Leo Dryfruits & Spices Trading Ltd. IPO: Key Details

Leo Dryfruits & Spices Trading

• Leo Dryfruits & Spices Trading is coming out with an initial public offering (IPO) of 48,30,000 equity shares in a price band Rs 51-52 per equity share.
• The issue will open on January 1, 2025 and will close on January 3, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 5.10 times of its face value on the lower side and 5.20 times on the higher side.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Pratibha Kumari Bharadia.

Profile of the company

Leo Dryfruits & Spices Trading is engaged in manufacturing/processing, trading and marketing of wide range of spices, dry fruits and other grocery products under the brand name “VANDU” and frozen/semi fried products under the brand name of “FRYD”. The company is currently engaged in supplying of various whole spices and blended spices under spices category, plain, roasted and flavoured dry fruits under dry fruits category and ghee, various type of seasoning, chiz bites, poppy seeds, sesame seeds and many more under other grocery products category in different packaging sizes.

To expand its product range, it is selling ghee under its brand name “VANDU” which is manufactured and packed by reliable manufacturer that adhere to follow strict quality standards along with the necessary approvals to ensure its customers receive the same level of quality and excellence expected from its brand. The company is also dealing in other grocery products such as seasonings, chili flakes, garlic powder, asafoetida (hing), black salt, pulses, dry ginger, fennel seeds, fenugreek seeds, nigella seeds, mace, nutmeg etc. which are sourced from third party producers or wholesalers and sell under “Vandu” brand. Also, it is acting as anchor distributor to re-distribute the soft drink named campa cola. It does not have any long-term agreement with any of such vendors for supply of ghee or any of the grocery products.

The company is doing its business in two verticals i.e., trading and manufacturing/processing of wide range of spices, dry fruits, frozen/semi fried products and other grocery products. Under trading division, it is dealing in various types of whole spices and dry fruits in bulk quantity under unbranded sale, various types of whole spices and dry fruits in smaller quantity under its brand name “VANDU” and frozen/semi fried products under the brand name of “FRYD”. Under its manufacturing/processing division, it is processing blended spices and other grocery products such as chiz bites and seasoning at its manufacturing/processing unit located at Thane, Maharashtra. 

Proceed is being used for:

• Funding working capital requirements of the company
• Branding, advertisement and marketing activities
• General corporate purposes

Industry Overview

India is the world’s largest spice producer. It is also the largest consumer and exporter of spices. The production of different spices has been growing rapidly over the last few years. Production in 2022-23 stood at 11.14 million tonnes compared to 11.12 million tonnes in 2021-22. During 2022-23, the export of spices from India stood at $3.73 billion from $3.46 billion in 2021-22. During 2021-22, the single largest spice exported from India was chilli followed by spice oils and oleoresins, mint products, cumin, and turmeric. India produces about 75 of the 109 varieties which are listed by the International Organization for Standardization (ISO). The most produced and exported spices are pepper, cardamom, chilli, ginger, turmeric, coriander, cumin, celery, fennel, fenugreek, garlic, nutmeg & mace, curry powder, spice oils and oleoresins. Out of these spices, chilli, cumin, turmeric, ginger and coriander makeup about 76% of the total production. The largest spices-producing states in India are Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Assam, Orissa, Uttar Pradesh, West Bengal, Tamil Nadu and Kerala.

India is the largest exporter of spice and spice items. During 2023-24 (until February 2024), the country exported spices worth $3.67 billion. For FY23, the country exported spices worth $3.73 billion. In July 2023, the exports of spices from India increased to $298.77 million from $293.84 million in June 2023. From 2016-17 to 2022-23, the total exported quantity from India grew at a CAGR of 5.85%. For FY23, total volumes of chilli, cumin, turmeric, and ginger exports were 0.51, 0.18, 0.17 and 0.05 million tonnes. During 2022-23, the export of turmeric, coriander, garlic, curry powder, other spices such as asafoetida, tamarind, etc., expanded both in value and volume as compared to 2021-22. India exported spices and spice products to 159 destinations worldwide as of 2023-24 (until February 2024). The top destinations among them were China, the USA, Bangladesh, the UAE, Thailand, Malaysia, Indonesia, the UK, and Sri Lanka. These nine destinations comprised more than 70% of the total export earnings in 2023-24 (until February 2024).

This initiative by the Spices Board of India aims to support the exporter to adopt high-tech processing technologies and upgrade the existing level of technology for the development of industry and to meet the changing food safety standards of the importing countries. The initiative provides benefits of infrastructure development, promoting Indian spice brands abroad, setting up infrastructure in the major spice growing centres, promoting organic spices and special programmes for north-eastern entrepreneurs. The Spices Board of India is set up for the development and global promotion of Indian spices. It acts as a link between Indian exporters and importers abroad. The main activities of the board involve promotion, maintenance and monitoring of quality, development of better production methods, guidance, financial and material support to growers, infrastructure facilitation and research. This board has been spearheading activities for the excellence of Indian spices, involving every segment of the industry. 

Pros and strengths

Diversified product portfolio: The company’s understanding of the consumer’s culinary taste complements its product development capabilities, which has allowed it to develop a comprehensive portfolio of a variety of spices, dry fruits and other products. Its product portfolio comprises various types of whole spices and blended spices under spices category, plain, roasted and flavoured dry fruits under dry fruits category and ghee, various type of seasoning, chiz bites, poppy seeds, sesame seeds and many more under other grocery products category in different packaging sizes. Its diversified product portfolio enables it to cater to a wide range of taste preferences and consumer segments.

In house manufacturing and processing capabilities: It grinds and blends spices at its manufacturing / processing unit. Blended spices are the mixture of spices that is required to make a dish in its most authentic form. The company is equipped with plant and machinery which enables processing, grading and packaging of manufactured spices all in a hygienic way. Its manufacturing / processing unit is accredited with FSSAI license under Food Safety and Standards Act 2006. The company has trained and experienced staff manning infrastructure in terms of cleaning, sorting and packing facilities and hygienic storages. Experienced manpower does a quality check of the whole spices and ensure they are properly stored in cold storage to keep seasonal deterioration and insects at bay.

Wide spread customer base across various segments: The company follows both offline and online model for sale of its products. It is catering B2B, B2C and D2C segment where under B2B segment, the company is engaged in wholesale trading, where it is selling various types of whole spices and dry fruits in bulk quantity under unbranded sale to various traders for further sale. Under B2C segment, the company is engaged in retail segment where, it is selling the whole spices, blended spices, dry fruits and other grocery products under its brand name “VANDU” through various distributors, super stockists, E -commerce platforms such as Amazon, Flipkart and its own website. Under D2C segment it is selling its products through its website and on direct order receive from the customers.

Risks and concerns  

Maximum revenue comes from limited customers: The substantial portion of its revenues has been dependent upon few customers. For instance, its top ten customers for the period ended September 30, 2024 and for the Fiscals 2024, 2023 and 2022 is Rs 1,668.76 lakh, Rs 2,753.05 lakh, Rs 1,562.23 lakh and Rs 485.50 lakh accounted for 93.32%, 44.29%, 42.87 % and 92.21% of its revenue from operations for the respective year. The company’s reliance on a limited number of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, a failure to negotiate favourable terms with its key customers or the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of the company.

Dependent on third party suppliers for some of its products: It does not manufacture some of its products such as ghee, flavoured dry fruits and frozen/semi fried products in its own capacity but procure the same from third party suppliers. Any decline in the quality of such products or delay in delivery of such products by such third parties or rise in their costs or charges may adversely affect its operations. Further there can be no assurance that such parties shall continue business with it or would cater to the demands of its competitors. The company does not have any long-term arrangements with such suppliers and if such suppliers terminate their business or supply similar products to its competitors at better rates, its result of operations and future prospects may be adversely affected.

Geographical constrain: Currently, the company is supplying majority of its products mainly in the Maharashtra region and hence more than 90% of its revenue for the last 3 financial years is generated from this region only. Accordingly, any materially adverse social, political or economic development, natural calamities, civil disruptions, regulatory developments or changes in the policies of the state or local government in this region could adversely affect its business activities, result in modification of its business strategy, which will in turn have a material adverse effect on its business, financial condition & results of operations. Geographical and functional expansion of its business requires establishment of adequate network. As it seeks to diversify its regional focus, it may face the risk that its competitors may be better known in other markets, enjoy better relationships with customers. 

Outlook

Leo Dryfruits & Spices Trading specializes in manufacturing and trading a variety of spices and dry fruits under the brand VANDU as well as frozen and semi-fried products under “FRYD. The company supplies whole and blended spices, roasted and flavoured dry fruits, ghee, seasonings, and other grocery items in various packaging sizes. The company has diversified product portfolio and has in-house manufacturing and processing capabilities. On the concern side, the company is a new player in the spice, dry fruits, frozen/semi fried and other grocery business and there is no assurance that it will be able to maintain or increase its revenue from operations in the long term. Moreover, substantial portion of its revenues has been dependent upon few customers, with which it does not have any firm commitments. The loss of any one or more of its major customers would have a material adverse effect on business, cash flows, results of operations and financial condition.

The company is coming out with a maiden IPO of 48,30,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 51-52 per equity share. The aggregate size of the offer is around Rs 24.63 crore to Rs 25.12 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 70.60% to Rs 6,216.59 lakh for Fiscal 2024 from Rs 3,643.96 lakh for Fiscal 2023. The main reason of increase was increase in the volume of business operations of the company. Moreover, its profit after tax increased to Rs 663.69 lakh for Fiscal 2024 from Rs 363.46 lakh for Fiscal 2023.

The company’s key focus is to increase its penetration in the markets where it currently operates by replicating the same proposition that has helped it to grow its brand. There is an increasing trend toward modern retail trade in the urban markets due to the availability of multiple brands and varieties, offers and discounts, and the option to purchase all products under one roof. The company is looking forward to enter into global markets and plans to target countries where it can leverage its track record and experience in India to compete effectively and expand its revenue base. These measures will enable it to increase the availability of its products which will in turn increase brand awareness and revenue.