Madhusudan Masala Limited IPO

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i. Madhusudan Masala is engaged in the business of manufacturing and processing of more than 32 types of Spices under the brand names of “DOUBLE HATHI” and “MAHARAJA”. They also sell products like: Whole Spices, Tea and Other Grocery Products like: Rajgira flour, Papad, Soya Products, Asafoetida (Hing), Achar masala (Ready to make pickle powder), Sanchar (Black salt powder), Sindhalu (Rock salt powder), Katlu powder (Food supplement), Kasuri Methi (Dry fenugreek) etc under the brand name of “DOUBLE HATHI”.

ii. Operating in the industry since last four decades, our promoters, Dayalji Vanravan Kotecha and Vijaykumar Vanravan Kotecha laid the foundation of the business and formed a partnership firm M/s Madhusudan & Co registered with Registrar of firms, Gujarat in the year 1982 with the objective to manufacture spices and other food products. With the focus on providing quality food products, cost effectiveness and improved accessibility they have been selling our products under the brand name of “DOUBLE HATHI” since 1977 and under the brand name of “MAHARAJA” since 2003.

iii. Their range of spices includes

(i) Ground spices which comprises of various varieties of Chilli Powder, Turmeric Powder, Coriander Powder and Coriander Cumin Powder and
(ii) Blend spices which comprises of Garam Masala, Tea Masala, Chhole Masala, Sambhar Masala, Pav Bhaji Masala, Pani Puri Masala, Sabji Masala, Kitchen King Masala, Chicken Masala, Meat Masala, Chatpata Chat Masala, Butter Milk Masala, Chewda Masala, Dry Ginger Powder (Sunth), Black Pepper Powder (Mari), Dry Mango Powder (Aamchur) etc.

iv. The company also deals in whole spices in retail and bulk quantity. During the Fiscals 2023, 2022 and 2021 the revenue from sale of spices contributed to 75.07%, 69.94% and 83.08% of their overall sales. The Double Hathi portfolio of ground spices comprises of premium quality spices whereas value for money segment of ground spices is offered under the Maharaja portfolio. Over the years the company has evolved as manufacturer of 13 types of chilli powder available in 78 SKUs catering to almost every customer segment in the industry.

v. They operate from their manufacturing facility located at Jamnagar, Gujarat. Their manufacturing unit is situated at Industrial Area Hapa, Near Jamnagar and is strategically located near the local APMC market thus facilitating easy and quick access to raw materials which reduces the transportation costs as well. Their manufacturing facility is equipped with plant & machinery to facilitate efficient production process of cleaning, drying, grading, grinding and packaging. All spices and other products are manufactured at their unit with utmost care and by way of natural process with scientific methods so as to retain the natural properties of the food like color & odor with time.

Competitive Strengths

i. We have a recognized brand name with heritage and a legacy of over four decades
ii. Consistent focus on quality
iii. Long Standing Relationship with our customers

Objects of the Madhusudan Masala Limited IPO:

The company intends to utilize the net proceeds from the issue towards the funding of the following objects: i. Funding to meet working capital requirements, and ii. General Corporate Purpose.

Madhusudan Masala Limited IPO Details:

Open Date: Sep 18 2023
Close Date: Sep 21 2023
Total Shares: 3,400,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 23.80 Cr.
Lot Size: 2000 Shares
Issue Price: ₹ 66 to ₹70 Per Equity Share
Listing At: NSE Emerge
Listing Date: Sep 29 2023

Promoters And Management:

We are engaged in the business of manufacturing and processing of more than 32 types of Spices under the brand names of “DOUBLE HATHI” and “MAHARAJA”. We also sell products like: Whole Spices, Tea and Other Grocery Products like: Rajgira flour, Papad, Soya Products, Asafoetida (Hing), Achar masala (Ready to make pickle powder), Sanchar (Black salt powder), Sindhalu (Rock salt powder), Katlu powder (Food supplement), Kasuri Methi (Dry fenugreek) etc under the brand name of “DOUBLE HATHI”. Furthermore we also generate revenue from trading of whole spices and food grains through unbranded sales. i. Rishit Dayalaji Kotecha aged 41 years is the Promoter and Chairman and Managing Director of the Company. He has an experience of around 20 years in the spices industry. He has completed B.Sc. in Physics and Instrumentation from D.K.V. Arts and Science College, Jamnagar in the year 2003. He has a wide knowledge in marketing and finance activities and looks after financial, compliance and marketing activities of the company. He is a second-generation entrepreneur and plays a pivotal role in business planning and development along with the overall management of the Company. He drives the organization’s goals and visions with a keen eye on industry trends and business strategies. ii. Hiren Vijaykumar Kotecha aged 37 years is the Promoter and Whole Time Director of the Company. He has an experience of around 20 years in the spices industry. He has completed his Bachelor’s degree in Commerce. He looks after planning, operations and packaging activities of the company. He is a second-generation entrepreneur and is responsible for the expansion and overall management of the business of our Company. iii. Dayalji Vanravan Kotecha aged 75 years is the Promoter and Non- Executive Director of the Company. He is the founder of the company and has an experience of around 41 years in the spices industry

Financials of Madhusudan Masala Limited IPO:

Pariculares ( In Lakhs )
2021
2022
2023
Revenue from Operations 6,868 6,541 12,722
Other Income 7 111 29
Total Revenue 6,875 6,652 12,751
Cost of Material Consumed 6,087 6,316 12,061
Changes in Inventories 102 -354 -935
Employee Benefits Expense 124 95 110
Other Expenses 265 266 352
EBITDA 297 328 1,163
Depreciation & Amortisation 56 67 63
Finance Cost 179 164 327
EBIT 241 261 1,100
OPM (%) 4.32% 4.93% 9.12%
PBT 62 97 773
Tax 17 16 197
PAT 45 81 576
NPM (%) 0.65% 1.22% 4.52%
No.of Shares 129 129 129
EPS 0.34 0.63 4.46

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Madhusudan Masala Limited 127 6 4.46 15.68 70 90.3
NHC Food Limited 164 2 1.48 29.0 45 52.8
* All the data is as per FY23.

Recommendation on Madhusudan Masala Limited IPO:

Review and Recommendation of Madhusudan Masala by IZ team is 4/10

Introduction

Madhusudan Masala Limited, with a four-decade legacy, is an established brand in the spices and food products industry. Founded in 1982, the company has built a reputable portfolio under its brands "DOUBLE HATHI" and "MAHARAJA," steered by the second generation of the Kotecha family—Rishit Dayalji Kotecha and Hiren Vijaykumar Kotecha.

Business Overview

Madhusudan Masala offers an extensive range of spices, teas, and other grocery items. Its product portfolio includes 32 types of spices and 13 types of chili powder, available in 78 SKUs, catering to a broad customer base.

Geographical Reach

Primarily operating in Gujarat, the company is expanding its footprint into Maharashtra and Rajasthan. The manufacturing facility in Jamnagar, Gujarat, is strategically located near the local APMC market, reducing transportation costs.

Quality and Accreditation

The company’s commitment to quality is evidenced by accreditations such as ISO 9001:2015, ISO 22000:2018, HACCP, and an FSSAI license.

Financial Highlights

While the revenue nearly doubled in 2023 to INR 12,722 lakhs, there are some financial challenges that potential investors should consider: 1. Low Gross Margin: The Gross Margin for FY23 stands at just 5%, indicating a low-margin business. This could be a concern for long-term profitability. 2. Cash Flow Concerns: The company failed to generate cash from operations in FY23 and FY22, which could potentially affect its liquidity and operational efficiency. 3. High Debt Levels: The company has accumulated a debt of INR 42 crores, which is significant and could be a burden on its financial health. Despite these challenges, the company’s net profit margin improved to 4.52% in FY23, and the EPS rose to INR 4.46.

Valuation Metrics

The company's P/E ratio is 15.68, appearing relatively undervalued compared to its industry peer NHC Food Limited, which has a P/E of 29.0. The market capitalization stands at INR 90.3 crores.

Management Team

The management team, led by Rishit Dayalji Kotecha and Hiren Vijaykumar Kotecha, brings valuable industry experience and has been instrumental in the company's growth.

IPO Objectives

The primary objectives of the IPO are to meet the company’s working capital requirements and for general corporate purposes.

Conclusion

Madhusudan Masala Limited presents both opportunities and challenges. While the company has strong fundamentals, an extensive product range, and a capable management team, potential investors must weigh these against the financial challenges such as low gross margins, cash flow concerns, and high debt levels. The IPO could offer the capital required for the company's future growth, but it comes with its own set of financial risks that warrant careful consideration.

Lead Manager of Madhusudan Masala Limited IPO:

  1. Hem Securities Limited

Registrar of Madhusudan Masala Limited IPO:

  1. Kfin Technology Private Limited

Company Address:

Madhusudan Masala Limited F. P. No. 19, Plot No. 1 - B Hapa Road, Jamnagar - 361001 Phone: +91- 0288 - 2572002 Email: info@madhusudanmasala.com Websitehttps://www.madhusudanmasala.com/

Discussion on Madhusudan Masala Limited IPO:

2 Comments

    1. Very low Gross Margin Business. In Fy23, the Gross Margin is just 5%.

    2. Not able to generate cash from operation in Fy23 and Fy22.

    3. Debt is 42 Cr which is very high.

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