Srivari Spices and Foods coming with an IPO to raise up to Rs 9 crore

Srivari Spices and Foods

• Srivari Spices and Foods is coming out with a 100% book building; initial public offering (IPO) of 21,42,000 shares of Rs 10 each in a price band Rs 40-42 per equity share.
• The issue will open for subscription on August 07, 2023 and will close on August 09, 2023.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 4.00 times of its face value on the lower side and 4.10 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Aradhana Puranlal Kawde.

Profile of the company

The company is engaged in the business of manufacturing spices and flour (chakki atta) and market & sell it in and around Telangana and Andhra Pradesh. It handpick its raw materials from various parts of the country and process its 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. Its unique business model has helped it penetrate the niche segment of its market and establish a customer base in and around Telangana and Andhra Pradesh.

Its goal since its 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 its goal it has created a unique business model, wherein it manufactures and package its products in quantities which can sustain a customer until the shelf life of its product, in order to avoid wastage and deliver a wide range of products which carry the freshness and goodness of each ingredient. Its business has two model first is direct to customer (D2C) in nature, wherein it delivers its products directly at the doorstep of its customers using many retail stores. Secondly it also works in business to business (B2B), wherein it delivers its products to the suppliers. Its business model has helped it create a strong customer base as the quantity of its products packed and delivered in directly proportional to the shelf life of its products, therefore, once the product is consumed by its customers they place an order for the product and this helps it maintain a cyclic and continuous relationship with its customers.

Proceed is being used for:

• Funding the working capital requirements.
• General corporate purposes.

Industry overview

India is the world’s largest spice producer. It is also the largest consumer and exporter of spices. The production of different spices has been growing rapidly over the last few years. Production in 2021-22 stood at 10.88 million tonnes. During 2020- 21, the export of spices reached an all-time high both in terms of value and volume by registering a growth of 17% in US$ value terms and 30% in volume terms. During 2021-22, the single largest spice exported from India was chili followed by spice oils and oleoresins, mint products, cumin and turmeric. 

India produces about 75 of the 109 varieties listed by the International Organization for Standardization (ISO). The most produced and exported spices are pepper, cardamom, chili, ginger, turmeric, coriander, cumin, celery, fennel, fenugreek, garlic, nutmeg & mace, curry powder, spice oils, and oleoresins. Out of these spices, chili, cumin, turmeric, ginger, and coriander makeup about 76% of the total production. The largest spices-producing states in India are Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Assam, Orissa, Uttar Pradesh, West Bengal, Tamil Nadu, and Kerala.

India is the largest exporter of spice and spice items. For the year 2021-22, the country exported spices worth $4,102.29 million. India is the largest exporter of spice and spice items. During April-Feb 2023, the country exported spices worth $3,332.02 million. In February 2023, the exports of spices from India increased by 44.12% to $379.51 million. In 2021-22, India exported 1.53 million tonnes of spices. From 2017-18 to 2021-22, the total exported quantity from India grew at a CAGR of 10.47%. For FY22, total volumes of chilli, cumin, turmeric and ginger exports were 0.55, 0.21, 0.15 and 0.14 million tonnes. 

Pros and strengths

Diversified product basket: The Company provides diversified product such as blended spices and whole wheat flour. Further, these products are available in different varieties. It is able to serve better with such diversified product basket. This helps it build brand recognition and customer loyalty. 

Well established brand name and goodwill amongst market players: It operates in a brand sensitive market. It has earned goodwill & competitive edge through its consistent quality oriented service. Few famous spices from the house of Srivari are turmeric powder (haldi), chilli powder (mirchi), coriander powder (dhaniya), madras sambar masala, chicken masala, garam masala and mutton masala and whole wheat flour (chakki atta). In view of its innovative business model and quality products, it was awarded with the title of ‘Best Emerging Spices Brand- 2021’ by Business Mint. It’s innovative and quality products help it to achieve brand recall among its consumers which strengths its brand equity.

Quality assurance and quality control of products: It is committed towards quality of its products. Its determination towards quality is demonstrated by well-defined quality and safety procedures at various stages of its manufacturing process from procurement of raw material to distribution of its products. Owing to the expertise of its experienced and trained team forming part of its Quality Division, all its products are manufactured strictly as per the regulatory standards. All its manufacturing facilities have a fully equipped Quality Division with experienced and qualified staff to carry out quality checks and inspections at all the stages of its manufacturing process. It has in-house laboratories and necessary infrastructure to test its raw materials and finished products to match the quality standards as specified by the relevant customers.

Risks and concerns

Unable to grow business in additional geographic regions:  The Company seeks to grow its market reach domestically to explore untapped markets and segments; however, it cannot assure that it will be able to grow its business as planned. Infrastructure and logistical challenges in addition to the advancement of research and development in the food and spices industry, changing customers’ taste and preferences may prevent it from expanding its presence or increasing the penetration of its products. Further, customers may be price conscious and it may be unable to compete effectively with the products of its competitors. If it is unable to grow its business in these new markets effectively, its business prospects, results of operations and financial condition may be adversely affected.

Operate in competitive business environment: The food and spices industry in India is competitive with both organized and unorganized markets. However, it is required to compete both in the domestic and international markets. It may be unable to compete with the prices and products offered by its competitors. It may has to compete with new players in India and abroad who enter the market and are able to offer competing products. Its competitors may have access to greater financial, manufacturing, research and development, marketing, distribution and other resources and more experience in obtaining the relevant regulatory approvals. Increasing competition may result in pricing pressures and decreasing profit margins or loss of market share or failure to improve its market position, any of which could substantially harm its business and results of operations.

Dependent on third party transportation providers: To ensure smooth functioning of its manufacturing operations, it needs to maintain continuous supply and transportation of the raw materials required from the supplier to its manufacturing units and transportation of its products from its units to its customers, which may be subject to various uncertainties and risks. It is significantly dependent on third party transportation providers for the delivery of raw materials to it and delivery of its products to its customers. Uncertainties and risks such as transportation strikes or delay in supply of raw materials and products could have an adverse effect on its supplies and deliveries to and from its customers and suppliers.

Outlook

Incorporated in 2019, the company is engaged in the business of manufacturing spices and flour (chakki atta) and market & sell it in and around Telangana and Andhra Pradesh. It handpick its raw materials from various parts of the country and process its 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. On the concern side. It is significantly dependent on third party transportation providers for the delivery of raw materials to it and delivery of its products to its customers. Uncertainties and risks such as transportation strikes or delay in supply of raw materials and products could have an adverse effect on its supplies and deliveries to and from its customers and suppliers.

The company is coming out with an IPO of 21,42,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 40-42 per equity share. The aggregate size of the offer is around Rs 8.57 crore to Rs 9.00 crore based on lower and upper price band respectively. On performance front, the total income of the company for fiscal year 2023 was Rs 3,582.01 lakh against Rs 1,764.21 lakh total income for Fiscal year 2022. Profit after tax for the Fiscal 2023 was at Rs 312.61 lakh against profit after tax of Rs 72.84 lakh in fiscal 2022, a 329.20% increase. Going forward, the company’s intends to improve efficiencies to achieve cost reductions so that they can be competitive. It intends to invest in developing and enhancing recognition of its brands, through brand building efforts, communication and promotional initiatives such as exhibitions, fairs, organizing food events, participation in industry events, public relations and investor relations efforts. This will help it to maintain and improve its global and local reach.