Shree Tirupati Balajee Agro IPO review (May apply)

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Review By Dilip Davda on September 2, 2024

•    The company is engaged in the business of manufacturing and marketing of FIBCs and other industrial packaging products. 
•    It marked steady growth in its top and bottom lines for the last three fiscals. 
•    Based on FY24 earnings, the issue relatively appears fully priced. 
•    Well-informed investors may park funds for the medium to long term. 

ABOUT COMPANY:
Shree Tirupati Balajee Agro Trading Co. Ltd. (STBATCL) 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 customized products and cater to the bulk packaging solutions of clients from diverse industries like chemicals, agrochemicals, food, mining, waste disposal industry, agriculture industry, lubricants and edible oil by supplying them FIBC products for transportation purposes and their packaging requirement. The company 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, its core competencies include a wide product range, multi-location facilities, recurring orders, global presence, scale of production, technical expertise, environmental contribution, and recycling efforts (Source: Care Edge Report). It offers a wide range of packaging solutions to 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, mining etc. Its products are logistic solutions for diverse industries 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. It 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 has established its services for more than 20 (twenty) years and operate out of five (5) manufacturing units. It operates and manages business through subsidiaries viz. Honorable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Limited (STBFL) and Jagannath Plastics Private Limited (JPPL) as well.

For the last three fiscals, the company served B2B number of customers 351 (FY2), 353 (FY23), and 346 (FY24). As of July 23, 2024, it had 857 employees on its payroll. It also hires contract labourers as and when required. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo IPO of 14750000 fresh equity shares issue worth Rs. 122.42 cr. at the upper cap, and an Offer for Sale (OFS) of 5690000 equity shares (worth Rs. 47.23 cr. at the upper cap). The company has announced a price band of Rs. 78 - Rs. 83 per equity shares of Rs. 10 each. The overall size of the issue will be approx. 20440000 shares worth Rs. 169.65 cr. The issue opens for subscription on September 05, 2024, and will close on September 09, 2024. The minimum application to be made is for 180 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.06% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 31.45 cr. for repayment/prepayment of certain borrowings, Rs. 20.82 cr. for investment in subsidiaries for repayment of loans, Rs. 13.50 cr. working capital, Rs. 10.74 cr. for funding working capital of subsidiaries., and the rest for general corporate purposes. 

The joint Book Running Lead Managers (BRLMs) to this issue are PNB Investment Services Ltd., and Unistone Capital Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 14.29 - Rs. 164.75 per share, between September 2002 and November 2023. It has also issued bonus shares in the ratio of 50 for 1 in August 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 2.78 per share. 

Post-IPO, its current paid-up equity capital of Rs. 66.82 cr. will stand enhanced to Rs. 81.57 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 677.04 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 453.79 cr. / Rs. 13.66 cr. (FY22), Rs. 478.14 cr. / Rs. 20.72 cr. (FY23), and Rs. 552.82 cr. / Rs. 36.07 cr. (FY24). 

For the last three fiscals, the company has posted an average EPS of Rs. 4.43 and an average RoNW of 19.16%. The issue is priced at a P/BV of 3.01 based on its NAV of Rs. 27.54 as of March 31, 2024, and at a P/BV of 2.29 based on its post-IPO NAV of Rs. 36.22 per share (at the upper cap). 

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 19.67. Based on FY23 earnings, the P/E stands at 32.68. Thus the issue is relatively fully priced. 

The company reported PAT margins of 3.01% (FY22), 4.33% (FY23), 6.53% (FY24), and RoCE margins of 10.02%, 13.39%, 16.29% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Commercial Syn Bags, Emmbi Ind., and Rishi Techtex as their listed peers. They are trading at a P/E of 38.1, 22.6, and 34.4 (as of September 02, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The two BRLMs associated with the offer have handled 19 pubic issues in the past three fiscals, out of which no issues closed below the offer price on the listing date. 

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