Srivari Spices and Foods, a company that packages spices and flour and operates in Telangana and Andhra Pradesh, has garnered significant investor interest, with its SME IPO being subscribed 450 times over. The company aimed to raise Rs 9 crore from the market to support its working capital needs and gain brand recognition through listing.
The surge in demand for the IPO is attributed to the company’s strong business performance and growth. Its operational revenue witnessed a compound annual growth rate (CAGR) of 77.25% during FY21-23, while net profit expanded at a faster 198% CAGR.
Srivari specializes in selling a variety of spices and flour products directly to customers under its brand name. It sources its items directly from farmers across the country, eliminating intermediaries and ensuring a fair revenue share for farmers. In terms of revenue, spices contributed two-thirds, while wheat flour accounted for the rest in FY23. The company’s top five and top ten customers contributed 56% and 70% of its revenue, respectively.
Despite offering its shares at an earnings per share (EPS) of Rs 7.07 and a price band of Rs 40-42, which makes it relatively cheap compared to mainboard FMCG companies, Srivari lacks a competitive advantage or “moat.” The company, being relatively new and confined to a limited area of operation, faces intense competition. Analysts are skeptical about its ability to sustain growth in such a challenging environment.
Umesh Paliwal from Unlisted Zone mentioned that this business is easily replicable, but despite this, investors are showing a strong interest in the IPO. The grey market premium (GMP) for Srivari’s shares is noted to be around 59-60%, indicating significant demand.
Srivari Foods’ shared scheduled to be listed on the EMERGE Platform of the National Stock Exchange of India Limited on August 18th. Investors are advised to seek advice from certified experts before making investment decisions.