Shree Tirupati Balajee Agro Trading IPO opens in 2 days: 10 things to know before you subscribe to ₹170 crore issue

Shree Tirupati Balajee Agro Trading's initial public offering (IPO), the second mainboard IPO in September, aims to raise ₹169.65 crore. The IPO consists of a fresh issue of 1.48 crore shares, amounting to ₹122.43 crore, and an offer for sale of 0.57 crore shares, totalling ₹47.23 crore. The company's promoter, Binod Kumar Agarwal, is selling part of his stake in the company.

Retail investors looking to participate in the IPO must bid for at least one lot of shares, which constitutes 180 shares. Investors can bid for up to 13 lots. The minimum bid amount is ₹14,940, while the maximum is ₹1,94,220.

At least 50 percent of the issue is reserved for Qualified Institutional Buyers (QIBs), 35 percent for retail investors, and the remaining 15 percent for Non-Institutional Investors (NIIs).

As the company prepares to go public, potential investors must understand the key details outlined in the Red Herring Prospectus (RHP), which provides valuable insights into the company's financials, growth strategy, and market positioning.

In this article, we will break down the key highlights from the RHP, offering the crucial details needed to make an informed decision about this IPO.

About Shree Tirupati Balajee Agro

Shree Tirupati Balajee Agro specialises in the manufacture and sale of Flexible Intermediate Bulk Containers (FIBCs), which are large flexible bags. It also manufactures other industrial packaging products, such as woven sacks, woven fabric, narrow fabric, and tapes. The company sells these products in both the Indian domestic market and overseas.

The company offers customised bulk packaging solutions for its clients across various industries, including chemicals, agrochemicals, food, mining, waste disposal, agriculture, lubricants, and edible oil. These FIBC products are specifically designed for transportation and packaging needs and can handle loads ranging from 500 kg to 2,500 kg.

With over 20 years of experience, Shree Tirupati Balajee Agro operates out of five manufacturing units. The company’s business is managed through its subsidiaries: Honourable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Limited (STBFL), and Jagannath Plastics Private Limited (JPPL).

Objectives of the issue

The company plans to utilise the net proceeds from the fresh issue (gross proceeds minus offer-related expenses) to achieve the following objectives:

- Repayment and/or prepayment, in part or full, of certain outstanding borrowings taken by the company and its subsidiaries, namely Honourable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Ltd (STBFL), and Jagannath Plastics Pvt Ltd (JPPL).

- Funding the incremental working capital requirements of the company and its subsidiaries.

- Covering general corporate purposes.

₹57 crore to be spent towards debt repayment

The company proposes to allocate up to ₹57 crore from the net proceeds of the IPO towards the repayment or prepayment of certain term loans and working capital facilities. This will cover borrowings by the company and its subsidiaries, including Honourable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Limited (STBFL), and Jagannath Plastics Private Limited (JPPL).

As of February 29, 2024, the company’s outstanding borrowings, encompassing both fund-based and non-fund-based loans, totalled ₹24,293.78 lakh on a consolidated basis. 

Majority revenue driven by exports

The company exports FIBC, i.e., technical bags, container liners, food-grade bags, platen bags, builder bags, etc. It has been accorded the status of a Three Star Export House, in accordance with the provisions of the Foreign Trade Policy, 2023, by the Department of Commerce, Ministry of Commerce and Industry of the Government of India.

Its export sales account for 63.06 percent, 64.13 percent, 84.44 percent, and 67.73 percent of total revenue for the period ended September 30, 2023, and in Fiscal 2023, Fiscal 2022, and Fiscal 2021, respectively. 

Domestic sales accounted for 36.94 percent of the company's revenue in the first half of the last fiscal year.

The company exports its products to over 38 countries across six continents, with major export destinations including Australia, New Zealand, the USA, Canada, Chile, Sweden, France, the UK, Germany, Spain, Malaysia, and Singapore.

It generates a major portion of its sales from overseas customers, primarily in the USA, Germany, Sweden, the UK, Spain, France, Australia, Canada, Lithuania, and Singapore. For the year ended March 31, 2023, the company generated 64.13 percent of its net revenue from operations cumulatively from these countries.

5 units in central India offer strategic advantages

The company operates five manufacturing units located in Pithampur and Indore in Madhya Pradesh. Centrally located in India, these units are well-connected to major national highways, providing a strategic advantage for nationwide distribution.

The central location also offers proximity to key ports, including Nhava Sheva, Kandla, Hazira, and Mundra. This geographic advantage facilitates efficient and cost-effective import and export operations, enhancing the company's ability to supply products promptly and economically to its clients.

The company commenced production of specialized PP woven bags/fabric/belt/tape with an installed production capacity of 1440 MT (PA) from Unit I in 2002 and enhanced its capacity to 20,000 MT (PA) in 2012. In 2006, it diversified into the production and export of FIBC.

Promoter holds nearly 90% stake in company

Binod Kumar Agarwal, a qualified chemical engineer and promoter of the company, also serves as the managing director. According to the company's Draft Red Herring Prospectus (DRHP), he holds 5,90,57,490 equity shares, which represents 88.382 percent of the company's issued, subscribed, and paid-up equity share capital prior to the offer.

Competes with large, organised companies

The company competes with both large, established firms and smaller regional competitors. Among listed companies of comparable size and product range in India, it faces competition from several private players, including Kanpur Plastipack Ltd, Rishi Techtex Ltd, Jumbo Bag Ltd, EMMBI Industries Ltd, and Commercial Syn Bags Ltd.

Financials

Its revenue from operations for the six-month period ended September 30, 2023, was ₹200.77 crore. This figure includes revenue from both domestic and export sales of manufactured products.

For Fiscal 2023, the revenue from operations grew by 7.04 percent to ₹475.43 crore, up from ₹444.18 crore in Fiscal 2022. This increase was primarily driven by a 148.69 percent rise in domestic sales due to higher sales of manufactured products and services.

Profit for the financial year 2023 rose by 51.36 percent to ₹20.72 crore, compared to ₹13.69 crore in the financial year 2022.

Key risks

The following are some of the key risks outlined by the company in its DRHP report:

Regulatory Risks: Growing awareness and regulatory efforts to control pollution have led to increased restrictions on plastic products. If any of its plastic packaging products are banned in India or in any of its export markets, it could significantly impact the company's business and operational results.

Raw Material Fluctuations: The company's primary raw materials include polypropylene granules, low-density polyethylene (LDPE), and high-density polyethylene (HDPE) of various grades. As these materials constitute a large portion of its expenses, fluctuations in crude oil prices can affect polymer costs. 

Additionally, risks associated with foreign exchange movements during polymer imports and potential increases in raw material prices, supply shortages, and cost overruns could adversely affect the company's operations.

Anti-Dumping Duties: The company said it may face anti-dumping duties, which could negatively impact its financial condition.

Allotment and listing details 

The allotment for the Shree Tirupati Balajee Agro Trading Company IPO is expected to be finalised on Wednesday, September 10, 2024. The shares are scheduled to be listed on both the NSE and BSE, with a tentative listing date of September 12, 2024.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.