TBI Corn NSE SME IPO review (May apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
  • Anchor Investor Link
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on May 29, 2024

•    TCL is a prominent player in the corn milling industry.
•    The company posted sudden boost in its top and bottom lines from FY23.
•    Based on FY24 annualized super earnings, the issue appears aggressively priced.
•    The company operates in a highly competitive and fragmented segment raising concern for sustainability of its margins.  
•    Well-informed investors may park moderate funds for the medium term. 

ABOUT COMPANY:
TBI Corn Ltd. (TCL) is a prominent player in the corn milling industry. Located in the Sangli district of Maharashtra, India, it specializes in the production of good-quality Corn / Maize Grits and related products. The Company offers a diverse range of products, including cleaned and fat-free Corn Grits/Meal, Corn Flakes, Stone-free Broken Maize & Corn Flour and Turmeric Finger, all manufactured without chemical additives or preservatives and GMO-free.

Apart from ISO certifications, TCL holds certificates from MSME, APEDA, and are both Indian Organic and USDA Organic certified. It has successfully expanded into international markets, serving countries in the Gulf, Sri Lanka, Malaysia, Brunei, Vietnam, South Korea, and soon, Europe and the US. 

TCL proudly supplies to renowned companies across India. Its products cater to the needs of corn starch and cattle feed industries, with potential expansion in this sector. The Company is a trusted name in the corn milling industry, known for its commitment to quality, innovation, and international excellence. With its expanding reach and unwavering dedication, the company aims to continue providing good quality corn products to customers worldwide. It has a strong track record of revenue growth and profitability in past years from March, 2021 to December, 2023. As of January 30, 2024, it had 49 employees on its payroll including 15 contract labour.

Maharashtra has lion share in company's total revenues followed by Gujarat. However, it faces competition as the segment is highly competitive and fragmented. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4780800 equity shares of Rs. 10 each to mobilize Rs. 44.94 cr. at the upper cap. It has announced a price band of Rs. 90 - Rs. 94 per share. The issue opens for subscription on May 31, 2024, and will close on June 04, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.33% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 16.80 cr. for expansion of existing unit, Rs. 17.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is jointly lead managed by Swastika Investmart Ltd., and Ekadrisht Capital Pvt. Ltd., while KFin Technologies Ltd. is the registrar to the issue. SS Corporate Securities Ltd. is the market maker for the company. The issue is underwritten to the tune of 85% by Ekadrisht Capital and up to 15% by Swastika Investmart. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 75 - Rs. 173965 per share between March 2023 and September 2023. It has also issued bonus shares in the ratio of 2000 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 5.99, and Rs. 222.28 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 13.38 cr. will stand enhanced to Rs. 18.16 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 170.69 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 67.76 cr. / Rs. 0.24 cr. (FY21), Rs. 100.97 cr. / Rs. 0.45 cr. (FY22), and Rs. 140.43 cr.  / Rs. 6.86 cr. (FY23- two broker periods). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 7.66 cr. on a total revenue of Rs.101.97 cr. Thus the boosted top and bottom lines for the last 21 months' period not only raise eyebrows, but also concern over its sustainability as the company is operating in a highly competitive and fragmented segment.  

The offer document is missing last three fiscals average EPS and RoNW data. The issue is priced at a P/BV of 3.09 based on its NAV of Rs. 30.41 as of December 31, 2023, and at a P/BV of 1.99 based on its post-IPO NAV of Rs. 47.15 per share (at the upper cap).

If we attribute annualized FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 16.70, and based on FY23 earnings, P/E stands at 24.87. Thus the issue appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 0.36% (FY21), 0.45% (FY22), 2.05% (FY23 - 82 days), 5.52% (FY23 - 283 days), 7.59 (9M-FY24), and RoCE margins of 8.19%, 10.39%, 3.47%, 25.14%, 18.65% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared 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 no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is the 10th mandate from Swastika Invest in the last four fiscals (including the ongoing one), out of the last 9 listings, 2 opened at discount, 1 at par and the rest with premiums ranging from 4.17% to 90% on the date of listing. 

This is the 2nd mandate from Ekadrisht Capital in the ongoing fiscal and the only issue handled by it i.e. India Emulsifier got listed at a premium of 225.76% on the date of listing. 

TBI Corn IPO FAQs