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:
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).
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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:
*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.
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