Abram Food BSE SME IPO review (May apply)

•    The company is engaged in manufacturing and marketing of Dal, Atta, Besan, Edible oil, spices etc. 
•    It markets products in northern region and UP area through distributors.
•    The company posted growth in its top and bottom lines for the reported periods.
•    Boosted top and bottom lines raise eyebrows and concern over its sustainability, as it is operating in a highly competitive and fragmented segment.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Abram Food Ltd. (AFL) is engaged in the manufacturing and trading of Chana Dal, Flour (Chakki Atta), Besan, Multi Grain Atta, Maida, Sooji, Spices, Cattle Feed (Khal) and edible oils in product range and market & sell it in Rajasthan, Delhi /NCR and Uttar Pradesh under the brand name of “Kherliwala” through distributors. It also provides Chana Dal, Atta, Besan, Chana Churi and Cattle Feed (Khal) to distributors in bulk quantities of ranging from 30 to 50 kg packaging to sell in loose quantity to end customer through retail outlets. The company follows standard packing process to ensure that quality and authentic taste of products range remains intact.

The company handpicks raw materials from various suppliers who procures such raw material from including but not limited to the Alwar Mandi, Khairthal, Bahrod Jaipur and Delhi. AFL processes products with utmost care without using artificial preservatives or chemicals, thereby creating a product portfolio of chana dal, flour, spices, Besan and cattle feed which carry the freshness and goodness of each ingredient. Its focus on quality ensures that every step of the process, from procurement, processing to packaging, is carried out to the highest standards. Its manufacturing facilities, coupled with a supply chain, enables it to deliver products that meet the evolving needs of customers.

Its model has helped the company penetrate the niche segment of market and establish a customer base in and around Rajasthan, Delhi-NCR ad Uttar Pradesh. To achieve this, it has developed a business model in which it manufactures, processes and packages products in quantities that can sustain a customer until the shelf life of the product, reducing waste and providing a diverse range of products with freshness and goodness. It focuses on optimum utilization of resources by efficiently using by-products extracted while producing Chana Dal such as Chana Churi, Chana Chilka & Chana Kachri as a source of addition in revenue streams by selling them, enabling it to optimally utilizing resources.

Presently most of its sales are derived from Rajasthan and Delhi-NCR. It is also engaged in sale of branded products through its website. As of March 31, 2025, it had 18 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1428000 equity shares of Rs. 10 each at a fixed price of Rs. 98 per share to mobilize Rs. 13.99 cr. The issue opens for subscription on June 24, 2025, and will close on June 26, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.71% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.40 cr. for this IPO process, and from the net proceeds of the IPO, the company will utilize Rs. 3.85 cr. for capex on new equipments, Rs. 6.70 cr. for working capital, and Rs. 2.05 cr. for general corporate purposes. 

The IPO is solely lead managed by Corporate Makers Capital Ltd., and KFin Technologies Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker.

The company has issued initial equity shares at par value. It has issued further equity shares in the price range of Rs.40.00 – Rs. 250.00 per share between March 2009, and October 2024. It has also issued bonus shares in the ratio of 11 for 1 in March 2024, and 1 for 5 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 1.75, Rs. 10.30, and Rs. 11.44 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 3.73 cr. will stand enhanced to Rs. 5.15 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 50.51 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 33.16 cr. / Rs. 0.48 cr. (FY23), Rs. 36.14 cr. / Rs. 1.02 cr. (FY24), Rs. 64.09 cr. / Rs. 3.26 cr. (FY25). Boosted top and bottom lines for FY25 raise eyebrows and concern over the sustainability of its net margins going forward, as it is operating in a highly competitive and fragmented segment. 

For the last three fiscals, the company has reported an average EPS of Rs. 5.74 and an average RoNW of 30.06%. The issue is priced at a P/BV of 4.33 based on its NAV of Rs. 22.62 as of March 31, 2025, and at a P/BV of 2.25 based on its post-IPO NAV of Rs. 43.51 per share.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 15.51. Based on FY24 earnings, the P/E stands at 49.50. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 1.46% (FY23), 2.83%, (FY24), 5.08% (FY25), and RoCE margins of 29.09%, 45.73%, 56.02% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It adopted a dividend policy in December 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown HOAC Food, Contil India, Jetmall Spices as their listed peers. They are trading at a P/E of 32.9, 16.9, and NA (as of June 20, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 2nd mandate from Corporate Makers in the last two fiscals, including the ongoing one.  It has a track record for only 1 listing so far, which opened at a discount and thus, it has poor track record.