Started in 1988, Capricorn Food Products India Limited is Chennai - Tamil Nadu based company engaged in the business of production and sale of a diverse range of processed fruits and vegetable products to domestic and export markets. Company's customers use their products to manufacture several end-use products, such as juices and other fruit and vegetable based beverages; packaged foods such as sauces, ketchups, condiments, jams and preserves; dairy products such as flavoured yoghurts and milk based beverages; ice creams and frozen desserts, baked products; and infant nutrition products/baby foods. Capricorn's primary product has been mango pulp and concentrates, and the have diversified into other fruit pulps, including not from concentrate ('NFC') and concentrates derived from guava, banana and papaya; tomato paste and puree; IQF fruits and vegetables; and other fruit and vegetable blends, crushes and processed products, including gherkins. CFPIL has a strong presence in the export as well as the domestic markets, with their export and domestic sales accounting for 54.95% and 45.05% of the revenue from product sales for fiscal 2017, and 49.54% and 50.46% of the revenue from product sales in the six months ended September 30, 2017, respectively. In fiscal 2017, company catered to over 40 countries across Europe, Middle East, Asia Pacific, Africa and North America. CFPIL supplies fruits and vegetables based ingredients to over 300 customers including branded fruit based beverages companies, processed food producers, companies selling ice cream and bakery items, frozen foods and companies selling frozen fruits and vegetables. Company's major domestic customers include multinational companies such as Coca-Cola India Private Limited and Varun Beverages Limited, ( franchisees of PepsiCo ). In the domestic market, they also supply to Manpasand Beverages Limited, Cremica Food Industries Limited, FieldFresh Foods Private Limited, Hector Beverages Private Limited and certain multinational companies. Some of the overseas customers with whom company enjoys long-standing relationships include Aujan Industries LLC, Crop’s Fruits NV, Ardo UK Limited and Agrana Fruit Services GmbH. CFPIL has three multi-functional production facilities, strategically located in Sathyavedu, Andhra Pradesh, Krishnagiri, Tamil Nadu, and Nashik, Maharashtra, which are high fruit and vegetable cultivating states, in addition to being major seaports. They have three IQF tunnels and five blast freezers, across their production facilities, and are in the process of installing another IQF tunnel and two more blast freezers. In addition to their production facilities, they also use two production facilities located in Krishnagiri, Tamil Nadu and Srikalahasti, Andhra Pradesh to cater to increased demand during peak seasons, under arrangements with third party manufacturers. Company has an extensive procurement network of over 3,900 farmers and over 400 aggregators, collection centres and mandis. They also engage in contract farming activities with farmers for sustained procurement of raw materials such as tomato, gherkins, melon, papaya and okra. As of December 31, 2017, they had 362 full time employees on their payroll. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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