis. 61% of this demand would come from petrochemicals followed by 37% from refineries and 2% from fetilizers (Urea). 46% of this demand would come from cracking furnaces followed by 24% from low capex heaters, 16% from high capex heaters, and 14% from reformers. Heating equipment suppliers indicated that order booking has grown by 25% in the last 2 years and the market is showing an upward trend – cumulative order booking for heating equipment in the last 6 years was approximately Rs 150,000 million i.e., Rs 25,000 million on annualized basis. 

The process fired heaters market has high barriers to entry and there are only a handful of suppliers, despite surge in demand. The market has high entry barriers as the engineering of industrial process fired heaters requires a complex understanding of various oil products. If the operation of a process fired heater is interrupted for even one day, users could incur significant losses, which is why suppliers undergo a thorough selection process. Since energy efficiency is one of the key performance indicators of any refinery, petrochemicals and, fertilizer plants and is determined by the efficiency of the process fired heaters, the process fired heaters become a critical aspect for customers and hence selection of suppliers for process fired heater requires strong credentials and references. Besides, there are certain regulatory standards to be mandatorily adhered to in the industry. Therefore, there are limited suppliers who can supply these critical equipment. The Indian heating equipment market is closely competed among seven companies with JNK India and Thermax being the most prominent and comparable players. Bharat Heavy Electricals is also a participant however, its revenue from heating equipment is comparatively lower compared to its other flagship businesses. Other participants in the Indian heating equipment market are, Esteem Projects, Heurtey Petrochem Solutions, TR Engineering, and ITT Engineering India. 

Pros and strengths

Established track record with a diverse customer base: The company is in the business of manufacturing the process fired heaters, reformers and cracking furnaces (together, the Heating Equipment) that are required in process industries such as for oil and gas refineries, petrochemical and fertilizer industries. It commenced operations in 2010 and has a successful project completion track record of over 10 years. It has successfully completed projects which were based in far-reaching locations, which included its projects in India at Numaligarh, Assam; Kochi, Kerala; Barauni, Bihar; and overseas at Lagos, Nigeria. In recognition of its efforts, it has been accorded incentives by its customers for early completion of projects in India and overseas. Further, in March 2022, it was recognised for its safety compliance by one of the private refinery companies of a multinational industrial conglomerate from Nigeria and was awarded a certificate of appreciation towards ‘Safety Compliance and Campaign Performance’. Also, in November 2022, it was awarded a certificate of appreciation by the same refinery company, for providing four million safe manhours without a lost time incident and recognising its effective contribution towards installation of process fired heaters. 

Well-positioned to capture industry tailwinds through its demonstrated capabilities over time: The company has provided efficient solutions to its customers and has been selected by its customers repeatedly. It has stringent quality systems in place to ensure that the equipment supplied by it and/or services provided to customers meet or exceed the contractual and regulatory requirements. It has a team of experienced engineers and technicians who work closely with its customers to understand their specific needs and provide solutions that meet or exceed their expectations. It has an extensive workforce consisting of 69 employees in the engineering department. It also provides installation services to its customers to ensure that their products are installed correctly and function effectively. Further, since its inception it has been working closely with JNK Global. JNK Global is involved in the design, manufacturing, installation of process fired heaters. JNK Global is the only industrial-use process fired heater producer in Korea and is ranked amongst the top three industrial use process fired heater producers globally. Rise in global oil and gas refinery and petrochemical capacities are the key factors driving the growth in the global process fired heaters market. The company is able to leverage JNK Global’s global position, to bid for larger projects in collaboration with JNK Global. 

Diversifying product portfolio to cater to varied industries: The company’s Heating Equipment are required in process industries such as oil and gas refineries, petrochemicals, fertilizers, hydrogen and methanol plants etc. The company receives orders from domestic and overseas oil and gas refining, petrochemical and fertilizers companies. Its diversified Customer base has helped it in expanding its markets and improve profitability. The customers are primarily from, amongst others, the oil and gas, petrochemical and fertilizers industries. Heating Equipment such as process fired heaters and reformers are used in a typical refinery and are also an effective and efficient heating solution for a wide range of industrial applications, but proper design, installation, and operation are critical to ensure safe and reliable performance. Process fired heaters are the critical equipment in a refinery. Around 10 – 20 process fired heaters are used in any typical refinery. Of all the process fired heaters, four applications such as the CDU, VDU, delayed coker unit and catalytic reforming units are the most critical and the capex for these heaters is also high when compared with the other heater application areas in the refinery. It has recently diversified into waste gas handling systems which includes flares and incinerators systems as well. Flare system is a gas combustion device used in industrial plants such as petroleum refineries, chemical plants, natural gas processing plants, at oil or gas production sites with oil wells, gas wells, offshore oil and gas. 

Skilled and experienced Promoters and management team with committed employee base: The company is led by a qualified and experienced management team, with a deep understanding of the industry and its customers’ preferences and requirements. Its Promoters and Directors, Arvind Kamath, Goutam Rampelli and Dipak Kacharulal Bharuka and its Director Bang Hee Kim have an extensive experience in the Heating Equipment industry and have been instrumental in the growth of its business. its Promoters are supported by an experienced management team comprising Deepak Sake (vice president engineering with an experience of over 21 years, Mohsin Shaikh (assistant vice president projects) with an experience of over 15 years, and Vallathur Ravikumar Mudali (general manager, procurement department) with an experience of over one year, in the development and execution of projects in process fired heaters industry. Its qualified and experienced team enables it to identify new avenues of growth and helps it to implement its business strategies in an efficient manner.

Risks and concerns

High working capital requirement: The company’s business requires significant working capital for its business operation, furnishing of bank guarantees for participation in bids, financing inventory and any change in terms of credit or payment would affect its working capital. The working capital projections made by the company are based on certain key assumptions by its management and it may require alternative means of funding in Fiscal 2024, Fiscal 2025 and Fiscal 2026 even after the utilization of Net Proceeds. Its inability to meet its present working capital requirements or its enhanced working capital requirements will have an adverse impact on its results of operation, business and financial condition. Delays in payment under its existing contracts or an increase in inventory and work in progress and/or accelerated payments to suppliers, or an increase in the performance bank guarantee requirement could adversely affect its working capital, lower its cash flows and materially increase the amount of working capital requirements. Accordingly, it may require additional capital or financing from time to time to meet its working capital requirements. While there have been instances in the past, where it faced delayed payments under its contracts, a requirement to increase the inventory or work in progress, to accelerate payments to suppliers and to increase the performance bank guarantee requirement, it was able to manage within the available resources without having any adverse financial impact on its business.

Business subjects to certain risks due to operations in multiple jurisdictions: The company undertake in-house fabrication process at its leased facility, apart from engaging with third-party fabricators. Its facility is situated at a multi-product special economic zone at Mundra, Gujarat, where fabrication is undertaken for export purposes only. Further, it is expanding into other jurisdictions and planning to set up sales office in Europe and opening more branches in the Middle East and Africa. In addition, changes in laws and regulations, more stringent enforcement or alternative interpretation of existing laws and regulations in jurisdictions in which it currently operate can change the legal and regulatory environment, making compliance with all applicable laws and regulations more challenging. While there has been no past instance where its operations were affected by any of the above-mentioned risks, if any of these risks materialises, it could have a material adverse effect on its business, financial condition and results of operations. 

Carry out in-house fabrication at some leased facilities: While the company outsource most of its fabrication process to third-party fabricators and most of the fabrication takes place at the premises of the third-party fabricators, it also undertakes in-house fabrication process at two of its leased premises. In the event these existing leases are terminated or they are not renewed on commercially acceptable terms or at all, it may suffer a disruption in its operations. If alternative premises are not available at the same or similar costs, sizes or locations, its business and results of operations may be adversely affected. One of its facilities is situated at a multi-product special economic zone at Mundra, Gujarat, where fabrication is undertaken for export purposes only. Further, on situational basis and based on the requirement of its projects, it take certain facilities on lease basis and once the project is completed the facility is shut down and all the equipment and machinery are shifted to other facilities for other projects. This ensures project optimisation while providing it with logistical efficiency. One such facility was situated, at Jajpur, Odisha, where fabrication was undertaken only for one of its customer’s refinery and it terminated the facility pursuant to a termination letter dated April 1, 2024, due to commercial reasons. Its facilities may be subject to various operating risks, including those beyond its control, such as the breakdown, failure of equipment or industrial accidents, fire, power interruption and natural disasters.

Business may be subject to labour conflicts, strikes: The company is significantly dependent on workforce for its operations. The success of its operations depends on the availability of labour and maintaining a good relationship with its workforce. A shortage of skilled or unskilled personnel or work stoppages caused by disagreements with its workforce, strikes and lockouts because of disputes could have an adverse effect on its business, results of operations and financial conditions. As such, its relations with its employees to be amicable. While there is no instance of work stoppages caused by disagreements with its workforce, strikes, lockouts or labour disputes in the past, it cannot assure that it shall not experience any such disagreements, strikes, lockouts or labour disputes in the future. Such events could disrupt its operations and may have a material adverse effect on its business, financial condition and results of operations. It also engages third-party fabricators to perform either parts of its project or entire project. There could be a delay in the performance of duties by third-party fabricator or any conflict which may cause a delay in the completion of its projects. The company had subcontracted some fabrication work of heaters in relation to a project in Mexico. 

Outlook

Over the years, JNK India has developed a wide range of products to meet the evolving requirement of its customers. It offers a wide range of products primarily categorised under two segments – (a) Heating Equipment and (b) Flares, incinerators and others. It is one of the well-recognized process fired heater companies in India. It has capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning process fired heaters, reformers and cracking furnaces. It is an ISO 9001:2015, 14001:2015, 45001:2018 Certified Company led by a Qualified And Experienced Management Team. Due to its long-standing relationship with its customers and its capability to provide customized solutions with a proven track record in product development and execution catering to the diverse needs of the customers, it has a competitive advantage, since there are very few competitors with similar capabilities. On the concern side, the company’s insurance may not be adequate to completely cover any or all its risks and liabilities. There can be no assurance that any claim under the insurance policies maintained by it will be honoured fully, in part or on time, or that it has taken out sufficient insurance to cover all its losses. Its inability to maintain adequate insurance cover in connection with its business could adversely affect its operations and profitability. 

The company is coming out with an IPO of 1,60,15,988 equity shares of face value of Rs 2 each. The issue has been offered in a price band of Rs 395-415 per equity share. The aggregate size of the offer is around Rs 632.63 crore to Rs 664.66 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by Rs 1,144.09 million or 38.50% from Rs 2,971.36 million in Fiscal 2022 to Rs 4,115.45 million in Fiscal 2023. It recorded an increase in profit after tax by Rs 103.79 million or 28.84% from Rs 359.83 million in Fiscal 2022 to Rs 463.62 million in Fiscal 2023. Meanwhile, the company intends on accelerating and expanding to new geographies such as expanding to European countries and opening sales offices in the Middle East and Africa.  It will continue to expand its product portfolio and plan to provide diversified offerings to its customers through augmenting engineering capacities and technology partnership. It intends to selectively pursue strategic investment, partnerships and acquisition opportunities that complement its business and enhance technological capabilities, add credentials, or establish its presence in its targeted domestic and overseas markets. 

Varyaa Creations

• Varyaa Creations is coming out with an initial public offering (IPO) of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share. 
• The issue will open for subscription on April 22, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 15.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Akshita Agrawal.

Profile of the company

The company is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. The company also intends to focus on manufacturing and selling of jewellery‘s. The company manufactures its jewellery through job worker located in Mumbai. The company has earned its revenues from wholesale trading of gold, silver, precious stone, semiprecious stone and from sales of jewellery. Currently, its products are sold only through the offline market, i.e. from its registered office located in Mumbai. Its customers can also make inquiry through its online platform www.varyaacreations.com. Further, the company will also be selling its products through its own online platform, i.e. www.baubleberry.com. This online platform will facilitate and provide its customers with an experience of Phygital marketing, i.e., an option to browse variety of jewellery through its catalogue. 

The major raw material used for making its products is gold, precious stones, gemstones, semi-precious stone, silver etc. which is further provided to the job worker who manufacture the jewellery for the company. The job worker manufactures its products as per design and pattern provide by the company. Designing of its products are done in-house. It has not entered into any formal contract or agreement with the job worker. It gets its products manufactured based on the orders basis and as and when need basis. It procures gold, silver, gemstones, precious and semi-precious stones majorly through the bullion market and jewellery market dealers located in Mumbai. 

Its jewellery is widely sold through B2B and B2C platform. It also sells customized jewellery to customers. It offers its jewellery across different price points so as to maximize its potential customer base. It endeavours to maintain the finishing and quality of its jewellery by ensuring control quality, timely delivery and competitive prices. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. 

Proceed is being used for:

• Financing the establishment of new showroom; a) Capital expenditure cost for the proposed new showroom and Purchase of Inventory for the proposed new showroom; (b) Purchase of Inventory;
• General corporate purposes.

Industry overview

As of February 2021, India’s gold and diamond trade contributed around 7.5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports. The gems and jewellery sector are likely to employ around 8.23 million persons by 2022, from around 5 million in 2020. Based on its potential for growth and value addition, the Government declared the gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the 77 Reserve Bank or the Government of India.

India’s gems and jewellery market size was at $78.50 billion in FY21. Growth in exports is mainly due to revived import demand in the export market of the US and fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC. India’s gems and jewellery exports reached $39.14 billion in 2021-22, a 54.13% rise from the previous year. In December 2022, India’s gems and jewellery exports was at $2.56 billion. The Government of India is aiming at $100 billion in jewellery export in the next five years (until 2027), up from $35 billion in 2020.

In the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2% of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions on gold import is likely to provide a fillip to the industry.

Pros and strengths

Established brand: It is well known through its brand named ‘Varyaa’ in the local jewellery market in Mumbai. This brand name has helped by the company earn the trust and goodwill of its customer which further has an influence on their buying decisions. Its well established and recognizable brand and the reputation built by the company, has and will enable it to increase its clientele list in the future. 

Well established relationship with supplier: It maintains long terms business relationships with its key suppliers and manufacturer with whom it has a mutual understanding. This long standing partnerships with them has ensured the company timely delivery of its raw materials, supply of quality raw materials, manufacturing of quality jewelleries, specialized services and superior finishing of its jewelleries. This has been beneficial for it as it is able to successful executes its orders on time and develops strong relationships with its suppliers and customers.

Extensive product list: It has an extensive product list which includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant set, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. Its portfolio offers its customers a wide variety of traditional, Indo-western, & modern design and jewellery for special occasions such as weddings and festivals to daily-wear for all ages, genders and across various price points.

Risks and concerns

Dependent upon few supplier: Its top 10 suppliers contributed 93.60%, 91.65%, 98.53% and Nil of the purchases for the period ending on December 31, 2023 and for the financial year ending on March 31, 2023, 2022 and 2021, respectively. Further, 23 as on March 31, 2021, due to the outbreak of Coronavirus (COVID-19) pandemic globally and in India and restriction/ constriction on the purchase and sale of gold, silver, precious stone, semi-precious stone, its company had not purchased any additional inventory and sold its existing inventory itself. In its industry, generally there are no definitive agreements with the suppliers of the products it sells. It also does not have any long-term supply agreements with its suppliers or distributors and it procures its products on a purchase order basis. Since there are no fixed terms of trade, the discounts and schemes for its customers are decided based on the negotiation skills of the procurement team. If it is unable to continue to procure supplies at competitive prices, its margins and business will be adversely affected.

Fail to protect jewellery designs: It changes its jewellery designs on a regular basis and do not register such designs under the Design Act, 2000. As such, it would be difficult for the company to enforce its intellectual property rights in its designs, and if its competitors copy its designs, in particular the designs of its products available on its website or the designs given to third party job workers/ suppliers, it could lead to a loss of revenue, which could adversely affect its results of operations and financial condition. 

Highly fragmented and competitive: The Company would not only compete with organized players but also a high percentage of unorganized entities such as individual jeweler‘s, retailer stores, jewellery showrooms and galleries and small scale companies. Some of them may offer better designs and patterns to the clients and may be capable of providing more personalized services to each client due to the smaller number of orders placed with them. Further, these unorganized entities offer their services at highly competitive prices having well established presence in their local markets. Aggressive discounting by competitors, including liquidating excess inventory, may also adversely impact its performance in the short term. This is particularly the case for easily comparable pieces of jewellery, of similar quality, sold through stores that closely resemble to those that it operates. In addition, there are minimal entry barriers in this sector and hence it may also faces competition from new entrants.

Outlook

Varyaa Creations is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. Its products are sold only through the offline market, i.e. from its registered office located in Mumbai. On the concern side, it faces competition from both the organized and unorganized sectors of the jewellery retail business. It competes with its competitors on a regional or product line basis. Many of its competitors have substantially large capital base and resources than it does and offer broader range of products. It faces competition from listed Companies like PNGS Gargi Fashion Jewellery, Ashapuri Gold Ornament, Titan Company, Bhakti Gems and Jewellery, PC Jewellers etc.

The company is coming out with an IPO of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share to mobilize Rs 20.10 crore. On performance front, the total income of the company for fiscal year 2023 was Rs 538.03 lakh against Rs 253.13 lakh total income for Fiscal year 2022. An increase of 96.40% in total income was due to increase in Sales. Profit after tax for the Fiscal 2023 was at Rs 78.93 lakh against profit after tax of Rs 57.98 lakh in fiscal 2022, a 36.12% increase. The profit is higher due to revenue increase, expense reduces and no tax expense in fiscal 2023 due to carried forward losses setoff in fiscal 2022. Meanwhile, it aim to focus on deepening its penetration in its existing markets and thereby increase its domestic presence by expanding its customer network. At present, it sells its products in Mumbai. It aims to focus on increasing its customer base by exploring domestic markets. It proposes to set up a showroom in Agra. Besides, it will continue to add new design to its existing product portfolio to cater to various customer and price segments in the jewellery markets. 

Faalcon Concepts

• Faalcon Concepts is coming out with an initial public offering (IPO) of 1950000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share. 
• The issue will open for subscription on April 19, 2024 and will close on April 23, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 6.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Navigant Corporate Advisors.
• Compliance Officer for the issue is Vinod Kumar.

Profile of the company

Incorporated in 2018, the company is engaged in designing, engineering, fabrication and installation of facade systems. It specialises in technically demanding facades. It offers various range of products to meet the demands of its customers. Over the years, it has developed a name for itself among its customers. Its product basket ranges from glazing /curtain walls, high end aluminium doors & windows, skylights, canopies, frameless glazing, MS structures, stone cladding, metal cladding, roofing & others. 

The company has completed a varied variety of projects for Schools, financial institutions, hospitality installations, corporate buildings, and luxury houses with success. Its clients are spread across India and the World, in communities from various states. Its team is totally responsible to produce a comprehensive turnkey package with all project specifics from the original design phase to the final installation for any commercial or residential facade project. It has offered its services for varied type of facade projects including residential buildings, commercial complexes, schools, parks etc. The company recognised list of clients include Espirit Techno Consultant, Galaxy Magnum Infra Height, Babbar Films, Maconns Infra, Silvers Stone Regency, St Xavier School Gurgaon High School etc. among others. It has also developed relations with some of the recognised suppliers in the company’s industry to fulfil its raw material supplies. The company has been ISO 9001: 2015 certified for developing Building façade. 

Proceed is being used for:

• Finance the capital expenditure for purchase of facade structural equipments.
• Part finance the requirement of working capital.
• General corporate purposes.

Industry overview

The India facade market size reached $2,638.2 Million in 2022. Looking forward, the publisher expects the market to reach $4,254.5 Million by 2028, exhibiting a growth rate (CAGR) of 8.23% during 2023-2028. The increasing construction activities, rising number of commercial spaces, and the growing number of remodeling and upgradation projects represent some of the key factors driving the market. The facade is an exterior front of a building that comprises roofing, street awnings, and ventilation louvers. It is produced using different materials, such as glass, brick, steel, aluminum, stone, concrete, metal, clay, and wood. It offers an aesthetic appeal to the building and enhanced waterproofing, fabrication, durability, and weather protection. It is generally used in energy efficient buildings for controlling light penetration, regulating internal temperature, and providing thermal insulation. It requires regular maintenance to ensure its longevity and functionality. It is commonly available in several shapes and sizes and can be created as per the requirements of the consumer.

The increasing construction activities in the residential areas on account of rapid urbanization and inflating disposable income levels represent one of the key factors driving the demand for façades in India. Moreover, the rising number of commercial spaces, such as shopping malls, restaurants, cafes, offices, hotels, and institutions, is contributing to the market growth. In addition, due to the growing environmental concerns, several measures are being undertaken by the government of India (GoI) to promote the use of sustainable construction materials and minimize carbon emissions. This, coupled with the launch of various government sponsored public housing programs due to the surging demand for affordable housing units, is driving the adoption of facades in the country. Apart from this, the increasing number of remodelling and upgradation projects for stadiums, airports, railway stations, metro, and hospitals is contributing to the market growth in the country. Furthermore, the rising popularity of polycarbonate facades in industrial and large-scale commercial buildings due to their numerous advantages, including easy installation, weather resistance, and low maintenance costs, is propelling the growth of the market. 

Pros and strengths

Leveraging the experience of its Promoter and employees: The company’s Promoters have played a key role in guiding, developing, and growing its business. Under the leadership and experience of its Promoters, the company has seen significant growth in the overall business. Its Promoters, have a proven background and experience in the Facade industry. Their leadership and vision have been instrumental in driving its growth since inception and implementing its business strategies. They are the guiding force behind all the corporate decisions and is responsible for the entire business operations of the Company along with the team of experienced and qualified professionals. Their industry knowledge and understanding also gives it the key competitive advantage enabling it to expand its geographical and customer presence in existing as well as target markets, while exploring new growth avenues.

Marquee client base and repeat orders: The company has undertaken projects across various segments in Residential, Commercial and Institutional buildings. The company value its relationships with its clients. Its motivated team of personnel and its work processes complement each other to enable it to deliver high levels of client satisfaction. Further, its quality of work and timely execution has allowed it to enhance its relationships with existing clients and to secure projects from new clients. Ability to successfully bid and win new projects is the result of its sustained focus on client satisfaction.

Designing and execution capability: The company is recognised for its capability to translate innovative architectural concepts in practical solutions, feasible in both technical and economic terms. Its success in the field is the result of constant research for innovation and improvement of the end user experience. Its designing and execution capability has enabled it to handle complex projects. Its designing and execution capability gives it a competitive edge over the peers.

Risks and concerns

Dependent upon few key suppliers: The company procure the material required for the development of facades. The major materials used in development of facades and other allied products are glass, aluminium composite panels, aluminum profiles, mild steel, GI sheet, sealant, gasket & hardwares, etc. It procures materials required in its installation of facade systems from domestic market. It procures a large portion of its material from 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. For the Fiscals 2021, 2022, 2023 and seven months ended October 31, 2023, purchases from its top ten suppliers represented 82.56%, 96.74%, 80.59% and 74.82% of its total purchases respectively. Inadequate supply of its material either by a sudden change in the prices or imposition of any new taxes or loss of any of its existing major vendors for any reason could have a material adverse effect on its business operations and profitability. If it cannot fully offset increases in the cost, it would experience lower margins and profitability, which would have a material adverse effect on its financial condition and results of operations.

Requires significant amounts of working capital: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high outstanding amount due from its debtors which may result in a high risk in case of non-payment by these debtors.

Business requires the services of third parties: The company’s business generally requires the services of third parties, including sub-contractors and suppliers of materials. The timing and quality of facade it installs depends on the availability and skill of those third parties, as well as contingencies affecting them, including labour and material shortages and industrial action, such as strikes and lockouts. It cannot assure that skilled third parties will continue to be available at reasonable rates and in the areas in which it needs to execute its projects. As a result, it may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of contracted services, and any delay in project execution could adversely affect its profitability. There is also a risk that it may have disputes with its subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, or its failure to extend existing orders or issue new orders under a subcontract. In addition, if any of its subcontractors fail to deliver on a timely basis the agreed upon supplies and/or perform the agreed-upon services, its ability to fulfil its obligations as a prime contractor may be jeopardize.

Outlook

Faalcon Concepts deals with the planning, design, fabrication, and installation of façade systems. The company offers facades resistant to UV rays, acid rain, dust, noise, and other influences. The company’s product portfolio includes glazing/curtain walls, aluminium doors and windows, skylights, canopies, frameless glazing, MS structures, stone cladding, metal cladding, and roofing. The company has catered to customers in various states like Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, Karnataka, Gujrat, Punjab, Delhi and overseas. The company’s focus on quality and innovation helps it to complete in the segment it deals. Intensive care is taken to determine the standard of every material/ product dispatched. Additionally, the company also keeps itself abreast with the latest changes in technology. On the concern side, modernization and technology up gradation is essential to reduce costs and increase the output. Its equipment may become obsolete or may not be upgraded timely, hampering its operations and financial conditions and it may lose its competitive edge.

The company is coming out with an IPO of 1950000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share to mobilize Rs 12.09 crore. On performance front, the company’s total revenue decreased by 28.50% to Rs 1,324.81 lakh for the financial year 2022-23 from Rs 1,852.93 lakh for the financial year 2021-22. The company’s profit after tax increased by 83.57% to Rs 179.52 lakh for the financial year 2022-23 from Rs 97.79 lakh for the financial year 2021-22. Meanwhile, a key strategy for increasing and growing its business is to increase the strength of its relationship with its existing customers, reaching out for new customers & widen its customer base. The company’s strategy is to widen its customer base geographically as well as demographically. It intends to continue to invest in its existing services so as to provide better experiences to its existing clients and also provide services for increasing the client base of the company.

Ramdevbaba Solvent 

• Ramdevbaba Solvent is coming out with initial public offering (IPO) of 59,13,600 shares of Rs 10 each in a price band Rs 80-85 per equity share.  
• The issue will open for subscription on April 15, 2024 and will close on April 18, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 8.00 times of its face value on the lower side and 8.50 times on the higher side.
• Book running lead manager to the issue is Choice Capital Advisors.
• Compliance Officer for the issue is Pratul Bhalchandra Wate.

Profile of the company

The company is in the business of manufacturing, distribution, marketing and selling of Physically Refined Rice Bran Oil (Rice Bran Oil). It manufactures and sell Rice Bran Oil to FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. It also manufactures, market and sell Rice Bran Oil under its own brands “Tulsi” and “Sehat” through thirty-eight (38) distributors who in turn sell to various retailers across Maharashtra. Rice bran oil is the oil extracted from the hard outer brown layer of rice called ‘bran’. It is well known for its high smoke point of 232 degree C i.e. 450 degree F and mild flavour, making it fit for high-temperature cooking methods such as stir-frying and deep-frying. It has an ideal balance of Polyunsaturated Fats (PUFA) and Monounsaturated Fats (MUFA), in almost a 1:1 ratio. Since rice bran oil is made from bran, it is rich in Vitamin E, an antioxidant. It also produces De-oiled Rice Bran (DORB), which is a by-product in the extraction of Rice Bran Oil and sell the same as cattle feed, poultry feed and fish feed in the States of Maharashtra, Goa, Gujarat, Madhya Pradesh, Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu. Other by-products such as fatty acid, lecithin, gums, spent earth and wax are sold in the open market.

Proceed is being used for:

• Setting up of new manufacturing facility.
• Repayment in full or in part, of certain of outstanding borrowings.
• Funding the working capital requirements of the company. 
• General corporate purposes. 

Industry overview

Over the years, agricultural production in India has consistently recorded higher output. India ranked first in pulses & milk, second in vegetable primary, fruit primary wheat & rice and third in cereals, eggs primary in World Agriculture in 2019. An abundant supply of raw materials, increase in demand for food products and incentives offered by the Government has impacted food processing sector positively. During the 5 years ending 2020-21, Food Processing sector has been growing at an average annual growth rate of around 8.38 per cent as compared to around 4.87 per cent in Agriculture & allied sector (at 2011-12 prices). Food Processing Sector has also emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. The sector constituted as much as 10.54 per cent and 11.57 per cent of GVA in Manufacturing and Agriculture sector respectively in 2020-21 (at 2011-12 prices). 100% FDI is permitted under the automatic route in food processing industries. 100% FDI is allowed through Government approval route for trading, including through e-commerce in respect of food products manufactured and/or produced in India. The sector has witnessed FDI equity inflow of USD 5.72 billion during April, 2014 to September, 2022.

Edible oils and Fats are essential ingredients for a wholesome and balanced diet and they are vital items of mass consumption. The Department of Food and Public Distribution deals with issues related to the Vegetable Oil Processing Industries, Price Control, Inter State trade & commerce and also supply & distribution of vanaspati, oilseeds, vegetable oil, cakes and fats. The Directorate of Sugar and Vegetable oils is staffed with qualified technical people who assist the Ministry in the coordinated management of Vegetable Oils Policy, particularly relating to production/availability and monitoring of prices. India is a vast country and inhabitants of several of its regions have developed specific preference for certain oils largely depending upon the oils available in the region. For example, people in the South and West prefer groundnut oil while those in the East and North use mustard/rapeseed oil. Likewise several pockets in the South have a preference for coconut and sesame oil. Inhabitants of northern plain are basically consumers of fats and therefore prefer Vanaspati, a term used to denote a partially hydrogenated edible oil mixture of oils like soyabean, sunflower, ricebran and cottonseed oils.

Pros and strengths

Strategic location of manufacturing facilities: The company’s Manufacturing Facilities are situated near Nagpur, Maharashtra giving it the strategic advantage to supply and distribute Rice Bran Oil in Maharashtra and DORB across various states in India. It is the preferred partner for its FMCG clients for manufacturing Rice Bran Oil as it can be easily distributed to central and southern India from Nagpur. Its strategic location also enables it to sell DORB to the southern states of Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu, which is used by fish & poultry farmers, traders and certain end user industries for their products.

Easy availability of rice bran around manufacturing facilities: Rice bran oil is extracted from the hard outer brown layer of rice called bran. There are various rice mills which are situated near its Manufacturing Facilities ensuring the supply of rice bran to it on regular basis. Vidarbha region is one of the largest rice producing area in the State of Maharashtra and therefore rice bran is easily available at competitive prices. The ease of availability of rice bran in abundance, which is its main raw material, ensures the smooth operations of its Manufacturing Facilities, and production and sale of its finished products. In addition to the ease in availability, rice bran is also available to it at a competitive price which in turn enhances its ability to compete aggressively in pricing of its finished product as compared to its competitors.

Integrated operations and economies of scale: Manufacture of Rice Bran Oil mainly involves two processes: (i) solvent extraction of crude oil from rice bran; and (ii) refining the extracted crude rice bran oil. It has integrated operations involving the extraction of oil from bran and refining of the extracted oil enabling it to meet the time, cost efficiency, quality and quantity requirements. Its Manufacturing Facilities have been designed in such a manner that for its operations, materials from one production process are transferred to the following production process through pipelines in a seamless way. This integration allows it not only to save costs but also helps it achieve economies of scale by controlling the inputs / production based on each previous process, improving its efficiency and margins.

Risks and concerns

Depends on sale of products to certain FMCG companies: The company supplies rice bran oil in bulk to certain leading FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. It has historically derived, and may continue to derive, a significant portion of its income from sales to these FMCG companies. Any reduction in orders from its FMCG customers would adversely affect its income. The demand from its FMCG customers determines its revenue levels and results of operations, and its sales are directly affected by their production and inventory levels. Over the years, it has developed strong relationships with its FMCG customers through whom it has been able to increase the quality of its offerings. Its business depends on the continuity of business with these customers. It has not entered into any long-term agreements with its FMCG customers and instead rely on purchase orders to govern the volume and other terms of its sales of products. Consequently, there is no commitment on the part of its FMCG customers to continue to place new purchase orders with it and as a result, its cash flow and consequent revenue may fluctuate significantly from time to time. Further, it may not find other FMCG customers for the surplus or excess capacity, in which case it may be forced to incur a loss due to lack of utilization of its production capacity. 

Business operations require significant working capital: The company’s business operation requires significant working capital specifically for raw materials and finished goods to undertake manufacturing operations. The working capital requirements for FY 2025 of the Company is estimated at Rs 1,200.00 lakh and will be funded out of the Net Proceeds, whereas the balance working capital requirements would be arranged from its internal accruals and borrowings from banks and financial institutions. However, it may not be able to obtain financing on better and favourable terms from bankers or financial institutions, if and when it decides to avail institutional funding. Further, it cannot assure that its bankers or financial institutions may implement new credit policies, adopt new pre-qualification criteria or procedures, raise interest rates or add restrictive covenants in loan agreements, some or all of which may significantly increase its financing costs, or prevent it from obtaining financings totally. All of these factors may increase in working capital requirements and if it experience insufficient cash flows to meet required payments on its working capital requirements, there may have an adverse effect on its financial condition, cash flows and results of operations.

Derive significant portion of revenues from Rice Bran Oil: The company derive a significant portion of its revenue from the sale of Rice Bran Oil. It manufactures, market and sell Rice Bran Oil under its own brands “Tulsi” and “Sehat” through thirty-eight (38) distributors who in turn sell to various retailers across Maharashtra. It also manufacture and sell Rice Bran Oil to FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. For the nine months ended December 31, 2023 and Fiscals 2023, 2022 and 2021, its revenue from its Rice Bran Oil under its own brands and to other brands of leading FMCG companies on a contractual basis amounted to Rs 19,396.87 lakh, Rs 29,698.16 lakh, Rs 29,030.38 lakh and Rs 18,555.68 lakh contributing 41.84%, 42.57%, 49.81% and 43.77% during nine months period ended December 31, 2023 and Fiscals 2023, 2022 and 2021 of its revenue from operations, respectively. Consequently, any reduction in demand from the consumers of Rice Bran Oil or lack of preference for Rice Bran Oil could have an adverse effect on its business, results of operations and financial condition.

Outlook

Founded in 2008, Ramdevbaba Solvent stands as a beacon of innovation and sustainability in the agro-industrial sector. With three state-of-the-art Solvent Extraction Plants in Maharashtra, it specializes in producing high-quality Rice Bran Oil, De-Oiled Rice Bran cake, and various by-products, reflecting its commitment to quality and environmental stewardship. The company’s Manufacturing Facilities are situated near Nagpur, Maharashtra giving it the strategic advantage to supply and distribute Rice Bran Oil in Maharashtra and DORB across various states in India. It is the preferred partner for its FMCG clients for manufacturing Rice Bran Oil as it can be easily distributed to central and southern India from Nagpur.  On the concern side, the company’s earnings are to an extent dependent on the prices of the commodities that it sells mainly physically refined rice bran oil. These fluctuate due to factors beyond its control, including, amongst others, world supply and demand, supply of raw materials, weather, crop yields, trade disputes between governments of key producing and consuming countries and governmental regulation.

The company is coming out with an IPO of 59,13,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 80-85 per equity share. The aggregate size of the offer is around Rs 47.31 crore to Rs 50.27 crore based on lower and upper price band respectively. On performance front, the company’s total income has increased by 20.35% to Rs 70,433.41 lakh in Financial Year ended March 31, 2023 from Rs 58,525.46 lakh in Financial Year ended March 31, 2022 primarily due to overall increase in the revenue from operations. The company recorded an increase of 97.25% in profit after tax from Rs 659.15 lakh in Financial Year ended March 31, 2022 to Rs 1300.15 lakh in Financial Year ended March 31, 2023. Meanwhile, the company intends to set up corn de-oiling manufacturing facility, adjoining its exisiting manufacturing unit at Brahmapuri, which involves crushing and processing of grains like corn using a process called dry-milling. The company will enhance its marketing efforts to reach out to other districts in and around the Vidharbha region of Maharashtra and also expand into other neighbouring states like Madhya Pradesh and Chhattisgarh. 

Grill Splendour Services 

• Grill Splendour Services is coming out with an initial public offering (IPO) of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share. 
• The issue will open for subscription on April 15, 2024 and will close on April 18, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 12.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Nikita Jawa.

Profile of the company

The company is engaged in the business of selling Bakery and patisserie food items through chain of Birdy’s store. The company is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. The company was incorporated in November 2019 as a hospitality company to acquire the bakery and confectionary business along with brand Birdy’s Bakery and Patisserie from WAH Restaurants. The acquisition was done via a Business Transfer and Intellectual Property Assignment Agreement dated December 27, 2019 (Acquisition Agreement). After that the company proceeded to invest in the business and grow the brand and spread presence. The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company vide above referred Acquisition Agreement. The primary focus of the Company was to bring back the quality and sheen of the brand. 

Its production facility is largely based on a manual production format. The food items are handmade by its chefs and they are of various varieties / sizes and types accordingly, there is no possibility to work out capacity. Hence capacity and capacity utilization does not apply to its business. It requires many ingredients viz. Chocolate, Premixes, Grocery, Whipping & Cooking Cream, Butter as raw material for which it supplies chain have a panel of listed negotiated vendors. These vendors supply all products like grocery, chocolate, dairy etc. Its major requirements are met through local vendors. 

The Promoters of the company, Srinidhi V Rao and Vandana Srinidhi Rao, individually have more than 30 years of experience in Hospitality industry. Its vision is to make available affordable experiential stores to meet every aspirational needs of individuals. Its Promoters inspirational leadership has led Grill Splendour Services (GSSL) to be recognised as one of the trusted food chains in its region. Further, the Company is managed by a team of experienced personnel. The team comprises of personnel having customer relationship, operational, marketing and business development experience.

Proceed is being used for:

• Funding additional working capital requirements
• Pre-payment/Repayment, in full or part, of certain outstanding borrowings availed by the company
• General corporate purposes

Industry overview

India’s food service sector is one of the vibrantly growing segment, which has witnessed noticeable growth in past few years. The sector, including both organised and unorganized segments, stands at Rs 4,23,865 crore in 2018-19. The sector is expected to reach to $79.65 billion by 2028, with a CAGR of 11.19%. Factors accelerating the progress of the food services sector include changing demographics, increase in disposable income, growing urbanization, increasing internet penetration and proliferation of online services. Also, young affluent couples with penchant for eating out are adding to the growth further.

According to a report, the market for food services in India is predicted to increase from $41.1 billion in 2022 to $79.65 billion by 2028, with a CAGR of 11.19%. According to the Food Service and Restaurant Business Report 2022-23 by Francorp and restaurantindia.in, the industry is predicted to employ 1 crore people by 2025, despite losing over 20 lakh jobs at the height of the COVID-19 pandemic. The country's restaurant and food service market is split into two segments, with the unorganised segment holding the lion's share of the market, according to the report, which also noted that the organised sector expanded rapidly between 2014 and 2020. The market for quick service restaurants (QSRs) in the country is predicted to be worth $690.21 million in 2022 and $1069.3 million in 2027, rising at a CAGR of 9.15%, according to the report's additional findings. The QSR chain market is anticipated to increase at a CAGR of 23% over the course of FY20–25, making it the fastest growing sub-segment overall in the food service industry.

Pros and strengths

Strong Brand recognition: The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company. The primary focus of the company was to bring back the quality and recognition of the brand. It did that over a period of last few years by a series of initiatives.

Chain of stores spread across Mumbai region: It is a chain of gourmet Bakery and Patisserie spread across Mumbai and Thane through 17 retail stores, a centralized production facility and multiple corporate clients. This presence helps it serves customer in major part of city and create satisfactory base of customers. The company after acquisition of Birdy’s brand has renovated more than half the shops. These shops now boast of seating, music ambience, table service, free library and freshly made food and beverages. These cafes attract a new category of customers called dine- in which was absent earlier.

Strong B2B customer relationships: Its quality of products and client relationships help the company to get repeat business from its B2B customers. Its client relationships also help it to cross sell its other products and services to them. Further it has been mutually value creating and stable association with its customers through products & services offered by the company. This has helped it creates a long-term relationship with its customers and improve its customer retention strategy. Through these efforts, it aims to become the ‘first choice service provider’ for all its customers for the products / services it offers.

Risks and concerns

B2B operations are subject to high working capital requirements: it started pursuing B2B business aggressively from end of last fiscal. Its B2B business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. It expects this to grow further in the coming years as it increases its focus on B2B business. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations.

Do not have long-term contracts with customers: It generates retail sales generally by its continuing relationships with its customers as well as walk-in customers. It does not enter in any long- term contract with any of its customers. It offers wide range of food products which are being sold under its stores operating under registered brand name ‘Birdy’s’. It has entered into agreements with most of its B2B customers and loss of any significant customers would have a material effect on its financial results. it cannot assure that the customers would renew their agreements or pay it in a timely manner or it would be able maintains the historical levels of business from these customers or that it will be able to replace these customers in case it losses any of them.

Operate in a highly competitive industry: The segments of the industry in which it operates are subject to intense competition. Its principal competitors are other established brands of the similar products it sells, including other major retail chains with well-established and recognized brands. If it is unable to compete successfully, its revenues or profits may decline or its ability to maintain or increase its market share may be diminished. It competes primarily on brand name recognition and reputation, customer satisfaction, quality of service etc. Some of its competitors are larger than it is in terms of size of operations and its competitors may also have greater financial and marketing resources than it does, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect its ability to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.

Outlook

Grill Splendour Services is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. On the concern side, it operates in a competitive market and competition is based primarily on quality of products and pricing of such products & services. To remain competitive in the market it strives to improve its sales & marketing efforts, reduce cost and improve operating efficiencies. If it fails to maintain its strengths, its competitors will gain an advantage over it, which would adversely affect its market share and results of operation. It faces competition from those who may be better capitalized, have longer operating history, have greater brand presence, and better management than it. If it is unable to manage its business, it might impede its competitive position and profitability.

The company is coming out with an IPO of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share to mobilize Rs 16.47 crore. On performance front, the revenue from operations for the FY 2023 is Rs 1,529.35 lakh as compared to Rs 1,150.49 lakh during the FY 2022 showing an increase of 32.93%. This overall increase in sales was mainly due to increase in B2B business during FY 2023. Profit after tax (PAT) increased from Rs 3.46 lakh for the FY 2022 to Rs 199.10 lakh in FY 2023. Meanwhile, the company will look to acquire brands of different styles that are scalable. These brands would offer popular cuisines in a casual dining format. This would enable them to have a lower real estate footprint. These brands would have processes where bulk of the production is done in the central kitchen and the restaurant kitchens are more final assembly/finishing areas. This would mean lower skill requirements and hence lower staff costs. It would also lead to consistency and ease of roll out.

Greenhitech Ventures 

• Greenhitech Ventures is coming out with an initial public offering (IPO) of 12,60,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share. 
• The issue will open for subscription on April 12, 2024 and will close on April 16, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 5.00 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 Sneha Jain.

Profile of the company

The company is engaged in trading of various petroleum-based products for the different categories of industries based on their requirement. This includes supply of biofuels, bitumen, light density oils, furnace oils etc. The company is also engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. It understands the market needs and upgrades its team constantly with growing technology and market trends. It provides business solutions and services to consumers of Fuels and other alternative materials across India.

The company is engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. Company is not having its owned manufacturing unit. The Company bids for tender of Government owned distillery for Operation & Maintenance as Job worker for Ethanol manufacturing. After receipt of tender, the company runs the ethanol plant in government owned distillery and manufacture ethanol and transfer all ethanol manufactured to the respective distillery. Hence there is no procurement and selling of Product for ethanol manufacturing as the Company manufacturer ethanol in government owned distillery for transferring to them only.

Driven by experience in agriculture, innovation and investment in Research & Development, as bio fuel is substitute for the traditional fossil fuels and with the indiscriminate exploitation of all fossil fuels. It started with an aim ‘Effective, Efficient and Economical’ the 3 E's form the base of its commitment be it any segment of services or supply that it provides. The company has compiled an extensive list of customers/potential customers and vendors. The Company is a well-known itself in Purvanchal belt of Uttar Pradesh, India for supply of bio-diesel. In Addition, the Ministry of Petroleum and Natural Gas vide its notification dated August 10, 2015 permit the sale of bio-diesel (B-100) for blending with high speed diesel to bulk consumers, in accordance with the standards specified by Bureau of Indian Standards. With the experience of its Promoter, technological drive, continuous research, supplier tie-ups, customer relationships, government support and industry demand for bio-fuel the company is one of key player for supplying of biofuels. 

Proceed is being used for:

• Meet working capital requirement 
• General corporate purpose

Industry overview

The oil and gas sector is among the eight core industries in India and plays a major role in influencing the decision-making for all the other important sections of the economy. India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. India retained its spot as the third-largest consumer of oil in the world as of 2022. India ethanol market size was estimated at $2.27 billion in 2022. During the forecast period between 2023 and 2029, India ethanol market size is projected to grow at a CAGR of 9.16% reaching a value of $4.15 billion by 2029. The rising demand for biofuels is expected to lead to growth in the India ethanol market.

India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. India’s consumption of petrol products stood at 222.3 MMT in FY23. High-Speed Diesel was the most consumed oil product in India and accounted for 38.6% of petroleum product consumption in FY23. India’s consumption of petroleum products stood at almost 4.44 million barrels per day (BPD) in FY23, up from 4.05 million BPD in FY22. India’s LNG import stood at 20.1 million metric tonnes (MMT) in FY23. Gross production of LNG was 2,883 MMSCM in January, 2023. According to the International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 BCM, registering an average annual growth of 9% until 2024.

Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% 90 of India’s oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.

Pros and strengths

Timely fulfilment of orders: Timely fulfilment of the orders is a prerequisite in its industry. The company has taken various steps in order to ensure adherence to timely fulfilment and also to achieve greater cost efficiency at its existing unit. The Company constantly endeavors to implement an efficient business process so as to ensure cost efficiency in procurement. 

Eco-friendly products: Unlike fossil fuel, bio-fuel and ethanol does not contribute to greenhouse gases and are renewable source of energy. The company is serving towards renewable green energy and sustainable development of renewable natural resources (Biofuels) through the adoption of environmental-friendly technologies that favour the net reduction of greenhouse gas emission.

Quality assurance and standards: The Company is providing its customers the best possible quality. Quality standards followed right from the beginning were very stringent, and are adhered during the process of manufacturing. It is very particular from usage of right quality of material to following the right procedure for manufacturing. Its dedicated efforts towards the quality of products, processes and inputs have helped it gains a competitive advantage over others. There are quality checks in place that prevent any defective material from reaching the customer.

Risks and concerns

Depend on top ten customers: Its top ten customers contribute around 100%, 100%, 99.96%, 99.97% of its revenues for the period ended July 31, 2023, March 31, 2023, March 31, 2022 and March 31, 2021. Any decline in its Quality standards, growing competition and any change in the demand for its products by these customers may adversely affect its ability to retain them. It cannot assure that it shall generates the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its revenues and profitability. However, the composition and revenue generated from these clients might change as it continues to add new clients in normal course of business. This helps the company in providing better value to each customer thereby increasing its engagement with its new and existing customer base that presents a substantial opportunity for growth.

Failure to adapt to technological developments: As its operations grow in scope and size, whether through expansion into new markets, it must continuously improve, upgrade, adapt and expand its systems and infrastructure to offer its customers enhanced products, features and functionality ahead of rapidly evolving customer demands, while maintaining the reliability and integrity of its systems and infrastructure in a cost-efficient and competitive manner. The systems, infrastructure and technologies it currently employs may become obsolete or be unable to support its increased size and scale. Even if it is able to maintain, upgrade or replace its existing systems or innovate or customize and develop new technologies and systems, it may not be as quick or efficient as its competitors in upgrading or replacing its systems. It may be unable to devote adequate financial resources or obtain sufficient financing on commercially acceptable terms in time, or at all, which may have a material adverse effect on its business, prospects, results of operation and financial condition.

Ethanol manufacturing business is slightly seasonal: The ethanol manufacturing business is slightly seasonal in country. This is due to the fact that distillery is shut down for period of rainy season, the timing and seasonality of weather impacts the business of the company. The company is engaged in two business i.e., ethanol manufacturing business as Job worker and trading of biofuels. The company undertakes trading in biofuels as a regular business during the year. Thus, it is subject to seasonal factors for ethanol manufacturing business, which make its operating results unpredictable. 

Outlook

Greenhitech Ventures is engaged in trading of various petroleum-based products for the different categories of industries based on their requirement. This includes supply of biodiesel and light density oils. The company is also engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. It understands the market needs and upgrades its team constantly with growing technology and market trends. It provides business solutions and services to consumers of Fuels and other alternative materials across India. On the concern side, its industry faces moderate competition from scattered unorganized players in the domestic market. It has a number of competitors who manufacture and trade products, which are similar to the company. Besides, the ethanol manufacturing business is slightly seasonal in country. This is due to the fact that distillery is shut down for period of rainy season, the timing and seasonality of weather impacts the business of the company.

The company is coming out with an IPO of 12,60,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share to mobilize Rs 6.30 crore. On performance front, the revenue from operations had decreased by 62.12% from Rs 6611.58 lakh in Fiscal 2022 to Rs 2504.35 lakh in Fiscal 2023. The change was primarily due to decrease in sales of products. The company reported a net profit of Rs 57.23 lakh in Fiscal 2023 as compared to a net profit of Rs 135.14 lakh in Fiscal 2022. Meanwhile, the company constantly endeavors to improve its business process, and will increase service activities to optimize the utilization of resources. It has invested significant resources, and intends to further invest in its activities to develop customized systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for providing its products which enables it to identify the areas of bottlenecks and correct the same.