Shri Ahimsa Naturals NSE SME IPO review (Apply)

•    The company is engaged in the manufacturing and extraction of caffeine anhydrous Natural, Green Coffee Beans Extracts and Crude Caffeine.
•    It is also trading in herbal extracts, and enjoys status as an 100% EoU.
•    It posted exceptional year of boost in top and bottom lines amidst the Pandemic impact.
•    The company marked sustainable trends for its top and bottom-line growth.
•    Based on its recent set of financial data, the issue appears reasonably priced.
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Shri Ahimsa Naturals Ltd. (SANL) commenced its operations in 1990 and is presently engaged in the extraction, manufacturing, of Caffeine Anhydrous Natural, Green Coffee Bean Extracts (GCE) and Crude Caffeine along with trading of other herbal extracts. Its products find their application in the food & beverage, nutraceuticals, cosmetics and pharmaceutical industries due to their health benefits.

The Company primarily processes crude caffeine procured from multiple decaffeination plants situated at Vietnam, Mexico, etc. The primary raw material of the company, crude caffeine, is a bi-product of such decaffeination plants. SANL further processes crude caffeine to manufacture Green Coffee Beans Extracts (GCE) and Caffeine Anhydrous Natural. Initially, the Company's business focused solely on the extraction, manufacturing, and sale of Caffeine Anhydrous Natural. 

Through further research and development on crude caffeine sourced from certain suppliers, the Company discovered that it contained GCE. To capitalize on this opportunity, the company developed a process to extract GCE from the crude caffeine and subsequently added GCE to its product portfolio in 2018. Additionally, in response to the growing demand for other herbal extracts from its customers, the company expanded its product portfolio to include various herbal extracts in year 2021. Since the year 2022, it has started manufacturing Crude Caffeine from Tea waste and Coffee waste, which is sold in open market and used for captive consumption.

SANL being an Export Oriented Unit, its operations are primarily export-focused, and presently it is supplying Products to over 14 countries including USA, Germany, South Korea, UK, Thailand, etc. 

The company makes direct sales to large-scale consumers and work with resellers to reach smaller consumers in export markets. Apart from direct exporters and EOU units situated in India. The quality of product is well accepted in international market and the same is evidenced by getting repeat orders from various customers. During the period ended on September 30, 2024, it had an on-going business relationship of three or more than three years with almost 32% of total customers who contributed almost 57% of the revenue from the operations for the period ended on September 30, 2024. The company operates on a B2B model. As of the date of filing this offer document, it had 73 employees on its payroll and is also engaging contract labourers as and when required. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 6202800 equity shares to mobilize Rs. 73.81 cr. at the upper cap. The company has announced a price band of Rs. 113 – Rs. 119 per share of Rs. 10 each. The issue consists of 4203600 fresh equity shares (worth Rs. 50.02 cr. at the upper cap) and an Offer for Sale (OFS) of 1999200 shares (worth Rs. 23.79 cr. at the upper cap). The issue opens for subscription on March 25, 2025, and will close on March 27, 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 NSE SME Emerge. The issue constitutes 26.59% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 35.00 cr. for investment in wholly owned subsidiary Shri Ahimsa Healthcare Pvt. Ltd., and the rest for general corporate purposes. 

The IPO is solely lead managed by Srujan Alpha Capital Advisors Llp, and Cameo Corporate Services Ltd., is the registrar to the issue. Choice Equity Broking Pvt. Ltd., is the Market Maker for the company. The issue is underwritten to the tune of 40.01% by Srujan Alpha and up to 59.99% by Choice Capital Advisors Pvt. Ltd. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 15.50 – Rs. 65.00 per share (on the basis of Rs. 10 FV) between February 2009, and August 2024. It has also issued bonus equity shares in the ratio of 5 for 2 in August 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 3.12, Rs. 5.83, Rs. 6.16, Rs. 7.34, Rs. 11.43, and Rs. 12.05 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 19.13 cr. will stand enhanced to Rs. 23.33 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 277.63 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 58.94 cr. / Rs.11.02. cr. (FY22), Rs. 106.14 cr. / Rs. 38.21 cr. (FY23), and Rs. 78.70 cr. / Rs. 18.67 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 9.74 cr. on a total income of Rs. 41.37 cr. 

According to the management, FY23 was the exceptional year of higher top and bottom lines following highly volatile global markets following the Pandemic and over buying happened which resulted in such an odd performance, but based on other years working, its top and bottom line has seen constant margins.  It enjoys monopoly in its products that has huge demand globally.

For the last three fiscals, the company has reported an average EPS of Rs. 13.18 and an average RoNW of 37.45%. The issue is priced at a P/BV of 2.28 based on its NAV of Rs. 52.11 as of September 30, 2024, and at a P/BV of 1.85 based on its post-IPO NAV of Rs. 64.16 per share (at the upper cap). (The RHP had NAV of Rs. 45.79 as of March 31, 2024 and was silent for its NAV as of September 30, 2024).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.25. Based on FY24 earnings, the P/E stands at 14.88. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 18.99% (FY22), 36.69% (FY23), 23.91%, (FY24), 23.93% (H1-FY25), and RoCE margins of 48.83%, 72.46%, 25.69%, 12.59% 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. 

COMPARISION 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 7th mandate from Srujan Alpha in the last three fiscals.  From the last 6 listings so far, 1 listed at par and the rest listed with a premium ranging from 5% to 32.5% on the listing date.