Rathi Narayan Das, aged 45 years, is the Chairman of the Board, Whole-time Director and Promoter of the Company. He holds bachelor’s degree in commence from Osmania University. He has experience of more than two decades in the food industry. Prior to joining the Company, he pursued his family business of trading of grains and spices and subsequently was appointed as the Marketing Head of the Company in 2019. He was appointed as an Executive Director of the Company on August 19, 2022 and his designation was changed to Whole-time Director with effect from March 2, 2023. He heads the production, sales and marketing and quality divisions of the Company Neihaa Rathi, aged 41 years, is the Whole-time Director and Promoter of the Company. She holds bachelor’s degree in science from Stella Mary Residential Degree College. She has experience of five years in the education industry and was previously associated with Arya Vidhya Vihar. She has been associated with the Company since incorporation and heads the human resource department of the Company. Uday Kiran Reddy Sama, aged 28 years, is an Independent Director of the Company. He holds bachelor’s degree in commerce from Acharya Nagarjuna University, Andhra Pradesh. He is an associate member of the Institute of Chartered Accountants of India. He has experience in the financial and accounts industry and is the proprietor of Uday Reddy & Co., Chartered Accountants. He was previously associated with Trinamix Systems Private Limited in the capacity of Associate Business Analyst.

Name of the Companies	Revenue (Cr)	Profit (Cr)	EPS	P/E	CMP	MCap
Srivari Spices and Foods Limited	35.8	3	4.38	9.6	42	29.99
Contil India Limited	20	0.6	2	50	89	27.7
Jetmall Spices And Masala Limited	3	0.01	0.02	48	23	14

*All the Data as per FY2023

Review and Recommendation of Sriveri Spices and Foods SME IPO by IZ team is 5/10

A) Strengths

1. Business Model: Srivari has a direct-to-consumer (D2C) as well as business-to-business (B2B) model, which allows it to have a larger market reach and build a strong customer base. The model also ensures the product is packed in quantities that align with its shelf life, leading to minimal wastage. 2. Quality and Sustainability: Srivari sources raw materials directly from farmers, ensuring high-quality, organic products. This sourcing model also supports sustainability and fair-trade practices. 3. Product Range: It has a diverse product portfolio, including organic spices and flour, which meets a variety of customer needs. The introduction of new product categories, like whole wheat flour (chakki atta), indicates adaptability and an understanding of market trends. 4. Price Advantage: By sourcing directly from farmers, Srivari is able to offer competitive pricing, giving it an edge over competitors.

B) Weaknesses:

1. Limited Geographical Presence: As of now, the company mainly operates in and around Telangana and Andhra Pradesh, which limits its market reach. 2. Company is formed in 2019 so very limited track record is available.

C) Opportunities:

1. Expansion: The company can explore opportunities to expand geographically to other regions of India or even internationally. But the competition in the sector is very high. 2. Online Sales: They can also explore ecommerce platforms or creating an online platform of their own for selling products, which can extend their reach beyond their current retail network. However, that requires lot of expenses on marketing side. 3. Product Diversification: There is potential for further diversification into related product categories, or creating premium product lines.

D) Threats:

1. Competition: The spices and food industry in India is highly competitive with many established brands. Price competition can also be intense. 2. Supply Chain Disruptions: As mentioned above, disruptions in sourcing or logistics due to unforeseen circumstances (natural disasters, strikes, etc.) can pose a risk. 3. Shift in Consumer Preferences: Rapid changes in consumer preferences or trends towards specific diets or ingredients could potentially impact the demand for their products.

E) Manufacturing Units:

Unit - I ( Capacity Utilisation =60%) : This is the original manufacturing unit of Srivari Spices and Foods in Jalpally Village, Telangana. It's where they first started producing spices like turmeric, chilli, and coriander powder in 2019. The unit has evolved to produce a wider range of products and features an in-house laboratory for product testing. Unit - II ( Capacity Utilisation =20%): Located in Raikal Village, Telangana, this unit was established in 2021 to produce ‘Srivari Whole Wheat Atta’ and ‘Sharbati Atta’. Like Unit I, it has modern manufacturing facilities and a dedicated quality testing lab. The addition of this unit allowed Srivari to expand its product portfolio and reach a larger customer base.

F) Margins in the Business:

The business traditionally held a gross margin of around 15%, but this significantly increased to 24% in FY23 due to the introduction of a new business segment. This additional line of business, specifically the Wheat Vertical, was established in FY22-23 and may have contributed greatly to this margin increase. In FY22-23, 62% of the company's revenue still stemmed from the Masala segment, while the Wheat segment accounted for 38%.

G) Financial Performance and Valuation

1. Revenue has increased from ~12 Cr in F21 to ~36 Cr in Fy23. That mean top-line has grown 3x in the last 3 years. 2. EBITDA has increased from ~82 lakh in F21 to ~5.89 Cr in Fy23. That mean EBITDA has grown 7x in the last 3 years. 3. PAT has increased from ~35 lakh in F21 to ~3.15 Cr in Fy23. That mean top-line has grown 9x in the last 3 years. 4. However, the company is not able to generate any cash flow from operations. In Facts, in the last 3 years, they have generated ~11 Cr negative cash flow from operations. This is high working capital business. 5. Total Capex done in the last 3 years is 4.82 Cr. As they have not generated anything from the operations, the capex is largely done by raising net long term borrowing of 4.85 Cr. 6. Post issue the Net-worth would be ~18 Cr and with ~3.12 Cr PAT in Fy23, the ROE is 17% which is decent. 7. Shares (Post Issue) = 71.42 Lakh and PAT (FY23) = 313 Lakh, so, EPS = 4.41 and P/E would be 9.52x which looks reasonably priced.

H) Conclusion:

On the positive side, the company has a strong business model, a focus on quality and sustainability, a wide product range, and a competitive pricing strategy. Moreover, the company has shown impressive growth in revenue, EBITDA, and PAT over the last three years. The new business line in the Wheat Vertical has notably improved the company's gross margin. Furthermore, their post-issue P/E ratio seems reasonably priced, and the company's ROE of 17% is decent. However, there are notable concerns. Despite robust profitability growth, the company hasn't been able to generate positive cash flow from its operations. High working capital requirements and a reliance on long-term borrowing for funding capital expenditure could put strain on the financial health of the company. It's also concerning that Srivari operates primarily in a limited geographical area and faces intense competition in a sector with rapidly changing consumer preferences. In conclusion, while Srivari has demonstrated strong potential and significant growth, there are considerable risks that investors must weigh before participating in this IPO. The company's inability to generate positive operational cash flow, limited geographic presence, and high competition could impact future growth and profitability. It is recommended that investors thoroughly consider these factors and their individual risk tolerance before making an investment decision.

Srivari Spices and Foods Limited Shed No. 5-105/4/A, SY No.234/A, Sriram Industrial Area, Kattedan, Jalpally, Hyderabad – 500 077 Phone: +91 737 588 8999 Email: compliance@srivarispices.com Website: http://www.srivarispices.com/