Healthy Life Agritec coming with an IPO to raise Rs 10 crore

Healthy Life Agritec

• Healthy Life Agritec is coming out with an initial public offering (IPO) of 1,00,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 10 per equity share.
• The issue will open on July 13, 2022 and will close on July 18, 2022.
• The shares will be listed on SME Platform of BSE.
• The share is priced at par to its face value of Rs 10.
• Book running lead managers to the issue is Finshore Management Services.
• Compliance Officer for the issue is Shekhar Kapoor.

Profile of the company

Healthy Life Agritec Limited incorporated in the month of November 2019, is engaged in the business of trading of Raw Milk in the state of Maharashtra and Live Chicken and Agro Products in the state of Maharashtra and Karnataka. The company procures raw cow milk from milk farmers in the State of Maharashtra, a significant cow milk producing region in India. The company’s direct procurement model enables it to control costs and ensure quality of the raw milk procured by company.

The company has engaged procurement partners, to co-ordinate the milk procurement process with milk farmers and supply Raw milk to milk wholesalers in the state of Maharashtra. In addition to Raw Milk, the company also procure Poultry from Poultry Growers in the state of Maharashtra and Karnataka and supply poultry to Chicken Wholesalers in the state of Maharashtra and Karnataka.

Proceed is being used for:

• Meeting the working capital requirements
• Meeting the issue expenses
• General corporate purposes 

Industry Overview

The Dairy sector in India has grown substantially over the years. As a result of prudent policy interventions, India ranks first among the world’s milk producing nations, achieving an annual production of 209.96 million tonnes during the year 2020-21(Provisional) as compared to 198.44 million tonnes during 2019-20 recording a growth rate of 5.80%. FAO Food Outlook (November 2021) reported 2.05% increase in world milk production from 895.9 million tonnes in 2019 to 914.3 million tonnes in 2020 (estimates). This represents a sustained growth in the availability of milk and milk products for the growing population.

Likewise, livestock sub-sector plays a vital role in the Indian economy and also in the socio-economic development of millions of rural households. Livestock is a principal source of draught power in rural areas and provides milk, meat, eggs, wool, hides & skins, manure and fuel. It is accounted for about 6.17% of total GVA of India (at current prices1) and 30.87% of the GVA of Agriculture & allied sector. In real terms, the contribution of agriculture & allied sector to the national GVA has been falling from a level of 22.93% in 1999-20 to 16.27% in 2020-21(at constant price). However, the contribution of livestock Sector to the total GVA has increased from 23.12% to 30.13% during the same period (at constant price).

Meanwhile, the total size of dairy market was about Rs 11.35 lakh crore in 2020. The dairy market has been growing at about 15% per annum during last 15 years and is expected to reach a market size of about Rs 26 lakh crores by 2026 as per IMARC 2021 report. The liquid milk market represents about half of the total dairy market in the country. Of the total liquid milk market, the share of organised sector has increased from 32% to 41% in last 3 years. It is estimated that the share of organised sector would reach to 54 % by 2026. Milk production in the country in 2020-21 has been estimated at about 21 crore metric tonnes registering a growth of 6.2% per annum during last 5 years. The per capita availability of milk has reached to 427 grams per day in 2020-21. The milk production is estimated to reach about 30 crore tonnes by 2030 as per NITI Aayog report. Therefore, strengthening of dairy processing infrastructure is required for catering to the growing dairy market in the country. 

Pros and strengths

Smooth flow of operations: Over the year, the company have developed a wide clientele base and this was done with valued based relationship approach. The company’s existing relationships help it to get repeat businesses from customers. This has helped company to maintain a long-term working relationship with customers and improve customer retention strategy. The existing relationship with clients represents a competitive advantage in gaining new clients and increasing business.

Existing supplier relationship: The company’s existing supplier relationship protects the business with terms of supply and pricing of the products and services, the quality of the products and services offered etc. The company, being a small and medium size organization, rely on personal relationships with suppliers. Further, the company also leverage the past experience of management in maintaining effective supplier relationship ensuring uninterrupted supply chain management.

Customer centric business model: The company focuses on attaining highest level of customer satisfaction. Understanding the consumer is one of the most important skills required to be successful in this business. The progress to be achieved by company will be largely due to its ability to address and exceed customer satisfaction.

Risks and concerns

Maximum revenue comes from limited customers: The company is dependent on a limited number of customers for revenues. Its top 5 customers contributed 86.51% and 83.89% of its total revenue from operations for the financial year ended March 31, 2022 and March 31, 2021, respectively. There can be no assurance that significant customers in the past will continue to place similar orders with company in the future. A significant decrease in business from any such key customer, whether due to circumstances specific to such customer or adverse market conditions affecting the industry or the economic environment generally, such as the COVID19 pandemic, may materially and adversely affect business, results of operations and financial condition.

Supply of raw milk is subject to seasonal factors: The supply of raw milk is subject to seasonal factors. Cows generally produce more milk in temperate weather, and extreme cold or hot weather could lead to lower than expected production. The company’s raw milk procurement is therefore higher in the second half of the financial year during the winter months with temperate climate in milk procurement region. Its product has a day of shelf-life and if not sold prior to expiry, may lead to losses or if consumed after expiry, may lead to health hazards which in turn may adversely affect company’s business, results of operations and financial condition.

Perishable nature of products: The company’s business activities could be materially and adversely affected by severe weather conditions such as rising temperature, etc. may cause damage to a raw milk. Raw milk is perishable in nature and are required to be transported in temperature controlled vehicles to ensure their preservation. Improper handling of Milk will result in milk getting spoiled and this may adversely affect sales and profitability which in turn will significantly affect results of operations.

Outlook

Healthy Life Agritec is engaged in the business of trading of Raw Milk in the state of Maharashtra and Live Chicken and Agro Products in the state of Maharashtra and Karnataka. In addition to Raw Milk, the company also procure Poultry from Poultry Growers in the state of Maharashtra and Karnataka and supply poultry to Chicken Wholesalers in the state of Maharashtra and Karnataka. On the concern side, company’s business activities could be materially and adversely affected by severe weather conditions such as rising temperature, etc. may cause damage to a raw milk. Raw milk is perishable in nature and are required to be transported in temperature controlled vehicles to ensure their preservation. Improper handling of Milk will result in milk getting spoiled and this may adversely affect sales and profitability which in turn will significantly affect results of operations.

The company is coming out with an IPO of 1,00,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 10 per equity share. On performance front, during the FY 2021-22 the revenue from operation and other income of the company increased to Rs 2615.71 lakh as against Rs 411.55 lakh in the FY 2020-21. This increase was mainly due to increase in volume of operation during the FY and getting repeated orders. The restated Profit after Tax for FY 2021-22 has increased to Rs 76.14 lakh as against Rs 6.50 lakh in the FY 2020-21. This increase was mainly due to increase in volume of operation during the FY as mentioned in revenue from operation above. Going forward, the company’s focus is on increasing sales volume through expansion, diversification and spread in geographical outreach. The company’s growth in local market can fetch it new business expansion and opportunities. It is currently providing its services to several clients domestically. Its emphasis is on scaling of its operations in other markets which shall provide it with attractive opportunities to grow its client base and revenues.