Issue Proceeds - Deployment Schedule

Transcription

1 Date: 8 th May, 213 Esteem Bio Organic Food Processing Limited (EBOFPL) Stock Performance Details Background Current Price : Rs. 54.5^ Face Value : Rs. 1 per share 52 wk High / Low : Rs /25.25 Total Traded Volumes : 24, shares^ Market Cap : Rs. 81crore^ Sector : Other Agricultural Products EPS (FY212) : Rs. 98. per share Equity Share Capital : Rs crore P/E (TTM) : (x)^ P/BV (TTM) : 3.55 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : EBFL BSE Scrip Code : Listing : BSE SME Platform ^as on 8 th May, 213; $ Capitaline Shareholding Details March 213 Particulars Promoter & Promoter Group Holding Total Institutional Holdings (FIIs & DIIs) Shareholding Nos. (%) 3,69, Public Holdings 1,18,48, Total 1,49,18, 1. Esteem Bio Organic Food Processing Ltd (EBOFPL) which is based in New Delhi operates in the Agriculture Sector. Organic Farming is the core business activity of EBOFPL. It is also engaged in the cultivation of wheat, paddy, sugar cane, fruits, vegetables, flowers and wood plantations. Under its horticulture segment, the company s focus has been on organic farming given the increasing awareness towards healthy food. EBOFPL adopts a share cropping model of farming, wherein it employs farmers, croppers and workers on contract basis to execute the strategy framed by the company s farm managers. The company s owns a farm of acres located at Pragna Rudrapur in Uttarakhand. The farm is situated at the foothills of the Himalayas. Some of the major customers of the company are: Greenply Industries Ltd, Kichha Sugar Co. Ltd, Asian Doors Industries, Vikas Plywood, Nisha Traders, Neelkanth Trading Company. The lead manager for EBOFPL was Guiness Corporate Advisors Pvt. Ltd based in Kolkata. The underwriters for the issue were Guiness Securities Ltd and Guiness Merchant Bankers Pvt. Ltd. Guiness Securities has been given the responsibility of acting as a Market Maker. IPO Objectives Issue Proceeds - Deployment Schedule Particulars Amount (Rs. Million) Setting up Shade Net Cultivation Facility 38. Development of Farm Land for Transition to Organic Farming 56.5 Procurement of Farm Tools & Equipments 3. Brand Building & General Corporate Purposes 8. Issue Expenses 7. Total Particulars FY FY Total Setting up Shade Net Cultivation Facility Development of Farm Land for Transition to Organic Farming Procurement of Farm Tools & Equipments Brand Building & General Corporate Purposes Issue Expenses ** For issue expenses Rs..5 million has already been incurred An Initiative of the BSE Investors Protection Fund 1

2 Financial Snapshot Particulars From the Research Desk of LKW s Gurukshetra.com Standalone Financials (Rs million) Income Statement 6M FY13 FY 212 FY 211 FY 21 FY 29 Income from Operations Y-o-Y Growth (%) EBITDA Y-o-Y Growth (%) EBITDA Margin (%) Net Profit Y-o-Y Growth (%) NPM (%) Balance Sheet Cash and Bank Balances Inventories Net Working Capital Net Worth Balance Sheet Ratios ROCE (%) RONW (%) Source : RHP, Capitaline; Company Financials Net income from operations for the financial year ended FY 212 increased by 75.7% on y-o-y and the same stood at Rs. 3.4 million as compared to Rs million for the year ended 31 st March 211. The reason for the increase could be attributed to the increase in sales. Further, the rise in demand for the products of EBOFPL could be on account of growing awareness towards organic food. The business model of the company is interesting. While, it takes ownership of the farm land, it curtails its operational costs by contracting croppers, farmers, workers etc to cultivate the land. These contracted farmers have to make use of their own equipment and seeds. This makes the cost sheet of the company much lighter as employee cost is one of the major cost item on the books of a company engaged in the agriculture sector. Of the total revenue generated, majority (75%) is earned by the company while, the balance 25% is shared with the croppers / farmer / worker. This in turn incentivises the farmer to adopt better farming practices to increase his individual yield and in turn benefit for the company. In line with the steady increase in Net Sales reported by the company since the year ended 31 st March 29 till the year ended 31 st March 212, the EBIDTA of the company has also increased. However, the EBIDTA margins have been on a decline for the same period. EBIDTA margins for the year ended 31 st March 212 stood at 96.7% as compared to an EBITA margin of over 4% for the year ended 31 st March 29. Inventory for the company stood at Rs million for the year ended 31 st March 212 as compared to Rs million for the year ended 31 st March 211 and as compared to Rs million for the year ended 31 st March 21. This could be attributed to the accounting policy adopted for Inventories. The finished agricultural produce being valued at 9% of Net Realizable value and semi finished produce like wood being valued at 75% of the Net Realizable value. With food inflation remaining high during FY 212 and FY213, the inventory value appears to have been high. As on FY212, there have been Unsecured Loans in the nature of Inter Corporate Loans which amounted to Rs million. The same in FY 211 stood at Rs million while in FY 21 and FY 29 it stood at Rs million. However, for 6M FY13 ended on 3 th September, 212 the same appeared to have been extinguished. An Initiative of the BSE Investors Protection Fund 2

3 One of the biggest concerns for the company and its business performance arises from the fact that it is heavily dependent on the vagaries of the monsoon. Thus a drastic change in the climatic conditions could have an impact on its financial performance and profitability. Also given that its farm is placed at the foothills of Himalayas, any natural calamity like an Earthquake as has been witnessed in the recent times could impact its business. Performance on the Bourses 25 2 Stock Performance as on 1st Apr, 213 % EBOFPL BSE Small Cap Peer Comparison The company operates in a highly competitive agriculture sector which is characterized by the presence of organized as well as large number of fragmented players in the unorganized segment. The below mentioned tables provides a snapshot of the financial performance of the company for FY 212 against one of the larger players in the industry. (Rs. In millions) Particulars EBOFPL Usher Agro Income from Operations EBIDTA Net Profit EBIDTA Margins (%) PAT Margins (%) Book Value Per Share P/E (x)** NA 4.9 P/BV (x)** NA.8 RONW (%) Source : Capitaline; Company RHP; ** TTM basis as on Dec 212; NA as company was not listed Business Model Positioning Key Positives / Growth Drivers Perennial source of water as the farm land is located at foothills of Himalayas in Uttarakhand. Forward Integration into food processing. Key Negatives & Threats Heavily dependent on monsoon and contracted labor. No threat of new entrants on account of low entry barriers. Growing awareness of organic foods and complete transformation of horticulture activites into organic farming. Foray into Green house farming. Highly fragmented market. Efficient Supply Chain Logistics Geographic concentration of business activities. An Initiative of the BSE Investors Protection Fund 3

4 About the Industry Management Outlook Indian economy is primarily an agrarian economy. In terms of farm output it ranks second globally. Agriculture and its allied activities provide employment to over 5% of the Indian population and in terms of revenues to the nation it contributed about 13.9% of the GDP in FY 212. India is also the largest producer of many agricultural products in the world like fresh fruits, jute, pulses, spices, sesame seeds etc to name a few. Organic farming as a form of agriculture relies on techniques such as crop rotation, green manure, compost, and biological pest control in order to maintain soil productivity. Organic farming as a method of farming has not gained popularity as yet. However, with increase in environmental issues affecting health of an individual. Resultantly, organic farming has been gaining growing acceptance thereby offering satisfactory growth prospects going forward. However in India agriculture as an industry still depends heavily on monsoon for water supply. Also another factor which leads to decline in agriculture yield is lack of proper irrigation facilities and accessibility to economically priced hybrid quality of seeds and fertilizers. While, the company is engaged in producing organic foods, its foray into food processing segment would help its revenues grow over the longer term. Further, increased awareness about organic foods too would aid its financial performance going forward. However, geographic concentration of business activities, dependence on monsoon & contract farmers, intense competition because of lack of entry barriers and increased risk of natural calamity (especially in the Northern region) are certain factors which merit attention. Traditional tools and techniques of farming are still widely used while farming in India. Also easy availability of credit is a big cause of concern for the Indian farmers and loans are still obtained at high credit rates. Problems like weak transport and infrastructure still hamper the agriculture industry by causing slippages, which leads to heavy losses. Further, the nature of the industry is also characterized by lack of an efficient supply chain and warehousing facilities. An Initiative of the BSE Investors Protection Fund 4

5 Financial Graphs Net Income from Operations 35 3 Rs. in Million FY 29 FY 21 FY 211 FY 212 EBIDTA & EBIDTA Margins 35 5 Rs. in Million % FY 29 FY 21 FY 211 FY 212 EBIDTA EBIDTA Margins PAT & PAT Margins 35 5 Rs. in Million % FY 29 FY 21 FY 211 FY 212 PAT PAT Margins An Initiative of the BSE Investors Protection Fund 5

6 Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra.com from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra.com in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and LKW s Gurukshetra.com shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW), commenced business in 199 and is currently engaged in providing WEALTH ADVISORY, CORPORATE ADVISORY and ECONOMIC & FINANCIAL RESEARCH & CONTENT services. LKW s ECONOMIC & FINANCIAL RESEARCH & CONTENT division currently generates Reports on Economic & Industry Trends, Global & Indian Equity Markets, Fundamental Analysis of IPOs, Companies & Industries, Management Meeting Reports, Balance Sheet & Financial Analysis Reports and an Economic Political and Sentiment Barometer. LKW also conducts Capital Market related Training Programs and has cutting edge expertise in Mutual Fund Analysis and specializes in Grading of Mutual Fund Schemes and IPOs. GURUKSHETRA.com is an online initiative of LKW that focuses on Personal Finance while theipoguru.com is India s Premier Primary Market (IPO) Portal. Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd.Office : B Wing, 55-56, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai consulting@lotusknowlwealth.com Tel : Website : An Initiative of the BSE Investors Protection Fund 6