Shree Tirupati Balajee Agro Trading Company
- Shree Tirupati Balajee Agro Trading Company is coming out with a 100% book building; initial public offering (IPO) of 2,04,40,000 shares of Rs 10 each in a price band Rs 78-83 per equity share.
- Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
- The issue will open for subscription on September 05, 2024 and will close on September 09, 2024.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 10 and is priced 7.80 times of its face value on the lower side and 8.30 times on the higher side.
- Book running lead managers to the issue are PNB Investment Services and Unistone Capital.
- Compliance Officer for the issue is Rishika Singhai.
Profile of the company
Shree Tirupati Balajee Agro Trading Company is engaged in the business of manufacturing and selling of Flexible Intermediate Bulk Containers (FIBCs) i.e. large flexible bags and other industrial packaging products such as woven sacks, woven fabric and narrow fabric, tapes in the Indian domestic market and overseas. It offers customised products and cater to the bulk packaging solutions of its clients from diverse industries like chemicals, agrochemicals, food mining, waste disposal industry, agriculture industry, lubricants and edible oil by supplying them its FIBC products for transportation purposes and their packaging requirement. It offers an alternative for packaging and transportation, streamlining the loading and unloading processes of vessels, containers, or trucks, thereby reducing labor requirements.
In terms of competence, the company’s core competencies include a wide product range, multi-location facilities, recurring orders, global presence, scale of production, technical expertise, environmental contribution, and recycling efforts. It offers a wide range of packaging solutions to its clients since it manufactures variety of FIBC bags, woven bags and container liners etc. It manufactures FIBC bags for packaging all possible products including, food products, chemicals, minings etc. The company’s products are logistic solutions for diverse industries and the success of its business does not depend upon a few sectors. It is a one-stop solution to all FIBC packaging needs. The company is among the few companies in India with large portfolio. For ease of operations and better management and control, it manufactures specific products under various Subsidiaries.
The company’s products are tailored to meet the preferences and demands of its customers. Quality checks are conducted at various stages of production to promptly address any defects or errors. The company has an in-house facility for conducting various tests aimed at furthering improvements. The company’s products are tailored to meet the preferences and demands of its customers. Quality checks are conducted at various stages of production to promptly address any defects or errors. Additionally, rigorous quality testing, including tensile testing, UV testing, surface resistibility testing in Type C, Rig testing, and Drop testing, is carried out to ensure that its products adhere to industry standards for safety, durability, and environmental sustainability before they are delivered to clients.
Proceed is being used for:
- Repayment and/or prepayment, in part or full, of certain of its outstanding borrowings availed by the company
- Investment in its subsidiaries HPPL, STBFL and JPPL for Repayment and/or prepayment, in part or full, of certain of outstanding borrowings availed
- Funding the incremental working capital requirements of the company
- Investment in its subsidiaries HPPL, STBFL and JPPL for funding working capital requirements
- General corporate purposes
Industry overview
The flexible intermediate bulk container (FIBC) industry encompasses the production, sale, and purchase of flexible intermediate bulk containers. FIBCs are large, flexible bags used to transport or store bulk materials, such as powders, granules, flakes, minerals, chemicals, and food products. Further, FIBCs are also classified as bulk transporting packaging made of flexible and foldable fabric materials woven together. They are widely used in the transportation, storage, and protection of dry products and contents. They are lightweight, recyclable, and environmentally friendly. In addition, FIBCs can be transported with the assistance of pallets fitted below them, making them easier to lift and handle. As a result, they are a versatile and efficient packaging solution for the transportation and storage of bulk materials.
The global FIBC consumption market was valued at $4,856 million in 2023 and is expected to grow to $5,117 million in 2024. The market growth is attributed to the rising need to reduce the weight of bulk packaging, the thriving food and pharmaceutical industries, and the expanding manufacturing and construction sectors in developing regions. FIBCs are used in a wide range of end-use industries, including food, chemicals, pharmaceuticals, building & construction, mining, manufacturing, agriculture, and waste handling. The expansion of the pharmaceutical industry is resulting to a high demand for FIBCs, as they are an efficient and cost-effective way to transport and store pharmaceutical products. Additionally, FIBCs can be folded and pressed together to save space, making them a popular choice for businesses that need to store large quantities of bulk materials.
FIBCs were first introduced in India in the early 1990s. Since then, India has developed into one of the world's key producers. Accordingly, the country is eager to globalize and export FIBC goods, given its sustainably expanding sizable local market. The installed capacity of the FIBC Industry grew by around 3.4% y-o-y (year-on-year) in 2023. It is expected to reach around 212.5 million units by the end of 2024. Growing demand over the years, especially from the chemicals, construction, and food agriculture sectors has helped the FIBC sector reach healthy capacity utilization levels resulting in players going for capacity expansion. The consumption of the FIBC Industry improved by around 7.3% y-o-y in 2023. It is expected to reach around 69.1 million units by the end of 2024. In 2022, there was a decline in the consumption pattern on account of the high base effect in the pharmaceutical industry.
Pros and strengths
Diverse customer base: Over the years, the company has nurtured relationships with clients across various industries, consistently providing them with its product offerings. It maintains relationships with many clients, and their repeat business provides it with an understanding of future revenues and a stable client base. It helps and designs customized FIBCs, by offering complete range of FIBC for packaging all possible products. This enables its customers to improve performance and to reduce the cost thereby helping it in retaining its customers and getting price advantage over other suppliers. The diverse product range of the company’s products allows its customers to source most of their product requirement from a single vendor and enables it to expand its business from existing customers, as well as address a larger base of potential new customers. It provides customized solutions and manufacture bags that cater to changing and specific need-based requirements of its clients.
Cost-Effectiveness of FIBCs: FIBCs are made of flexible woven fabrics, usually polypropylene (PP), and can hold a weight of 500 kg to 2,000 kg. These flexible intermediate containers are commonly used to store dry and mobile products such as grains, seeds salt, chemicals, sand, clay, cement, etc. FIBCs offer cost-effectiveness, efficient load handling, ease of use, and chemical resistance, making them a swift replacement for alternative bulk packaging options such as paper-based products. Additionally, FIBCs contribute to weight reduction, resulting in lower transportation costs. Beyond the surging demand anticipated in the Asia-Pacific (APAC) region, particularly in the food & beverage industry, other key end-use sectors including chemicals, pharmaceuticals, construction, metals & mining, among others, are progressively transitioning to FIBCs due to their advantages, such as cost-efficiency and enhanced handling convenience. FIBC reduce the total weight of bulk packaging due to their negligible weight. They can also be stored in a small space by folding and pressing multiple container bags together.
Multi- product portfolio: The company offers a wide range of packaging solutions to its clients since it manufactures variety of FIBC bags for packaging all possible products including, food products, chemicals, mining etc. Its products are logistic solutions for diverse industry and the success of its business does not depend upon a few sectors. The company is a one-stop solution to all FIBC packaging needs and putting efforts to grow majorly on the same. The company has a multi-product portfolio and has the ability to adjust to needs of its customers. The company’s ability to offer the complete range of FIBCs help it in retaining its customers and also helps it in getting price advantage over other suppliers. The company is into diverse categories of bag and liner production, which is manufactured on the basis of the specifications provided by its customer, along with printing on the bags to make the bags attractive.
Integrated manufacturing facility: The company owns and operates 5 manufacturing facilities strategically located at Indore (Madhya Pradesh). The location of its units is in proximity to Mumbai, Maharashtra and major industrial zones having good connectivity to ports, airports, and highways, which enhances its capability of supplying its products in time and on a cost-effective basis to its clients. The company’s manufacturing facilities are constructed over an area of 21,613 Sq. Mtr., with an installed extrusions capacity of 2,300 Mt/ month approximately and its utilized capacity of 2,200 Mt/ month approximately. The company’s facilities are equipped with modern machinery. It has enhanced and persist in modernizing its manufacturing facilities, infrastructure, machinery, equipment, and technology to enable it to provide a varied product range, minimize operating expenses, and enhance productivity.
Risks and concerns
Manufacturing facilities concentrated in a single region: The company and its Subsidiaries collectively operate through 5 manufacturing facilities and all the five manufacturing facilities are situated at Pithampur, Madhya Pradesh. Two of its manufacturing facilities are situated at Sector-1 and Sector-3, Pithampur. The remaining three manufacturing facilities are of its Subsidiaries namely Jagannath Plastics Private Limited, Honourable Packaging Private Limited and Shree Tirupati Balajee FIBC Limited and are also situated in Pithampur, Madhya Pradesh. Thereby resulting in concentration in a single region, posing a concentration risk. The occurrence of any significant localized social unrest, natural disaster, delay in production at, or shutdown of, or any interruption, including political instability, workforce productivity issues, regulatory compliance challenges, production cost difficulties, or quality assurance concerns, along with unforeseeable events such as natural disasters or pandemics like COVID-19 in or around Pithampur, Madhya Pradesh, or any delay or disruption in production at its manufacturing units could significantly impact its business and financial condition.
Many economies including India have joined in the efforts to ban plastic product: The company is engaged in the business of manufacturing and selling of Flexible Intermediate Bulk Containers (FIBCs) i.e. large flexible bags and other industrial packaging products such as woven sacks, woven fabric and narrow fabric, tapes in the Indian domestic market and overseas. All of its products contain plastic as a primary raw material. FIBC, major product that are typically made from woven polypropylene fabric, which is a type of plastic material. Plastic, due to its lengthy decomposition period and harmful effects on the environment and living organisms is increasingly being phased out by many countries worldwide. While previous measures have not directly impacted its business, the company cannot guarantee immunity from potential future regulations. Legislative actions, such as those against plastic usage by the Government of India or stricter regulations on packaging products, could adversely affect its business and operations.
Majority portion of domestic sales are derived from the western zone: The company has historically derived a major portion of its revenue from sales in the western zone. For Fiscal 2024, Fiscal 2023 and Fiscal 2022 the revenue generated from sales in western zone represented 93.81%, 90.06% and 73.61% respectively of its revenue from domestic sales. Accordingly, any materially adverse social, political or economic development, natural calamities, civil disruptions, regulatory developments or changes in the policies of the state or local government in this region could adversely affect its manufacturing and distribution activities, result in modification of its business strategy or require it to incur considerable capital expenditure, which will in turn have a material adverse effect on its business, financial condition, results of operations, and cash flows.
Huge working capital requirement: The company’s business requires significant amount of working capital. It requires working capital for purchasing key raw materials which are procured from domestic and international suppliers. Its working capital requirements are met through a combination of internal accruals, bank borrowings, and other financial instruments. Internal accruals consist of the retained earnings generated from its operations. The working capital requirement for last three Financial Years i.e. 2024, 2023 and 2022 was Rs 14,697.82 lakh, Rs 9,550.64 lakh and Rs 7,742.51 lakh respectively. It maintains relationships with banks and non-banking financial institutions to enhance financing flexibility. Its credit profile often allows it to secure financing on favorable terms. However, it cannot guarantee that its relationships with lenders will remain unchanged, or that lenders will continue their current lending practices. Lenders may introduce new credit policies, implement new pre-qualification criteria, increase interest rates, or impose restrictive covenants in loan agreements. Any of these changes could significantly raise its financing costs or hinder its ability to secure financing altogether.
Outlook
Shree Tirupati Balajee Agro Trading Company manufactures and sells Flexible Intermediate Bulk Containers (FIBCs), i.e., large flexible bags, and other industrial packaging products such as woven sacks, woven fabric, narrow fabric, and tapes in the Indian domestic market and overseas. The company offers customized products and caters to the bulk packaging needs of clients from various industries, including chemicals, agrochemicals, food, mining, waste disposal, agriculture, lubricants, and edible oil. The company is not dependent on a single market and has its presence in both, overseas as well as domestic market having its customer base spread across the globe. Its products are exported to 38 different countries and in the domestic market it supplies its products on PAN India basis. Further, it has exported around 3.8 million FIBC bags during FY 2023 from its Unit I and Unit II. On the concern side, there is an increased awareness towards controlling pollution and many economies including India have joined in the efforts to ban plastic product. In case any plastic packaging products manufactured by it is banned in India or in any of the markets where it exports its products, it could have a material and adverse effect on its business and results of operations. Moreover, all the company’s manufacturing facilities are situated at Pithampur, Madhya Pradesh resulting in concentration in a single region. Any interruption for a significant period of time, in these facilities may in turn adversely affect its business, financial condition and results of operations.
The company is coming out with a maiden IPO of 2,04,40,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 78-83 per equity share. The aggregate size of the offer is around Rs 159.43 crore to Rs 169.65 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations was Rs 53,966.08 lakh for the year ended March 31, 2024, which comprised of revenue from sale of manufacturing products (Domestic and Export). Revenue from operations increased by 13.51% to Rs 53,966.08 lakh for Fiscal 2024 from Rs 47,543.33 lakh for Fiscal 2023, primarily due to increase in revenues from Domestic sale of Products by 63.10% due to sale of manufactured products and services. Moreover, the company recorded an increase of 74.11% in its profit before tax, which amounted to Rs 3,607.27 lakh for Fiscal 2024, as compared to Rs 2,071.80 lakh in the Fiscal 2023. Focused on the manufacturing of FIBC, the company aims to maintain its presence in this sector. The company’s commitment lies in consistently enhancing its capabilities to meet the rising demand, considering the global shift in FIBC usage. While historically prevalent in developed countries, FIBC is now gaining traction in India and other developing nations. It foresees a growing market for FIBC with the increasing industrial and agricultural production in India. Its existing capacity, operational scale, and skilled workforce position it to effectively respond to this escalating demand. Going forward, the company has a wide product basket and strive to add new products that are required or essential or which are trending in the market or those products which are manufactured by its competitors or those that may be recommended by its Research and Development team. The company shall continue to focus on exploring new and feasible business opportunities.
