Srivari Spices and Foods Limited IPO

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i. Srivari Spices and Foods is engaged in the business of manufacturing spices and flour (chakki atta) and market & sell it in and around Telangana and Andhra Pradesh. They handpick their raw materials from various parts of the country and process the products with utmost care without the use of artificial preservatives or chemicals, thereby creating a product portfolio of organic spices and flour, which carry the freshness and goodness of each ingredient.

ii. Their unique business model has helped us penetrate the niche segment of our market and establish a customer base in and around Telangana and Andhra Pradesh. The goal since incorporation was to manufacture quality spices and other food products which are organic and do not contain any artificial preservatives or chemicals, and in order to achieve the goal they have created a unique business model, wherein they manufacture and package their products in quantities which can sustain a customer until the shelf life of their product, in order to avoid wastage and deliver a wide range of products which carry the freshness and goodness of each ingredient.

iii. Their business has two model first is direct to customer (“D2C”) in nature, wherein they deliver the products directly at the doorstep of the customers using approximately 15,000 retail stores. Secondly we also work in business to business (“B2B’’), wherein we deliver their products to the suppliers. The business model has helped them create a strong customer base as the quantity of the products packed and delivered in directly proportional to the shelf life of our products, therefore, once the product is consumed by the customers they place an order for the product and this helps us maintain a cyclic and continuous relationship with the customers.

iv. Their business model and the products are completely sustainable in nature. They source their raw materials directly from farmers to ensure that we use absolutely natural ingredients in our products. Their business model ensures that the farmers receive complete benefit of their produce without having to share their revenue with market intermediaries. Since, the source of raw materials directly from the farmers, they are able to offer their products at a lower range than the competitors, thereby having a unique pricing model.

v. The company source its raw materials from across the country to ensure that the products they manufacture have an authentic taste without artificially disturbing the natural taste of the spices or other food products. For instance, for the chilli powder they source their chillies from the farms of Guntur, Khammam, Warangal, Raichur, Byadgi, Malakpet, Hyderabad and their ‘Srivari Whole Wheat Atta’ and ‘Sharbati Atta’ is made from wheat grains which are sourced from Sehore, Vidisha and Sironj in Madhya Pradesh.

Competitive Strengths

i. Unique and sustainable business model
ii. Diversified Product Basket
iii. Strong and stable management team with proven ability

Objects of the Srivari Spices and Foods Limited IPO:

The Company proposes to utilize the Net Proceeds towards funding the following objects: i. Funding the working capital requirements of the Company ii. General corporate purposes

Srivari Spices and Foods Limited IPO Details:

Open Date: Aug 07 2023
Close Date: Aug 09 2023
Total Shares: 2,200,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 9 Cr.
Lot Size: 3000 Shares
Issue Price: ₹ 40-42 Per Equity Share
Listing At: NSE Emerge
Listing Date: Aug 18 2023

Promoters And Management:

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.

Financials of Srivari Spices and Foods Limited IPO:

P&L Statement
Particulars (in Lakhs) 2023 2022 2021
Revenue From Operations 3,581 1,764 1,140
Cost of Material Consumed 2,695 1,502 976
Change in Inventories -173 -57 -58
Employees Benefit Expenses 229 113 54
Other Expenses 242 42 86
EBITDA 588 164 82
OPM 16.42% 9.30% 7.19%
Other Income 1 0 0
Depreciation 70 52 34
Finance Cost 86 11 0
PBT 433 101 48
Tax 120 28 12
PAT 313 73 36
NPM 8.74% 4.14% 3.16%
Shares 71.42 71.42 71.42
EPS 4.38 1.02 0.50

Comparison With Peers:

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

Recommendation on Srivari Spices and Foods Limited IPO:

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.

Lead Manager of Srivari Spices and Foods Limited IPO:


Registrar of Srivari Spices and Foods Limited IPO:

  1. Bigshare Services Private Limited

Company Address:

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: Website

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