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Shri Ahimsa Naturals

• Shri Ahimsa Naturals is coming out with an initial public offering (IPO) of 62,02,800 equity shares in a price band Rs 113-119 per equity share.
• The issue will open on March 25, 2025 and will close on March 27, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 11.3 times of its face value on the lower side and 11.9 times on the higher side.
• Book running lead manager to the issue is Srujan Alpha Capital Advisors LLP.
• Compliance Officer for the issue is Aayushi Jain. 

Profile of the company

The company commenced its operations in 1990 and is presently engaged in the extraction, manufacturing, of Caffeine Anhydrous Natural, Green Coffee Bean Extracts (GCE) and Crude Caffeine along with trading of other herbal extracts. Its products find their application in the food & beverage, nutraceuticals, cosmetics and pharmaceutical industries due to their health benefits. The company primarily processes crude caffeine procured from multiple decaffeination plants situated at Vietnam, Mexico, etc. The primary raw material of the company, crude caffeine, is a bi-product of such decaffeination plants. It further processes crude caffeine to manufacture GCE and Caffeine Anhydrous Natural. Initially, the company's business focused solely on the extraction, manufacturing, and sale of Caffeine Anhydrous Natural. Through further research and development on crude caffeine sourced from certain suppliers, the company discovered that it contained GCE. To capitalize on this opportunity, the company developed a process to extract GCE from the crude caffeine and subsequently added GCE to its product portfolio in 2018. 

Additionally, in response to the growing demand for other herbal extracts from its customers, the company expanded its product portfolio to include various herbal extracts in year 2021. Since the year 2022, the company has started manufacturing Crude Caffeine from Tea waste and Coffee waste, which is sold in open market and used for captive consumption. The quality of its product is well accepted in international market and the same is evidenced by getting repeat orders from its various customers. During the period ended on September 30, 2024, it had an on-going business relationship of three or more than three years with almost 32% of its total customers who contributed almost 57% of the revenue from the operations for the period ended on September 30, 2024.

Proceed is being used for:

• Investment in its wholly-owned subsidiary, Shri Ahimsa Healthcare Private Limited (SAHPL) for setting up a manufacturing facility at Sawarda, Jaipur, Rajasthan.
• General corporate purpose.

Industry overview 

Caffeine is a chemical compound naturally available in tea and coffee and in some other plants like cocoa beans and guarana berries. This compound comes primarily from ‘Coffea Arabica’ and ‘Coffea Robusta’ a shrub or tree that grows in high-altitude subtropical and equatorial regions of the world. The Caffeine Anhydrous market has experienced significant growth, with a valuation of $622.4 million in 2023, projected to reach $881.5 million by 2030, showcasing a steady Compound Annual Growth Rate (CAGR) of 6.88% during the forecast period of 2024-2030. This expansion is propelled by the increasing adoption of Anhydrous Caffeine across various end-use verticals, notably in the beverage industry and dietary supplements sector.

Several factors contribute to the expanding Anhydrous Caffeine market, including heightened health awareness, the prevalence of obesity among adults, escalating demand from athletes, and its utilization as supplements for diet and weight loss purposes. The prevalence of obesity and overweight offers has spurred consumer interest in weight loss supplements, thereby strengthening the demand for Anhydrous Caffeine due to its nerve stimulant properties, which have been found beneficial for weight control.

Global demand for Caffeine continues to rise, prompting manufacturers to invest in producing superior quality Caffeine products. Coffee, as one of the world's most favored beverages, plays a pivotal role in this market dynamic, with coffee beans ranking as the second most heavily traded commodity globally. Notably, consumer preferences are shifting towards low and no-calorie beverages, with increasing emphasis on scrutinizing ingredients like Caffeine and preservatives, as highlighted by a recent survey conducted by the International Food Information Council (IFIC).

Pros and strengths

Quality service: It has set high standards for itself when it comes to timeliness and quality of service it provides to its customers. It ensures that all the products reach its customers on stipulated time and there are minimum errors to ensure reduced product rejection. Its quality service for the last 3 decades has earned the company a confidence from its customers, which has resulted in customer retention and order repetition. It has also helped it to add to its existing customer base. It has internal procedure of checking the client orders at each stage from customer order to delivery. The company focuses on maintaining the level of consistency in its service, thereby building customer loyalty for its product.

Long term relationship with clients: The company has long established relationships with its key customers. It has developed a wide clientele base and this was done with its valued based relationship approach. Its existing relationships help it to get repeat businesses from its customers. This has helped the company to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

Healthy relationship with crude caffeine suppliers: One of the crucial aspects of its industry is availability and sourcing of raw materials for production of the final product. Its existing supplier relationship helps and protects its business in terms of timely supply and pricing and quality of the products offered. The company, being a relatively smaller size organization, relies on personal relationships with its suppliers. Further, it also leverages the past experience of its management in maintaining effective supplier relationship ensuring uninterrupted supply chain management.

Risks and concerns

Dependent on limited number of customers: A significant majority of its revenues from operations is derived from a limited number of customers. However, the composition of revenue generated from these customers might change as it continues to add new customers in the normal course of business. Its revenues may be adversely affected if there is an adverse development with such customer, including as a result of a dispute with or its quality issue with such major customers, which may result in significant reduction in its orders from such customers, and thereby decline in its revenue, cash flows and liquidity. Further, if its customers are able to fulfil their requirements through captive or in house manufacturing or any of its existing or new competitors providing products with better quality, or cheaper cost, it may lose significant portion of its business and revenue.

Requires certain approvals and licenses: The company requires several statutory and regulatory permits, licenses and approvals to operate its business. Many of these approvals are subject to periodical renewal. Any failure to renew the approvals that may expire, or to apply for the required approvals, licences, registrations or permits, or any suspension or revocation of any of the approvals, licences, registrations and permits that have been or may be issued to the company, could result in delaying the operations of its business, which may adversely affect its business, financial condition, results of operations and prospects.

Dependent on third-party suppliers: The company is dependent on third-party suppliers for its raw materials. The raw materials used by the company include Crude Caffeine. Discontinuation of production by these suppliers or a failure of these suppliers to adhere to the delivery schedule or the required quality could hamper its production schedule and therefore affect its business and results of operations. This dependence may also adversely affect the availability of key materials at reasonable prices thus affecting its margins and may have an adverse effect on its business, results of operations and financial condition.

Outlook

The company primarily processes crude caffeine procured from multiple decaffeination plants. The primary raw material is crude caffeine, a bi-product of such decaffeination plants. It processes crude caffeine to manufacture GCE and Caffeine Anhydrous Natural. The company's business focused on extraction, manufacturing & sale of Caffeine Anhydrous Natural. On the concern side, the company is dependent on third party transportation providers for transportation of raw materials and finished goods. Accordingly, any increase in transportation costs or unavailability of transportation services for its products or transportation strikes may have an adverse effect on its business. 

The company is coming out with a maiden IPO of 62,02,800 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 113-119 per equity share. The aggregate size of the offer is around Rs 70.09 crore to Rs 73.81 crore based on lower and upper price band respectively. On performance front, the company’s total income has decreased by 25.85% to Rs 7,870.39 lakh in Financial Year ended March 31, 2024 from Rs 10,613.98 lakh in Financial Year ended March 31, 2023 primarily due to overall decrease in the revenue from operations and other income. Moreover, the company recorded a decrease of 51.14% in profit after tax from Rs 3,820.80 lakh in Financial Year ended March 31, 2023 to Rs 1,866.73 lakh in Financial Year ended March 31, 2024.

Meanwhile, the company intends to expand its supplier base to drive down net costs and reduce dependency on a limited number of suppliers, thereby improving its margins, shortening product time to market, and ensuring a timely supply of raw materials. This strategic move will enhance its geographical presence and operational efficiency by allowing the company to negotiate better terms, leverage competitive pricing, and mitigate risks associated with supplier-specific issues. Additionally, optimizing procurement processes and fostering relationships with diverse suppliers will improve production efficiency, product quality, and innovation, supporting sustained profitability and long-term growth for the company.