Megastar Foods Limited IPO

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Megastar Foods Limited IPO
(i) Incorporated in 2011, the Company is engaged in the manufacturing of food based products such as wheat flour, organic wheat flour products and allied flour products. Basically, the company produce food products related to wheat i.e. Atta-wheat flour products, Maida-Fine wheat flour products, Suji/Rawa-Semolina, Chokar/Wheat Bran, Organic Atta, Organic whole Wheat flour and Organic wheat flour etc.

(ii) The Company is an FSSC 22000 certified company for food safety systems including ISO 22000:2005, ISO 22002-1:2009 and additional FSSC 22000 requirements in respect of Processing (Pre Cleaning, Cleaning, milling, Sifting) of Wheat products like Atta, Maida, Suzi, Bran and its packaging in HDPE laminated bags and Poly Pouch bags by Intertek Certification Limited, United Kingdom. The Company is having FSSAI license, Organic Certificate for in accordance with the requirements of India’s National Programme for Organic Production Standards by the Ecocert India Pvt. Limited, HALAL certified by HALAL India Pvt. Ltd etc.

(iii) The Company is having state of the art modern machinery in the wheat processing plant in Punjab, India, with an installed capacity of 81000 MT per year. The Company has ensured constant endeavour at all the levels to ensure processing of wheat with quality, undertaking testing and exploring new possibilities with the team of highly skilled people. It has been their hallmark in the organization to strictly follow the Good Manufacturing Practices (GMP), Good Laboratory Practices (GLP) to ensure the high standards of food safety, quality & hygiene. At present they are catering majorly to MNC’s in India and also exporting some of their products to United Nations Organization, Europe, United States & Middle East.

(iv) The company’s main aim is to grow relationships with their customers, so that they can serve them successfully by providing them a point of difference, adding value and ultimately, providing profitable growth for both parties.

Objects of the Issue:

Objectives of

Megastar Foods Limited IPO

are: 1. To Meet Working Capital Requirement 2. General Corporate Purpose 3. To Meet the Issue Expenses

Issue Details:

Open Date: May 14 2018
Close Date: May 16 2018
Total Shares: 26,80,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Issue
Issue Size: 8.04 Cr.
Lot Size: 4000 Shares
Issue Price: ₹ 30 Per Equity Share
Listing At: BSE SME

Promoters And Management:

Promoters of Megastar Foods Limited Company are: (i) Mr. Vikas Goel aged 46 years, is Chairman cum Managing Director and also the Promoter of our Company. He holds a metric passed certificate. He was appointed on the Board on November 28, 2011 and further designated as Managing Director of the Company on February 10, 2014. He is actively engaged in managing the company since his appointed as Director. He has more than over 25 years in the field of Wheat Flour Industry. His experience has helped the Company to grow extensively over the period of time. He is playing vital role in formulating business strategies and effective implementation of the same. He is responsible for the expansion and overall management of the business of our Company. His leadership abilities have been instrumental in leading the core team of our Company. (ii) Mr. Vikas Gupta aged 42 years, is the Whole Time Director and the Promoter of our Company. He holds a degree of Bachelor of Commerce and Inter passed certificate from The Institute of Chartered Accountants of India for Accounting Technician. He was originally appointed on the Board on November 28, 2011 and further designated as the Whole Time Director of the Company on April 04, 2018 for a period of 5 years liable to retire by rotation. He has a profound experience of more than 15 years. He is with our company since from incorporation of our Company and has been involved in the business activities to set up business operations and many more things related to business activities. He looks after in the field of Production, HR & Admin as well as Business Development.

Company Business:

(i)They are basically producing food products related to wheat. Atta-wheat flour products, Maida-Fine wheat flour products, Suji/Rawa-Semolina, Chokar/Wheat Bran, Organic Atta, Organic whole Wheat flour and Organic wheat flour etc. (ii) The main raw material for manufacturing of their products is Wheat, so company’s main expense is the cost of Wheat, which is seasonal. Though Company has provision of buying raw material in advance but still the earnings will always be high during season. (iii) Wheat, is the main ingredient of Agriculture Industry. Therefore, the business of the company is totally depends upon the growth of Agriculture Industry.The Agriculture Industry in turns is highly dependent on Monsoon.

Capital Structure:

(i) Authorized Share Capital (1,50,00,000 shares at FV@10) 15 Cr
(ii) Issued, Subscribed,& Paid-up Share Capital Before Issue (72,23,700 Shares at FV@10) 7.223 Cr
(iii) Present Issue (  26,80,000 Shares at FV@10) 2.68 Cr
(iv) Reservation for Market Maker  ( 1,36,000 Shares at FV@10) 13.6 Lacs
(v) Net Issue to Public (26,80,000-1,36,000=  25,44,000 Shares) 2.544 Cr
(vi) QIB & HNI quota-12,72,000 50.0%
(viii) Retail Quota - 12,72,000 50.00%
(ix) Paid Up Share Capital after the issue 9.903 Cr
The average cost of acquisition of Equity Shares to the Promoter are:
Sr.no Name of the promoter No. of shares Average cost of equity shares
1 Mr. Vikas Goel 24,92,660 8.87
2 Mr. Vikas Gupta 21,03,900 6.65

Company Financials:

1. Assets and Liabilities Key Parameters
Year Asset(Lacs) Net Worth(Lacs) Book Value D/E ROE Receivable days
FY13 286.15      173 10 0.65 Commenced Operations  NA
FY14 1313.84      597 10 1.2 (in Loss) 198 Days
FY15 2007.93      567 9.49 2.53 (in loss) 39 Days
FY16 3081.85      627 10.5 3.91 9.39% 50 Days
FY17 3160.33      733 12.27 3.3 14.44% 47 Days
9MFY18 3917.57    820.61 13.74 3.77 10.61% 42 days
Post Issue 1624.61 16.4 1.9  7.14%  NA
2. Profit n Loss Snippet (i) The Reveune of the company in last 5 years ( FY14 to 9MFY18) is 7.85 Cr, 44.50 Cr, 78.40 Cr, 97.76 Cr and 78.36 Cr respectively. The Company is growing at a CAGR of 90.99%.[ Excellent]. (ii) The PAT of the company in last 5 years ( FY14 to 9MFY18) is (.11) Lacs, (28.15 Lacs) 58.92 Lacs, 1.05 Cr and 87 Lacs respectively. The Company was in loss in FY14 and FY15 due to " Appropriations of Funds and Deferred Tax liability". However, from FY16 onwards the Company is growing at CAGR of 40%. (iii) The EBITDA Margins of the company for FY14( 6.4%), FY15(4.5%), FY16(4.30%) ,FY17(4.43%) and 9MF18(4.78%) . The Company has flat margins in the last 5 years. (iv) P/B(post issue)= 1.89 (at cutoff price of 30) (v) Annualized EPS(post issue)= 1.17 (vi) Annualized P/E(post issue)=25.64 at the cutoff price of 30
3. Cash Flow Statement(all figures in Lacs)
Particulars FY17 FY16 FY15 FY14 FY13
(i) Net Cash Generated from Operation 268.15 -462.05 -514.25 -71.56 -81.46
(ii) Net Cash Generated from Investment -113.42 -157.22 -33.02 -791.37 -144.85
(iii) Net Cash Generated from Financing Activity -324.79 759.21 559.82 890.22 227.54
Note: The Company has negative Cash flows from operations in the past years which is a cause of concern here.

Comparison With Peers:

The Company has shown DFM Foods Limited as a peer in DRHP. As on 11.05.2018 the CMP of DFM Foods is Rs.1441 which translate into the P/E of 65.  The IPO of Megastar Foods Limited is reasonably priced at a P/E of 25 as compared to DFM Foods.

Recommendation:

Review and Recommendation of Megastar Foods Limited IPO

from our side is: The Issue is reasonably priced at P/E of 25 and the Govt Initiative of doubling the Agriculture Income by 2022 will further boost the growth of this company as they are directly dependent on Agriculture for their raw material. Rating: 5/10. 1-5: Fair 5-7: Good 7-10: Excellent .

Company Address:

Registered Office: Plot No. 807, Industrial Area, Phase-II, Chandigarh-160102, India. Corporate Office: Kurali-Ropar Road, Village - Solkhian, Dist. Roopnagar -140108, Punjab, India. Tel No: +91-01881-240401. E-mail: info@megastarfoods.com. Website: www.megastarfoods.com.

Bid Details as on 16 May 2018 | 11:58:01 PM

Category No.of shares offered No. of shares bid
1,272,000 2,392,000
1,272,000 1,928,000
136,000 136,000
2,680,000 4,456,000
QIBs No
QIBs+HNIs Subscription 1.88X
Retail Subscription 1.52X
Total Subscription 1.61X

    The business of the company is highly competitive and entry barrier is very less. So they may face competition from big player like ITC which can impact their margins in future. So better not to apply here.