Italian Edibles Limited's confectionery products are sold under the brand name of "ofcour's". Confectionery in a broader sense implies the preservation of sweet delicacy preparation in the form of candies, caramels, chocolate, processed cocoa and milk and traditional Indian confections. They offer a wide range of confectionery's such as Rabdi [Meethai Sweet], Milk Paste, Chocolate Paste, Lollipops, Candies, Jelly Candies, Multi-Grain Puff Rolls, Fruit Based Products to the customers. India being a country with different cultures, many festivals and occasions, celebration with confectioneries plays a major role in those special occasions, festivals etc. Keeping in mind the company’s mantra “Sharing is Everything” and “Delightful Creation and Boundless Joy”, the company has been manufacturing delicious mouthwatering confectionery products for the last 14 years. The confectionery products are sold PAN India, majorly in rural and semi-urban areas of Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Karnataka, Kerela, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand, West Bengal and through local wholesalers and distributors located in these areas. The consumer segments largely include teenagers, young adults and children’s located in rural and semi-urban areas of India. Apart from selling the confectionery products within India, they also export to various countries such as Nigeria, Yemen, Sinegal and Sudan. As on August 31, 2023 the top customers include Chocolate World, Yuvraj Agency, Bakewell Biscuits Private Limited, R. K. Prabhavati Tarders, Mamta Stores, Ma Laxmi Traders, Suria Distributor etc. Also, one of the product, i.e., Jelly Candies are sold to Dharpal Premchand Ltd (BABA) group. Over the years, they have developed a large pan-India distribution network. As of August 31, 2023, they had approximately 450 Suppliers and distributors located across 22 states in India and they have exported the products through network of 5 merchant exporters. The distribution network within India and outside India and well-established brand has enabled to effectively manage marketing strategy, market penetration and thereby increase the turnover over the years. They have two operational manufacturing unit that is operated by them and is located in Gram Palda, Indore and Prabhu Toll Kanta, Indore (Madhya Pradesh). Being strategically located in the industrial area, procurement and transportation of raw materials is easy, quick and cost effective. The manufacturing unit are FSAAI, ISO 22000:2018 and FIEO certificated. In house manufacturing unit is well equipped with mixture of modern, fully-automated and semi-automated plant & machinery which enables to manufacture the confectionery products in an effectively control manner and also ensure consistent quality while manufacturing the confectionery products. In addition, they manufacture range of products under the private labeling arrangement with the customers and is exclusively sold by third party. However, they do not have any collaboration with these companies. They sell the confectionery products in retail and wholesale packs. Lollipops, Candies, milk sweetmeat products are available in Pet Jars, polypacks and cardboard boxes. As per financial performance, Italian Edibles Limited has posted total income / net profits of Rs 48.99 Cr / Rs 0.87 Cr (FY21), Rs 75.45 Cr / Rs 0.80 Cr (FY22), Rs 63.30 Cr / Rs 2.64 Cr (FY23) and Rs 30.52 Cr / Rs 2.10 Cr (upto 5M FY24). So as per previous financials data, company has shown zig-zag results. But, sudden rise in net-profit is surprising. Company has posted an average EPS of Rs 1.60 and average RoNW of 18% for last three fiscals. Issue is priced at a P/BV of 2.54 as per NAV of 26.75 as on post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 125.29, 38.03 and 19.97 respectively, which looks aggressively priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, First Overseas Capital Limited is associated with this SME IPO and handled 23 SME IPOs and 1 main board IPO in last 3 year. From last 9 SME IPOs, all are opened above issue price or at par on the day of listing and from last one main board IPO, that opened above issue price. As of now from last 9 SME IPOs, three are trading below issue price and remaining are trading above issue price and last 1 main board IPO, that is trading above issue price. ( As on 29.01.24 ) As per financials, Italian Edibles Limited has shown zig-zag results, RoNW is 24.50% and P/E is respectively 125.29, 38.03 and 19.97 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced and also sudden rise in net-profit raises doubts. Company is in business of confectioneries and other food items, which is highly competitive and fragmented segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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