What you must know about Srivari Spices and Foods IPO

Srivari Spices and Foods Ltd, is an SME IPO on the NSE which is opening for subscription on 07th August 2023. The company, Srivari Spices and Foods Ltd, was incorporated in the year 2019 to manufacture spices and flour (chakki atta). The company also has a complete marketing network to take care of the after production sales and marketing of the products. Its principal product categories include spices, masala and atta. While its spices get delivered to over 3,000 outlets, its atta gets delivered to more than 15,000 outlets. Its whole wheat and sharbati atta are quote popular in the states of Andhra Pradesh and Telangana. Its production methods are predominantly organic with limited use of artificial preservatives and chemicals to keep the original flavour of the product intact. It has a direct to customer (D2C) sales model as well as a business to business (B2B) marketing model to cater to institutional and corporate customers.

The company has two production facilities at Ranga Reddy district, adjoining Hyderabad. The company has tried to maintain a sustainable model. The raw materials are sourced directly from the farmers and then processed at their manufacturing plants located near Hyderabad. In 2020, the company had expanded its product portfolio to include sambar masala, chicken masala, garam masala and mutton masala. Sourcing the raw materials directly from the farmers gives the company a pricing advantage which is a competitive edge in a crowded market. The company is also looking to expand its products globally, especially in countries with a vast expatriate population, which would be a logical market extension to the domestic market. In terms of revenue contribution, spices contribute 79% of revenues while wheat flour contributes 21%.

Key terms of Srivari Spices and Foods IPO SME

Here are some of the highlights of the Srivari Spices and Foods IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 07th August 2023 and closes for subscription on 09th August 2023; both days inclusive.
   
• The company has a face value of ₹10 per share it will be a book built issue. However, the issue price band for the IPO is yet to be fixed and is expected shortly.
   
• The fresh issue of the company will entail the issue of 22 lakh shares at a price band that is yet to be determined. Based on the price band, the size of the issue will be determined at the upper end of the price band of the book built IPO.
   
• The public issue only has a fresh issue component so the issue of 22 lakh shares also constitutes the total size of the IPO. There is no offer for sale component in the IPO hence the entire issue of shares here would be EPS and capital dilutive.
   
• The minimum lot size for the IPO investment will is yet to be determined and that would be based on the pricing of the IPO. The IPO price band is expected to be announced in the first half of this week.
   
• The company has been promoted by Rathi Narayan Das and Neihaa Rathi. The promoter stake in the company stands currently at 99.90%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted to 69.38%.
   
• The fresh issue proceeds will be used by the company for meeting the working capital needs of the company, funding global expansion plans as well as to meet general corporate expenses of the business.
   
• GYR Capital Advisors Ltd will be the lead manager to the issue while Bigshare Services Private Ltd will be the registrar to the issue. Post the IPO, the total share capital of the company will go up from 50 lakh shares to 72 lakh shares.

The company has allocated 50% of the issue size for the QIBs, 35% for the retail investor while the balance 15% is allocated to HNI / NII investors. The table below captures the gist of the quota allocation.

Key dates to be aware of in the Srivari Spices and Foods IPO (SME)

Srivari Spices and Foods IPO opens on Monday, August 07th, 2023 and closes on Wednesday August 09th, 2023. The Srivari Spices and Foods IPO bid date is from August 07th, 2023 10.00 AM to August 09th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is August 09th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Srivari Spices and Foods Ltd

The table below captures the key financials of Srivari Spices and Foods Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The company is of very recent origin so it is tough to take a call on the financials of the company over a 3 year period, although the company has shown good traction in sales growth in the last 2 years. However, the key factor to watch out for here is the very focused market and the ability to tap the retail and the institutional market for spices and atta. The vast reach of the company and its strong franchise in the South are added advantages. Valuations would eventually depend on the pricing of the IPO.