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Review By Dilip Davda on February 28, 2018
Sarveshwar Foods Ltd. (SFL) is primarily engaged in the business of processing and marketing of branded and un-branded basmati and non-basmati rice in the domestic and international markets. Its operations are based out of the Jammu Region in the State of Jammu and Kashmir. States like the Jammu and the Leh-Ladakh region have been largely peaceful, except for a few stray incidences, which have not affected their peace and law & order. SFL believes it is one of the few Indian companies with a presence across the entire rice value chain, which includes procurement, storage, milling, sorting, packaging, branding and distribution. Its product portfolio comprises of Basmati and non-Basmati rice of various kinds including white raw rice, steam rice, broken rice, brown rice and parboiled rice. Along with the varied variety of conventional Basmati and non-Basmati rice, SFL's product portfolio also includes organic Basmati and non-Basmati rice including range of other organic products.
Besides conventional Basmati and non-Basmati rice, Company has also forayed into procurement, storage, milling, sorting, packaging, branding and distribution of 'Organic' Basmati and non-Basmati rice. 'Organic' business also includes organic food products such as dry fruits and nuts, pulses, lentin, flours, porridge, spices, garam masalas and super foods like chia seeds, flax seeds, quinoa seeds, etc. SFL markets and distributes these organic food products under its brand 'Nimbark' and 'Sarveshwar'. It has in May, 2017 launched its flagship retail store in the name of 'Nimbark - Living the Satvik Way' for organic products at Channi Himmat, Jammu. The company is present across all price points in the Basmati and non-Basmati rice markets viz. branded, unbranded and organic. SFL has an extensive distribution network which enables its products reach states in India like J&K, Delhi, Telangana, Andhra Pradesh and cities like Chennai, Pune. In the international markets, products are sold and distributed in the USA, Europe and Middle East.
To part finance its investment in subsidiary, working capital, general corpus fund needs, SFL is coming out with a maiden IPO of 6467200 equity shares of Rs. 10 each via book building process with a price band of Rs. 83-85 to mobilize Rs. 53.68 – Rs. 54.97 crore based on lower and upper price bands. Issue opens for subscription on 05.03.18 and will close on 07.03.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Perhaps for the first time, we are witnessing four BRLMs for this offer. They are Keynote Corporate Services Ltd., Small Industrial Development Bank of India (SIDBI), Indian Overseas Bank (IOB) and Asit C Mehta Investment Intermediates Ltd. Registrar to the issue is Bigshare Services Pvt. Ltd. Issue constitutes 26.33% of the post issue paid up capital of the company. Its entire equity is issued at par and has also issued bonus shares in the ratio of 1 for 1 in February 2017. Post issue its current paid up equity capital of Rs. 18.10 crore will stand enhanced to Rs. 24.57 cr. Average cost of acquisition of shares by the promoters is Rs. 5 per share.
On performance front, SFL has (on a consolidated basis) posted turnover/net profits of Rs. 241.37 cr. / Rs. 7.40 cr. (FY14), Rs. 262.50 cr. / Rs. 7.97 cr. (FY15), Rs. 355.19 cr. / Rs. 5.43 cr. (FY16) and Rs. 419.89 cr. / Rs. 12.81 cr. (FY17). For first half of current fiscal ended on 30.09.17 it has reported net profit of Rs. 7.93 cr. on a turnover of Rs. 259.39 cr. For last three fiscals, SFL has posted an average EPS of Rs. 7.09 and an average RoNW of 18.94%. Based on last three years' average EPS asking price is at a P/E of around 12. Issue is priced at a P/BV of 1.98 on the basis of its NAV of Rs. 43.03 as on 30.09.17. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 13 against its peers trading at 60 (LT Foods), 27 (KRBL) and 19 (Chamanlal Setia) as on 28.02.2018. Thus issue is reasonably priced. Company suffered set back in FY 16 due to poor pricing of Basmati rice that has seen upward movements since then yielding more rewards in last one and half year. Company is having major thrust on organic (safe foods) that will bring lead to more improved performance going forward. In addition, company's plans to go for retail space with own direct outlet as well as franchise route will add in top and bottom lines.
On BRLMs' front, this is the 4th mandate from Keynote Corp. in last three years and out of 3 listings, one opened at discount, one at par and the one at 13% premium to offer price on the listing day. From SIDBI this is the 4th mandate in last three years and out of 3 listings, on opened around par and the two with a premium of 13% on the offer price on listing day. From IOB this is the 6th mandate in last three years and 4 listings opened with a premium ranging from 12 to 20% on listing day, while one IPO that of Greensignal Bio Pharma could not sail through. This is the first mandate from Asit C Mehta Investment Intermediates Ltd. and has no track record.
Review By Dilip Davda on February 28, 2018
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 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: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Sarveshwar Foods Ltd offers an early investment opportunity in Sarveshwar Foods Ltd. A stock market investor can buy Sarveshwar Foods IPO shares by applying in IPO before Sarveshwar Foods Ltd shares get listed at the stock exchanges. An investor could invest in Sarveshwar Foods IPO for short term listing gain or a long term.
Read the Sarveshwar Foods IPO recommendations by the leading analyst and leading stock brokers.
Sarveshwar Foods IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sarveshwar Foods IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Sarveshwar Foods IPO is to subscribe.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Sarveshwar Foods IPO.
The Sarveshwar Foods IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sarveshwar Foods IPO allotment status to check.
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