Dollex Agrotech coming with an IPO to raise Rs 24.39 crore

Dollex Agrotech

• Dollex Agrotech is coming out with an initial public offering (IPO) of 69,68,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 35 per equity share.
  
• The issue will open for subscription on December 15, 2022 and will close on December 20, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 3.50 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Expert Global Consultants.
  
• Compliance Officer for the issue is Kalyani Bhatjiwale.
  

Profile of the company

The company is engaged into the business of manufacturing & trading of sugar with captive power cogeneration capabilities. The company’s promoter Mehmood Khan possess rich experience of sugar industry of nearly about fifteen years. In 2006, Mehmood Khan, one of its promoter, participated in a tender floated by Government of Maharashtra for a sugar unit on lease at Nanded, Maharashtra and was allotted the unit for a period of 6 years. After getting rich experience in sugar industry, he started mentoring other companies engaged in sugar manufacturing. Thereafter, he decided to set up a sugar manufacturing plant, in the name of the company ‘Dollex Industries Limited’ which was later on merged with an unlisted company, ‘Parvati Sweetners and Power Ltd’, in 2018, and its promoters sold their shareholding in that company & currently has no control neither by shareholding nor by any managerial rights.

As the production of sugarcane required ample amount of time, the company started its cane development process since Incorporation. Thereafter, the promoters started gathering resources like plant and machinery, key managerial personnel etc. for establishing and operating sugar manufacturing plant till the year 2017. In the year 2018, the company then started its operations of Sugar manufacturing, from sugarcane along with co-generation capabilities in Indore, Madhya Pradesh. Its plant is situated at Village Erai, Tehsil Badoni Khurd, Dist. Datia, Madhya Pradesh- have crushing capacity of 2500 TCD. It has received in-principle approval from department of Food & public distribution from Government of India for establishing distilleries of 200 KLPD capacity. In addition to sugar, it also produce and sell its byproducts such as mollases, pressmud and bagasse. The bagasse is used to generate power. Further, the company is into captive power generation with a capacity of 3 MW for its own use and not in commercial power generation and distribution as on date. The power is generated from bagasse to run its plant at Datia.

Proceed is being used for:

• Meeting out the Working Capital requirements.
  
• Meeting out the General Corporate Purposes.
  
• Meeting out the Issue Expenses.
  

Industry overview

Agriculture is the primary source of livelihood for about 58% of India’s population. Gross Value Added by agriculture, forestry, and fishing was estimated at Rs. 19.48 lakh crore ($276.37 billion) in FY20. As per 1st advance estimates of National Income FY22, the percentage share of GVA of Agriculture and Allied Sectors (at current prices) is 18.8% of the total GVA. Consumer spending in India will return to growth in 2021 post the pandemic-led contraction, expanding by as much as 6.6%. Agriculture and allied activities recorded a growth rate of 3.6% at constant prices in FY21.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The total agricultural and allied products exports stood at $ 41.25 billion in FY21.

Sugar industry is an important agro-based industry that impacts rural livelihood of about 50 million sugarcane farmers and around 5 lakh workers directly employed in sugar mills. Employment is also generated in various ancillary activities relating to transport, trade servicing of machinery and supply of agriculture inputs. India is the second largest producer of sugar in the world after Brazil and is also the largest consumer. Today Indian sugar industry’s annual output is worth approximately Rs.80,000 crores. There are 732 installed sugar factories in the country as on 31.07.2017, with sufficient crushing capacity to produce around 339 lakh MT of sugar. The capacity is roughly distributed equally between private sector units and cooperative sector units.

Pros and strengths

Long term relationship with customers and dealers: The company has some reputed companies in this industry as its customers. Its success lies in the strength of its relationship with its customers and dealers who have been associated with the Company for a long period. Due to strong Dealer network and branding, its product is known to public.

Experienced & skill management team: The company has experienced & skill management team to motivate the sub- ordinates & staff to step towards their achievements & organizational goals. With their efficient management skills & co-ordination with subordinate, they are always working as a catalyst to encourage the entire team for the development & nourishment of the organization.

Risks and concerns

Face significant competition: The sugar industry is highly competitive. Domestically, the company competes with numerous small to medium size producers. Despite increased consolidation, the Indian sugar industry remains highly fragmented. Its major competitors in India are sugar mills based in the Madhya Pradesh and nearby states. Further, it also face competition from the sugar mills based in the Indian state of Maharashtra. Further, excess sugar stocks may be dumped by competitors from other states into the northern India region markets, leading to excess supply and price drop.

High working capital requirements: A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact the company’s profitability. The significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Outlook

Dollex Agrotech is an indigenous sugar manufacturing and trading company with captive power co-generation capabilities. Its Promoters possess a rich experience of sugar manufacturing. In year 2017, Mr. Mehmood Khan, Director of the Company decided to set-up sugar manufacturing plant & commenced its operations in 2018 of Sugar manufacturing, from sugarcane along with captive power co-generation capabilities in Datia, Madhya Pradesh. In addition to sugar, the company also produces and sell its by-products such as mollases, pressmud and bagasse. The bagasse is used to generate power. Further, it is engaged in power generation up to the captive power of 3 MW. The company also has a vision to enter into new segment of ethanol production under EBP Program bythe Ministry of Petroleum and Natural Gas in coming years. On the concern side, the company’s business largely depends on the availability of sugarcane and any shortage of sugarcane may adversely affect its financial condition and business operations. It does not own any land for sugarcane cultivation and it has to procure it from independent farmers. Besides, its sugar production depends on the volume and sucrose content of the sugarcane that is supplied to it. Crop yields and sucrose content depend primarily on the variety of sugarcane grown and is impacted by any crop disease and weather conditions such as rainfall and temperature, which vary.

The company is coming out with a maiden IPO of 69,68,000 equity shares of Rs 10 each at a fixed price of Rs 35 per equity share to mobilize Rs 24.39 crore. On the performance front, total Income for the Financial Year 2021-22, it stood at Rs 7,962.58 lakh, whereas in Financial Year 2020-21 it stood at Rs 7,748.42 lakh representing an increase of 2.76%. The restated profit after tax for the Financial Year 2021-2022 stood at Rs 326.90 lakh, whereas For the Financial Year 2020-21, it stood at 167.43 lakh representing an increase of 95.24%. Meanwhile, the company intends to cater to the increasing demand of its existing customers and also to increase its existing customer base by enhancing the distribution reach of its products. The company aims to enhance the growth by leveraging its relationships and further enhancing customer satisfaction. It plans to increase its customers by increasing the product & geographical base, maintaining its client relationship and renewing its relationship with existing buyers.