Vishwas Agri Seeds
- Vishwas Agri Seeds is coming out with initial public offering (IPO) of 30,00,000 shares of face value of Rs 10 each for cash at a fixed price of Rs 86 per equity share.
- The issue will open for subscription on March 21, 2024 and will close on March 26, 2024.
- The shares will be listed on NSE Emerge Platform.
- The share is priced at 8.60 times higher to its face value of Rs 10.
- Book running lead manager to the issue is ISK Advisors.
- Compliance Officer for the issue is Karina Dipak Chandwani.
Profile of the company
Vishwas Agri Seeds started its business in the city of Gondal near Rajkot, Gujarat in year 2009. Initially started with small scale seed processing unit in Gondal, Rajkot. Today, the company is in the business of processing quality seeds and supplying to farmers via there distribution network. The company sells its seeds under the brand name ‘Vishwas’. Its seeds processing unit is equipped with optical sorting machine, they detect unwanted colours, subtle discoloration, size and shape defects, and foreign materials. Further its seeds undergo seed treatment process where seeds are processed by application of fungicide, insecticide, or a combination of both, to seeds so as to disinfect them from seed-borne or soil-borne pathogenic organisms and storage insects.
The company is focused to provide good quality seeds. It follows the standard process to ensure high quality consistently. It is involved in each stage of seed processing ecosystem which unclues contracting with farmers to germinate seed plants, it has dedicated staff for inspecting the seed plant in the field to ensure quality of seeds and further processing the seeds and packing & storing of seeds. It has an identified land parcel of 14,000 square feet within its Seed processing unit in Ahmedabad where it grows sample seeds and monitor its growth which helps it in adding differents in its products. Its distribution network helps in supplying seeds in Different parts of India.
As of March 31, 2023, the company produced seeds for more than 40 different field crops, vegetables and has the presence of its products in the state of Gujarat, Maharashtra, Rajasthan via its Seles and Distribution network. Vishwas has more than 75 varieties of Crops. Its product portfolio includes crop seeds for Groundnut, Soyabin, Wheat, Cumin, Green Gram, Black Gram Research Hybrid seeds for Cotton, Castol, Pearl Millet, Maize, hybrid vegetable seeds Chilli, Tomato, Brinjal, Watermelon, Sweet Corn, cabbage, Onion, Coriander Seeds, Fenugreek, Mustard, Lucern, Carrot, etc.
Proceed is being used for:
- Capital Expenditure to furnish the Corporate Office building, to purchase equipments for setting up Seed Testing laboratory, to set-up Greenhouse (Fan-Pad System) and to install Roof Top Solar Monocrystalline Panels (129.6KW).
- Additional Working Capital Requirement.
- General Corporate Purpose.
Industry overview
Indian Seed industry is a sub-sector within Agri-input sector of Agriculture and allied industry. Seed is the primary input in Agriculture, which encapsulates the genetics of Plant variety. At the core of Indian Seed Industry is Plant variety development through conventional plant breeding in the process of genetic improvement of crops. The seed industry in India size reached US$ 6.3 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 12.7 Billion by 2028, exhibiting a growth rate (CAGR) of 12.43% during 2023-2028.
The growing population and the availability of rich arable lands and various agro-climatic zones in India represent one of the key factors positively influencing the market. In addition, the commercialization of agriculture and the active collaboration of private and public sectors are propelling the growth of the seed industry in the country. Apart from this, leading seed breeders are increasingly introducing advanced digital technologies to help farmers overcome the negative impacts of pests, climate, and other environmental factors. This, in turn, is contributing to the market growth. Additionally, the integration of data science, artificial intelligence (AI) tools, advanced phenomics, and genomics in the agricultural sector is offering a favourable market outlook. Along with this, various opportunities provided by the Government of India (GoI) to encourage farmers and breeders are creating a positive outlook for the market.
According to a report of the Standing Committee on Agriculture in 2021, the share of the private sector in India's seed market increased from 57.3% in 2017-18 to 64.5% in 2020-21. A 2019 report by Indian Council of Food and Agriculture, the Indian seed market reached a value of $4.1 billion in 2018 and is expected to grow at a rate of 13.6% from 2019-24, reaching a value of $9.1 billion by 2024. Hybrid seeds occupy about 6% of India's 44 million hectares under rice cultivation. Hybrid seeds for paddy (rice) are the primary type of hybrid seeds available in India, occupying about 6% of the rice cultivation area. The majority of India's seed market is occupied by wheat and paddy (rice), accounting for about 85% of the seed market.
Pros and strengths
Integrated Seed processing unit with cold-storage and warehouse facility in one premise: The company’s seeds processing unit is equipped with automated seed sorting, grading and packing machines, its seeds processing facility includes warehousing and cold storage facility to store seeds. The integrated seeds processing unit with required storage infrastructure to store the seeds help it to meet the demand as per the sowing season. Its plant is also strategically located and has access to logistic to transport its products.
Wide range of products backed by consistent quality: The company offers a wide range of seeds that includes Groundnut, cotton, Wheat, Cumin, Onion, Coriander, Mustard and corn etc. It continuously adds new product variants which help it to cater the needs of its customers. It is committed to provide best quality seeds which provides higher yield and productivity to the farmers. It treats the seeds with chemical like insecticides and fungicides to enhance consistent quality of the seeds. It is in process to setup inhouse seed testing laboratory within the premise of its unit which will help it to develop new variants of seeds and ensure quality of its seeds.
Experienced Promoter supported by dedicated Management team: Mr. Ashokbhai Gajera and Mr. Dineshbhai Madhabhai Suvagiya have years of experience in the seeds industry. Coming from the farmer background themselves they understand the needs of farmers. The company’s promoters and management are well updated with the changing demand all the year around as per the crop season. Its promoters have proactive approach in reading the demand for the product and help in meeting the demands the customers via its established inhouse marketing team along with distribution network.
Risks and concerns
High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards accounts receivable and inventories. Its accounts receivable collection cycle is fairly long as a result of the nature of its business and operations. This makes its business more susceptible to market downturns and client credit risk. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Seed production requires various raw materials including foundation seeds as well as other key inputs such as pesticides, fertilisers and electricity.
Business is seasonal in nature: The company’s business is seasonal in nature and as a result, its operating results may fluctuate. Since its business is influenced by the traditional crop season in India, its production as well as the demand for its products may be affected by seasonal factors such as weather conditions, irrigation facilities, availability of credit to farmers and overall agricultural production. Consequently, the results of one reporting period may not be necessarily comparable with the preceding, succeeding or corresponding reporting periods. Its revenues recorded during planting and harvesting seasons are typically lower as compared to revenues recorded during the periods preceding these crop seasons. During periods of low sales activity, the company continues to incur substantial operating expenses in connection with, among other things, product promotion expenses which are not reduced significantly during such periods, while its revenues remain reduced. It also experiences significant fluctuations in its working capital requirements during the planting and harvesting cycles.
Rely on third-party farmers who assist in growing seeds: The company generally undertake its seed production through contractual arrangements with certain selected Seed Growing Farmers during every crop season. It provides these Seed Growing Farmers with the required farm inputs and closely manage their activities during all stages of seed production. However, its arrangements with these Seed Growing Farmers carry risks that they may have economic or other interests that are inconsistent with its interests. They may take actions that are contrary to its instructions or requests, or may be unable or unwilling to fulfil their obligations, especially those that relate to timely delivery of the produce. Under the provisions of the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (the “PPV & FR Act”), farmers may be entitled to statutory protection, thereby enabling farmers to save, use, sow, re-sow, exchange, share or sell their farm produce in any manner they want and it may not be able to enforce provisions in its agreements with such Seed Growing Farmers to restrict them from doing so.
Outlook
Vishwas Agri Seeds is in the business of processing and supplying seeds to farmers via the distribution network. The company sells its seeds under the brand name ‘Vishwas’. The company’s product portfolio includes crop seeds for Groundnut, Soybean, Wheat, Cumin, Green Gram, Black Gram Research Hybrid seeds for Cotton, Castol, Pearl Millet, Maize, hybrid vegetable seeds Chilli, Tomato, Brinjal, Watermelon, Sweet Corn, cabbage, Onion, Coriander Seeds, Fenugreek, Mustard, Lucern, Carrot, etc. The company’s commercial operations of seed processing unit along with Warehouse & Cold storage facility is located in Bavla, District: Ahmedabad, Gujarat. It has a presence in Gujarat, Maharashtra, and Rajasthan. On the concern side, the market for the company’s products is competitive on account of existence of both the organized and unorganized players. Competition occurs generally on the key attributes such as quality of products, distribution network, pricing and timely delivery. The company use third party transportation providers for the delivery of its raw material and Finished products. Transportation strikes could have an adverse effect on its receipt of raw materials and its ability to deliver its products to its customers.
The company is coming out with an IPO of 30,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 86 per equity share to mobilize Rs 25.80 crore. On performance front, in Fiscal 2023, revenue from operations has been marginally increased by Rs 45.15 lakh, from Rs 6,485.58 lakh in Fiscal 2022 to Rs 6,530.73 lakh in Fiscal 2023. Profit After Tax is increased from Rs 247.94 lakh in Fiscal 2022 to Rs 534.14 lakh in Fiscal 2023 due to saving in other operating cost. Meanwhile, with over 14 years of process in the seeds business, the company’s Brand name ‘Vishwas’ enjoys a strong presence in the market. Over the years it has developed network of distributors which are located across the state of Gujarat, Rajasthan and Madhya Pradesh. It has network of over 780 distributors which gives it a strong presence in the market. It has sales and marketing team of about 18 employees who are responsible to develop new distributors and also to cater the needs of the existing distributors.
