Sawaliya Food NSE SME IPO review

•    The company is engaged in the manufacturing and processing of dehydrated vegetables.
•    It operates on B2B model of business and earns more revenue.
•    The company marked growth in its top and bottom lines for reported periods.
•    The sudden surge in bottom lines from FY24 onwards raises eyebrows.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Sawaliya Food Products Ltd. (SFPL) is a manufacturer and processer of dehydrated vegetables, serving leading institutional manufacturers engaged in branded packaged food industries, traders and international importers of dehydrated products. As such, it is deeply connected with the branded packaged food industry and this accounted for 66.15 % of its revenue in Financial Year 2025. Its products find wide application as raw materials in the fast-moving consumer goods (“FMCG”) industry, for products such as cup noodles, ready to eat noodles, pasta, soup, etc. SFPL’s main products include dehydrated carrot, dehydrated cabbage and dehydrated ring beans / beans. Over the years, it has crafted a sustainable as well as an integrated business model wherein it sources raw materials directly from farmers to ensure that it uses absolutely natural ingredients in products. Since the farmers are located in close proximity to its manufacturing unit, it has an advantage of procuring desired quantity of raw materials mainly being carrots, at cost competitive prices and low logistical costs. 

Since, it sources raw materials directly from the farmers, it is able to offer products at a lower range than competitors, thereby having a unique pricing model. Additionally, its tie-ups with farmers enable it to procure vegetables, especially carrot in warehouse, and sell the under-utilised raw materials, at higher prices in the market and gain from the fluctuation in prices of the raw materials. The Company has a diversified customer portfolio for its products. Its customer base is divided into three categories namely, institutional manufactures, Indian as well as foreign traders and international customers. As of June 30, 2025, it had 25 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 2902800 equity shares of Rs. 10 each to mobilize Rs. 34.83 cr. at the upper cap. It has announced a price band of Rs. 114 – Rs. 120 per share. The issue consists of 2602800 fresh equity shares issue (worth Rs. 31.23 cr. at the upper cap), and an OFS (Offer for Sale) of 300000 shares (worth Rs. 3.60 cr. at the upper cap). The issue opens for subscription on August 07, 2025, and will close on August 11, 2025. The minimum number of shares to be applied is for 2400 shares and in multiples of 1200 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 29.27% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 7.49 cr. for capex on purchase of new manufacturing and upgradation of existing machinery, Rs. 10.00 cr. for working capital, Rs. 4.61 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

The IPO is solely lead managed by Unistone Capital Pvt. Ltd., and Skyline Financial Services Pvt. Ltd., is the registrar to the issue. Alacrity Securities Ltd. is a market maker.

The company has issued initial equity shares at par value. It has issued further equity shares at Rs.110 per share in February 2015, and March 2015. It has also issued bonus equity shares in the ratio of 42 for 1 in March 2024, and 3 for 8 in September 2024. The average cost of acquisition of shares by the promoters/ selling stakeholders is Rs. 0.27, and Rs. 0.85 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 7.32 cr. will stand enhanced to Rs. 9.92 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 119.02 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 15.30 cr. / Rs. 0.59 cr. (FY23), Rs. 23.67 cr. / Rs. 3.12 cr. (FY24), Rs. 34.34 cr. / Rs. 6.95 cr. (FY25). Quantum jump in bottom lines from FY24 onwards raise eyebrows.

For the last three fiscals, the company has reported an average EPS of Rs. 6.30 and an average RoNW of 49.52%. The issue is priced at a P/BV of 6.94 based on its NAV of Rs. 17.29 as of March 31, 2025, and at a P/BV of 2.71 based on its post-IPO NAV of Rs. 44.24 per share (at the upper cap). There is a garble in its NAV as of March 31, 2025 in RHP and in IPO ad published.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 18.32. Based on FY24 earnings, the P/E stands at 38.10. Thus, the issue appears aggressively priced.

For the reported periods, the company has posted PAT margins of 3.94% (FY23), 13.33% (FY24), 20.32%, (FY25), and RoCE margins of 14.40%, 49.24%, 48.96%, respectively for the referred periods. In IPO ad, ROCE data is garbled with Debt-to-Equity Ratio data. Its debt equity ratio of 1.78 as of March 31, 2025 also raise alarm.

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.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Prime Fresh, as its listed peers. It is trading at a P/E of 24.6 (as of August 01, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 25th mandate from Unistone Capital in the last three fiscals including the ongoing one.  Out of the last 12 listings, 3 opened at discount, and the rest with premium ranging from 3.84% to 86.61% on the date of listing.