DADA Organics Limited IPO: Business Model, Management, Financials, and Growth Plans

DADA ORGANICS LIMITED has filed Draft Red Herring Prospectus with BSE on 18th May, 2023.

A) Business Model of Company

1. Mr. Dineshbhai Bhanushankar Pandya and Mrs. Jayshree Dineshbhai Pandya founded the company in 2017. Before that, Mr. Pandya operated a proprietorship concern called “Dada Organics” since 2004, producing organic manure and later expanding into manufacturing animal feed products, Ayurvedic and herbal products.

2. In 2022, the business of the proprietorship concern was taken over by the company, transitioning to a corporate setup. Mr. Pandya became the director and oversees operations and major decisions.

3. The company manufactures Ayurvedic products, herbal cosmetic products, agricultural products, and animal feed products from its manufacturing facility in Gujarat.

4. Mr. Pandya, a visually impaired first-generation entrepreneur, has extensive experience in Ayurveda and Pharma and is also the promoter and managing director of Add-Shop E-Retail Limited.

5. The company’s products include animal feed products, ayurvedic products, agricultural products, and herbal cosmetic products.

6. The manufacturing facility is equipped with modern machinery and holds various licenses and certifications for manufacturing and quality management.

7. As part of their growth strategy, the company plans to set up a sanitary napkin manufacturing unit to improve women’s economic conditions and raise awareness about menstrual hygiene management in rural areas.

B) Who are the Management of the Company?

Jayshree Dineshbhai Pandya,

She is the Promoter and Managing Director of the Company. She joined the board as a Director on August 30, 2017. Despite not having a formal graduation degree, she is responsible for overseeing the manufacturing, sales, and finance departments of the Company.

C) Why is the company raising funds via IPO?

The objectives of the issue are as follows:

1. Funding Capital Expenditure of Sanitary Napkin Unit:

The company aims to utilize a significant portion of the funds raised to finance the capital expenditure for setting up a Sanitary Napkin Unit. The estimated amount for this purpose is ₹2,592.37 lakhs, which accounts for 59.20% of the total issue size.

2. Meeting Working Capital Requirements:

A portion of the funds will be allocated towards meeting the working capital requirements of the company. The estimated amount for this purpose is ₹1,176.43 lakhs, which represents 26.87% of the total issue size.

3. Meeting Issue Expenses:

Some funds will be utilized to cover the expenses related to the issue itself. The estimated amount for this purpose is ₹110.00 lakhs, accounting for 2.51% of the total issue size.

4. General Corporate Purposes:

A portion of the funds will be allocated for general corporate expenses and other miscellaneous purposes. The estimated amount for this objective is ₹500.00 lakhs, representing 11.42% of the total issue size.

The total issue size is ₹4,378.80 lakhs, and the net issue proceeds after deducting issue-related expenses are estimated to be ₹4,268.80 lakhs. These funds will be utilized in the financial year 2023-24.

D) Financials of the company? 

1. The company has shown impressive growth in revenue over the three-year period, with revenue increasing from ₹28.39 lakhs in 2021 to ₹14,625.26 lakhs in 2023.

2. Expenses have also seen significant changes, including a rise in material costs and purchases of stock-in-trade.

3. Employee benefit expenses increased from ₹1.29 lakhs in 2021 to ₹39.19 lakhs in 2023.

4. Profit before tax experienced substantial growth, reaching ₹680.18 lakhs in 2023 compared to ₹2.44 lakhs in 2021.

5. The company’s profitability improved, with a profit for the period of ₹508.99 lakhs in 2023, up from ₹2.44 lakhs in 2021.

6. Earnings per equity share were ₹50.28 in 2022.

E) Risk in The IPO

1. The Company is dependent on single customer for sales. Loss of this customer may affect its revenues and profitability.

2. They sell their products in highly competitive markets and company inability to compete effectively may lead to lower market share or reduced operating margins, and adversely affect our results of operations

3. Their Registered Office is not owned by them. In the event they lose such rights, othe business, financial condition and results of operations and cash flows could be adversely affected.