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Sheetal Universal Ltd IPO

07 Dec 2023

Introduction:

Like mainboard companies, small and medium-sized enterprises (SMEs) can also launch their Initial Public Offerings (IPOs). Doing so allows them to sell their equity ownership and raise capital from the public. It allows investors to buy stakes in growing companies and achieve long-term capital growth.

Sheetal Universal Limited is one such SME that plans to raise funds through its IPO. Engaged in the business of agricultural commodities processing, the company intends to raise Rs. 23.8 crores through the IPO, which ended for public subscription on Wednesday, 6 December 2023. Continue reading to learn more details regarding the Sheetal Universal IPO.

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Details of the IPO

Sheetal Universal IPO comprises a fresh issue with a total issue size of Rs. 23.8 crores. The company has fixed the issue price for the shares as Rs. 70 per share. Retail investors can apply for at least 2000 shares (one lot) and in multiples thereof. Refer to the table below for more IPO details:

IPO Date 4 December to 6 December 2023
Basis of Allotment 07-Dec-23
Listing Date 11-Dec-23
Face Value Rs. 10 per share
Issue Price Rs. 70
Lot Size 2000 shares
Total Issue Size 3,400,000 equity shares (Worth Rs. 23.80 crores)
Fresh Issue 3,400,000 equity shares (Worth Rs. 23.80 crores)
Listing At NSE SME, BSE SME

About the issuing company

As mentioned, Sheetal Universal Limited is engaged in the business of agricultural commodities processing. The company is responsible for sourcing, processing, and supplying raw materials to the manufacturers of biscuits, cakes, chocolate, peanut butter, and other bakery products. The company’s product portfolio comprises spices, pulses, sesame seeds, and other agro-based products.

The company has a manufacturing and processing unit in Jamnagar, Gujarat. It spans across a cumulative land area of approximately 14,668 square metres. The Government of India certified the manufacturing facility with the FSSAI-2006 certification in 2006. The company generates most of its revenue through exports to countries like Russia, Indonesia, Vietnam, Malaysia, Israel, Turkey, Egypt, Iran, Algeria, and the United Arab Emirates (UAE).

Key strengths of the company

Analyzing the key strengths of the issuing company can give you an idea of its future growth prospects. It can be a crucial factor to influence your investment decision. Below are the primary strengths of Sheetal Universal Limited as reflected in its Red Herring Prospectus:

  • The manufacturing unit of the company is located strategically in Jamnagar, which is near Gujarat sea ports, offering seamless exportation of products
  • The company follows a strict quality control mechanism at each stage of product processing. It has numerous quality-adherence certificates from the Government
  • The company boasts a diversified global customer base across several countries. It has maintained established relationships with its customers
  • The company has an excellent track record of delivering products within the stipulated time
  • A scalable business model 

Risks or weaknesses highlighted

Investors perceive the risks or weaknesses associated with the issuing company as red flags. These are the reasons that may hinder its growth in the long term. Below are the key risks or weaknesses associated with Sheetal Universal Limited:

  • A significant portion of the revenue is derived from the oil seeds business
  • The company is highly dependent on limited customers for its revenue
  • Unfavorable local weather or disruptions in the supply chain system may impact the availability of raw materials
  • The agricultural commodities are subject to price fluctuations, impacting the profit margins

Core financials of the company

Another key aspect that must influence your IPO investment decision is the issuing company’s financials. A company with strong financials has more chances of attracting investors. The table below portrays the core financials of Sheetal Universal Limited for the last three completed financial years:

Particulars Period Ended August 23, 2023 As of and for FY Ended March 31
2023 2022 2021
Share Capital 8 4 4 4
Net Worth 10 6 5 4
Total Borrowings 15 14 10 6
Revenue From Operations 57 129 39 38
Profit After Tax 2 2 0.3 0.3
Earnings Per Share (Diluted) 2.4 2.6 0.4 0.3
Return on Net Worth (%) 18% 31% 6% 6%

*Amount in Crores

Source – RHP Dated 28 November 2023 on SEBI website

As you can see, the company’s net worth has improved at a steady rate in the last three financial years. The revenue has grown robustly from Rs. 38 crores in FY21 to Rs. 129 crores in FY23. The EPS for FY23 stood at a healthy 2.6%.

To conclude

If you applied for the Sheetal Universal IPO, you can receive an allotment (or refund) notification by 7 December. Depending on your investment goals, you can sell shares at listing or keep them for the long term. But do not forget to analyse the company’s fundamentals and other factors before making a final decision.

 

Related Articles:  How to Analyse an IPO | What is IPO Grading? | What is Cut Off Price In IPO Application 

 

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