Ambo Agritec Limited

Ambo Agritec Limited is primarily engaged in the business of Manufacturing of Biscuits, outsourced manufacturing of Edible Oils, Vanaspati and Bengali Speciality Products (through third parties) and started in year 1994 with the name of 'Sunny Biscuits Bakery and Confectionery Private Limited'. In addition to this, Ambo Agritec Limited company is also engaged in trading of Crude Linseed Oil, Soyabean Meal. The Company use raw material of premium quality sourced from reputed local suppliers for Biscuits and raw materials imported for Edible Oils & Vanaspati, which help us to ensure the quality of our products. The Company products are marketed under the brand names "Happy Bites" for Biscuits, "Happy Heart" for Edible Oil, "Ambo Gold" & "Vanaspati 2000" for Vanaspati and "Max Health" for Bengali Speciality Products. The Company's Installed capacity as on March 2022 is 3750 MTPA. The company's capacity utilization in FY22, FY21 and FY20 is respectively 70.17%, 63.16% and 47.12%. The total strength of manpower as on date of this prospectus is 92 employees. As per financial performance, AMBO Agritec has posted total income/net profits of Rs 74.28 Cr / Rs 0.31 Cr (FY20), Rs 47.17 Cr / Rs 0.19 Cr (FY21), Rs 94.86 Cr / Rs 1.19 Cr (FY22) and Rs 16.21 Cr / Rs 0.49 Cr (upto Q1 FY23). So company has shown zig-zag results and sudden rise in net profit in IPO year. Company has posted an average EPS of Rs 2.04 and average RoNW of 20.91% for last three fiscals. Issue is priced at a P/B of 1.62 as per NAV of Rs 18.52 post issue. As of June 30, 2022, its debt-equity ratio stood at 2.74, which raises concern. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 24 and as per annualised FY23 earnings P/E is 14. As per RHP, there is no listed peer.     On BRLM's front, Finshore Management Services Limited associated with this SME IPO and handled 30 SME IPOs in last 5 years. From last 10 IPOs, two opened below issue price and remaining above issue price or at par. As of now from last 10 IPOs, six are trading below and remaining are trading above issue price or at par. ( As on 17.11.22 ) As per financials AMBO Agritec, has shown zig-zag results, RoNW is 32.16% and P/E is respectively 24 and 14 as per FY22 and annualised FY23 earnings, which looks fully priced. Also sudden rise in profit in IPO year raises concerns. The biscuit & Edible oil sector is highly competitive and there is nothing special with this company. Performance of BRLM is poor post listing. So we are giving AVOID rating to this IPO.

• 1 Mr. Umesh Kumar Agarwal