Evaluating Shree Tirupati Balajee Agro Trading Company IPO opportunity; Should you invest?

In this analysis, we take a closer look at Shree Tirupati Balajee Agro Trading Company Ltd and present you with the exclusive IPO details.

About the Issue  

Shree Tirupati Balajee Agro Trading Company Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the IPO details.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Repayment and/or prepayment, in part or full, of certain of the outstanding borrowings availed by the company.

2. Investment in the subsidiaries HPPL, STBFL and JPPL for repayment and/or prepayment, in part or whole, of certain outstanding borrowings availed.

3. Funding the incremental working capital requirements of the company.

4. Investment in the subsidiaries HPPL, STBFL and JPPL for funding working capital requirements.

5. General corporate purposes.

Promoter holding  

Binod Kumar Agarwal is the promoter of the company. The promoter currently holds a pre-issue shareholding stake of 88.38 per cent in the company.

Company profile  

The company specialises in the manufacturing and sale of Flexible Intermediate Bulk Containers (FIBCs), large flexible bags, and various industrial packaging products, including woven sacks, woven fabric, narrow fabric, and tapes, catering to both the Indian domestic market and international clients. The company’s top ten customers are based in India, Sweden, the USA, the UK, Australia, and Germany.

The company provides customized products, offering bulk packaging solutions to clients across diverse industries such as chemicals, agrochemicals, food, mining, waste disposal, agriculture, lubricants, and edible oils. Additionally, it offers alternative packaging and transportation solutions, streamlining the loading and unloading of vessels, containers, or trucks, thereby reducing labour requirements.

With over 20 years of industry experience, the company operates from five manufacturing units. To streamline operations and enhance management and control, the company produces specific products through its subsidiaries, including Honourable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Limited (STBFL), and Jagannath Plastics Private Limited (JPPL).

Financials  

The company has demonstrated steady and significant growth in both revenue and profit over the past few years. From FY22 to FY24, it achieved a Compound Annual Growth Rate (CAGR) of 10 per cent in revenue and 63 per cent in net profit. The bottom line could have been stronger if the company hadn't incurred substantial finance costs. However, it is expected to improve significantly as a notable portion of the net proceeds will be allocated for loan repayment. In FY24, the company reported an impressive Return on Equity (RoE) of 21 per cent and a Return on Capital Employed (RoCE) of 16 per cent.

Valuation and outlook  

The issue is priced with a P/BV ratio of 3.01 times, calculated using its Net Asset Value (NAV) of Rs 27.54 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 2.29 times, considering its post-IPO NAV.

When calculating the PE ratio for the company based on FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 14. Considering both valuation and returns, the company has significantly outperformed its listed peers.

In terms of capabilities, the company's core strengths encompass a broad product portfolio, multiple locations, recurring orders, global presence, large-scale production, technical expertise, environmental contributions, and recycling initiatives. Therefore, we advise investors to consider subscribing to the issue with a long-term investment horizon.