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Published on 31/03/2021 1:39:53 PM | Source: Accord Fintech

Jetmall Spices and Masala coming with an IPO to raise upto Rs 5 crore

Posted in IPO Analysis| #IPO

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Jetmall Spices and Masala

  • Jetmall Spices and Masala has come out with an initial public offering (IPO) of 24,90,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 20 per equity share.

  • The issue has opened on March 31, 2021 and will close on April 7, 2021.

  • The shares will be listed on SME Platform of BSE.

  • The share is priced 2 times higher to its face value of Rs 10.

  • Book running lead manager to the issue is Mark Corporate Advisors.

  • Compliance Officer for the issue is Sheethal Jayandra Mehta.

Profile of the company

Jetmall Spices & Masala is incorporated to carry on trading and marketing of food products, ready to eat foods, food grains, spices, dry fruits, nuts, ready to cook foods, food ingredients, processed foods, food stuffs and other consumable provisions of every description for human consumption in addition to Retailing of these products. The company is into Trading and marketing of Spices, Masalas and Dry fruits. It imports spices and supply in India in bulk quantities. Its major imports are from Vietnam, Srilanka, Indonesia, etc. It is prominently indulged in wholesaling of superior quality Spices, masalas and dry fruits. It is B2B traders, highly specialized in Masala, Spices & Dry fruits.

The company maintains stocks and distribute them to different institutional parties like Masala manufacturers, Exporters, etc, it provides them in bulk quantities. It also provides to retail stores in bulk quantities in its brand name and thereafter they repack and sell in their own brands. It follows standard packing process to ensure that quality and authentic taste of spices remains intact. It offers the best of taste in market. It is the top rated dealers when it comes to spices due to its uncompromising quality supplies. Its core strength is Loyal Customers, Dedicated Team, Excellent Quality Products, Strong Resources, Marketing Network & Prompt Delivery.

Proceed is being used for:

  • Setting up of ten new retail outlets.

  • Meeting the working capital requirements.

  • General corporate purposes.

  • Meeting the expenses of the Issue.

Industry overview

Fast-moving consumer goods (FMCG) sector is India‘s fourth largest sector with household and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55%) is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared to urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50% of the total rural spending.

The retail market in India was estimated to reach $1.1 trillion by 2020 from $840 billion in 2017, with modern trade expected to grow at 20 25% per annum, which is likely to boost revenue of FMCG companies. Revenue of FMCG sector reached Rs. 3.4 lakh crore ($52.75 billion) in FY18 and is estimated to reach $103.7 billion in 2020. FMCG market is expected to grow at 9-10% in 2020. Rise in rural consumption will drive the FMCG market. It contributes around 36% to the overall FMCG spending. FMCG urban segment witnessed growth rate of 8%, whereas, rural segment grew at 5% in the quarter ended September 2019. The Government has allowed 100% Foreign Direct Investment (FDI) in food processing and single-brand retail and 51% in multi-brand retail. This would bolster employment, supply chain and high visibility for FMCG brands across organised retail markets thereby bolstering consumer spending and encouraging more product launches. The sector witnessed healthy FDI inflow of $16.28 billion during April 2000-March 2020.

India, known as the home of spices, boast a long history of trading with the ancient civilisations of Rome and China. Today, Indian spices are the most sought-after globally, given their exquisite aroma, texture, taste and medicinal value. India has the largest domestic market for spices in the world. Traditionally, spices in India have been grown in small land holdings, with organic farming gaining prominence in recent times. India is the world's largest producer, consumer and exporter of spices; the country produces about 75 of the 109 varieties listed by the International Organization for Standardization (ISO) and accounts for half of the global trading in spices. In FY20, spices worth $ 3.65 billion were exported. During FY19, a total of 1.10 million tonnes of spices and spice products valued $2.80 billion was exported from the country as against 1.02 million tonnes valued $2.78 billion in FY18, registering an increase of 7% in volume. Top 10 importers of Indian spices in FY19 were US, China, Vietnam, Hong Kong, Bangladesh, Thailand, UK, UAE, Malaysia, and Sri Lanka.

Pros and strengths

Quality: Quality for company is a never-ending process to meet significant quality requirements. Its products are always the best of the season and retain maximum freshness, natural flavour and taste. It committed to supply of premium quality products at most reasonable price to clients.

Customers: The company pride in having settled long lasting mutually beneficial relationships with clients. Its product & services are accepted wherever it is which makes company’s gain trust and profit from customers is that it considers them the center to work around. The company value its customers and aims to exceed customer expectations by fulfilling valuable commitments. Its customer-oriented approach and cordial relations with them are the key strengths of the company. The company aims to provide cost effective solutions available while adhering to the quality standards of the services. It strives to establish relationships with clients and collaborate with them to drill down on the best solutions.

Experienced and Professional Team: The company is promoted by Bharat Kumar Pukharajji. He is the guiding force behind the growth of the company and possesses more than two decades of experience in the trading & retailing. He is also associated with the company since incorporation. With his dedication and commitment along with support of company’s key management personnel and dedicated employee base, the company has shown an increasing trend in its business operations. Its market position has been achieved by adherence to the vision of its Promoter and senior management and their experience. 

Risks and concerns

Substantial portion of revenues depends upon few clients: For the fiscal year ended March 31, 2020, 2019 and 2018; the company’s top ten largest clients accounted for approximately 45%, 42% and 40%, respectively of its revenues from operations. The loss of a significant client or clients would have a material adverse effect on its financial results. It cannot assure you that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it loses any of them. Furthermore, major events affecting its clients, such as bankruptcy, change of management, mergers and acquisitions could adversely impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivables from that client would increase and may have to be written off, adversely impacting its income and financial condition.

Products are perishable in nature: The company is engaged in to trading/supplying of spices and Dryfruits and same has certain shelf life before which the same needs to be consumed. Hence, it has to ensure that right quantity and quality of its products reach the markets in a timely manner. Any interruption in supply of its products to the various markets, due to any reason including those not within its control, could have a material adverse effect on its business, results of operation and financial condition.

Depends on third party transportation for carrying supplies: The company uses third party transportation for carrying supplies to client locations. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. These transportation facilities may not be adequate to support its existing and future operations. In addition, supplies may be lost or damaged in transit for various reasons including but not limited to occurrence of accidents or natural disasters. An increase in the freight costs or unavailability of freight for transportation may have an adverse effect on its business and results of operations. Further, disruptions of transportation services due to weather-related problems, strikes, lockouts, inadequacies in the road infrastructure and port facilities, or other events could impair ability to procure goods on time. Any such disruptions could materially and adversely affect its business, financial condition and results of operations.

Outlook

Incorporated in 2012, Jetmall Spices and Masala is engaged in the trading and marketing activities of spices, food products, masalas, and dry fruits. Its product portfolio includes ready-to-eat foods, food grains, nuts, dry fruits, food ingredients, processed foods, food stuffs, etc. It imports spices from countries i.e. Srilanka, Vietnam, Indonesia, etc, and supplies it in India in bulk quantity. Its core strength is Loyal Customers, Dedicated Team, Excellent Quality Products, Strong Resources, Marketing Network & Prompt Delivery. The company maintains stocks and distribute them to different institutional parties like Masala manufacturers, Exporters, etc, it provides them in bulk quantities. It also provides to retail stores in bulk quantities in its brand name and thereafter they repack and sell in their own brands. On the concern side, the company require a number of approvals, licenses, registrations and permits in the ordinary course of its business. Additionally, it needs to apply for renewal of approvals which expire, from time to time, as and when required in the ordinary course. The company operate in an industry, which faces intense competition from established as well as unorganized players. Its competition depends on several factors, which include quality, price and its pace in keeping up with the changing trend.

The company is coming out with an IPO of 24,90,000 equity shares of Rs 10 each at a fixed price of Rs 20 per equity share to mobilize Rs 4.98 crore. On the performance front, the operating income of the company for the year ending March 31, 2020 is Rs 3913.95 lakh as compared to Rs 4343.94 lakh for the year ending March 31, 2019, showing decrease of 9.90 % and such decrease/ is due to the fluctuation in the market demand. Profit before tax decreased from Rs 24.29 lakh in financial year 2018-2019 to Rs 20.36 lakh in financial year 2019-20 due to decrease in revenue from operations and increase in overall costs. The company intends to expand its existing customer base by reaching out to other geographical areas. It also intends to continue growing by reaching out to new customers and also increasing sales to the existing customers and thereby reaching to other geographical areas. All these factors may result in an increase in the quantum of current assets.

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