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Proventus Agro NSE SME IPO review (Avoid)

Review By Dilip Davda on May 20, 2023

•    PAL is engaged in the trading of integrated health foods.
•    It posted inconsistency in its top and bottom lines for the reported periods. 
•    It incurred a huge loss for FY20 and has translated its last three fiscals EPS in red.
•    Based on FY23 working, the issue is aggressively priced discounting all near-term positives.
•    There is no harm in skipping this pricey bet.

Proventus Agrocom Ltd. (PAL) is an integrated health food brand with a presence in the entire range of dry fruits, nuts, seeds and berries and healthy snacking products across the value chain. Its approach in the space focuses on diversifying across the baskets and intensifying presence across the value chain; in the end, being a 'one-stop shop' for consumers. 

The motto of Proventus is to create expertise in healthy food products and build the revenue stream by moving across the value chain from origination to distribution and creating an integrated business model - from "farm to homes". The fundamental cornerstone of its approach is to capture the demand and supply stream by developing a stable base of sourcing and distribution.

There is a large vacuum in the "healthy snacking" space in India especially in the dry fruits, nuts, seeds and berries category. In the last few years, there has been a shift in consumer preference from unbranded/loose produce to branded products all the way down to Tier 2 city Kirana stores also. As consumer preference gravitates towards better quality branded produce, they are looking for a trustworthy brand offering innovative products from natural to flavour-augmented healthy snacks - this is where 'ProV' is positioned with its wide range of healthy snacks in the dry fruits, nuts, seeds and berries category. With its Pan-India distribution and easy availability, ProV aims to be THE brand consumers think of whenever they want to buy nuts or dry fruits.

With growing consumer awareness, health and nutrition increasingly forming an inextricable attribute of new-age food culture, our snacking items as well as habits are gravitating towards healthy snacking in general. Also, post the Covid-19 pandemic, the world has evolved - be it business or lifestyle. And since this has not been restricted merely to urban areas and big cities but is also developing demand in rural pockets, healthy snacking has become a top priority. Indian households are likely to increase their spending on health-focused foods and beverages in the next few years, as consumers are increasingly shifting to healthier alternatives and buying foods with better ingredients. 

As health and hygiene increasingly become the deciding factor for consumers, they are now consciously avoiding open unpackaged dry fruits and unhealthy snack offerings. Instead, they are increasingly moving to packaged dry fruits and healthy snacks. In the recent past, the Covid-19 pandemic scare and increased focus on healthy lifestyle has particularly given a fillip to such packaged products, thereby increasing their demand. Its activities are likely to be disturbed by the shift of its operation place as its lease is getting over in the near term and the company has to shift to new premises. As of March 31, 2023, it has overall 39 employees on its payroll and 145 contract labour (including its subsidiary).

The company is coming out with a maiden IPO of 901920 equity shares of Rs. 10 each at a fixed price of Rs. 771 per share to mobilize Rs. 69.54 cr. The issue comprises 671773 fresh equity shares (Rs. 51.80cr.) and 230147 equity shares (Rs. 17.74 cr.) by Offer for Sale (OFS). The minimum application to be made is for 160 shares and in multiples thereon, thereafter. The issue opens for subscription on May 24, 2023, and will close on May 26, 2023. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.32% of the post-IPO paid-up capital of the company. PAL is spending Rs. 1.74 cr. (including expenses of Rs. 1.25 cr. for fresh equity issue) for this IPO process and from the net proceeds it will utilize Rs. 9.91 cr. for working capital and Rs. 29.86 cr. for working capital of its subsidiary - Prov Foods Pvt. Ltd., and Rs. 10.78 cr. for general corporate purposes. Excluding the market maker reserved portion of 45120 shares, it has allocated 428480 shares for HNI and 428320 shares for Retail investors.

Sundae Capital Advisors Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Ajcon Global Services Ltd. is the market maker of the company.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 197 - Rs. 240 between March 2016 and June 2017. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 10.00, Rs. 199.34, Rs. 206.00, Rs. 208.14, and Rs. 240.00 per share. 

Post-IPO PAL's current paid-up equity capital of Rs. 2.76 cr. will stand enhanced to Rs. 3.43 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 264.27 cr.

On the financial performance front, for the last three fiscals, PAL has posted a turnover/net profit - (loss) of Rs. 900.89 cr. / Rs. - (21.90) cr. (FY20), Rs. 301.74 cr. / Rs. 1.88 cr. (FY21), and Rs. 404.35 cr. / Rs. 1.14 cr. (FY22).  For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 1.90 cr. on a turnover of Rs. 319.10 cr. Thus while its top line marked inconsistency post the drastic fall in FY21, its bottom line too posted inconsistency. 

For the last three fiscals, PAL has reported an average EPS of Rs. - (8.91) and an average RoNW of 2.43%. The issue is priced at a P/BV of 3.45 based on its NAV of Rs. 223.80 as of December 31, 2022, and at a P/BV of 2.33 based on its post-IPO NAV of Rs. 331.05 per share. 

If we annualize FY23 earnings and attribute them to fully diluted post-IPO equity capital, then the asking price is at a P/E of 104.61. Thus the issue is aggressively priced. 

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

As per the offer document, the company has shown Krishival Foods as their listed peer. It is currently trading at a P/E of 157.56 (as of May 19, 2023). However, they are not truly comparable on an apple-to-apple basis.  

This is the 1st mandate from Sundae Capital and has no track record of its past performance.

Conclusion / Investment Strategy

The company operates in a highly competitive and fragmented segment with many big players around. Its recent performance marked inconsistency in its top and bottom lines. Based on FY23 earnings, the issue appears aggressively priced. Post-IPO, tiny paid-up equity capital also indicates longer gestation for migration to the mainboard. There is no harm in skipping this pricey bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 20, 2023

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Proventus Agrocom IPO FAQs

  1. 1. Why Proventus Agrocom IPO?

    The initial public offer (IPO) of Proventus Agrocom Limited offers an early investment opportunity in Proventus Agrocom Limited. A stock market investor can buy Proventus Agrocom IPO shares by applying in IPO before Proventus Agrocom Limited shares get listed at the stock exchanges. An investor could invest in Proventus Agrocom IPO for short term listing gain or a long term.

  2. 2. How is Proventus Agrocom IPO?

    Read the Proventus Agrocom IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Proventus Agrocom IPO what should investors do?

    Proventus Agrocom IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Proventus Agrocom IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Proventus Agrocom IPO good?

    Our recommendation for Proventus Agrocom IPO is to avoid.

  5. 5. Is Proventus Agrocom IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Proventus Agrocom IPO.

  6. 6. When will Proventus Agrocom IPO allotment status?

    The Proventus Agrocom IPO allotment status will be available on or around May 31, 2023. The allotted shares will be credited in demat account by June 2, 2023. Visit Proventus Agrocom IPO allotment status to check.

  7. 7. When will Proventus Agrocom IPO list?

    The Proventus Agrocom IPO will list on Monday, June 5, 2023, at NSE SME.