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Vishwas Agri Seeds operates in the agri sector, more specifically, in the business of processing seeds to supply to farmers. The seeds are sold under the brand name “Vishwas”.. Vishwas Agri Seeds IPO is set to raise Rs 25.80 crores. The issue is entirely a fresh issue of 30 lakh shares.

About Vishwas Agri Seeds:

• Vishwas Agri Seeds started its business in the city of Gondal near Rajkot, Gujarat in year 2009.
• Vishwas Agri Seeds Limited is in the business of processing quality seeds and supplying to farmers via their distribution network.
• The Company sells its seeds under the brand name “Vishwas”.
• Initially company started seeds processing unit at Gondal, Rajkot. Company closed its operations in Gondal near Rajkot and in July 2023, Company started commercial operations of its own seed sorting & grading unit, warehouse and cold storage at in District Ahmedabad, Gujarat.
• Its Ahmedabad. facility is more larger, more technologically advanced facility than earlier plant.
• They employed 77 employees including daily waged workers as on September 30, 2023.
• They have network of over 780 distributors
• The company is in process of furnishing its corporate office, setting up is seed testing laboratory and green house (fan – pad system).
• Company is promoted by members of Gajera and Suvagia families.

Financials: Vishwas Agri Seeds IPO

Vishwas Agri Seeds IPO: Salient Points

• Indian Seed industry is a sub-sector within Agri-input sector of Agriculture and allied industry.
• The seed industry in India size reached US$ 6.3 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 12.7 Billion by 2028, exhibiting a growth rate (CAGR) of 12.43% during 2023-2028.
• Promoter stake post issue shall stand at 70.00%.
• The fund requirements for each of the Object of the Issue are stated as below:

• Vishwas Agri Seeds’ portfolio has seeds for over 40 different field crops and vegetables. This includes groundnut, soybean, wheat, cumin, and research hybrid seeds for cotton, castor, and maize, among others
• The sale of Groundnut seeds is the largest contributor towards to total revenue, and contributed 58.03%, 46.82%, % and 60.45% & 37.11% to revenue from operations in period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
• The Sale of Cumin seeds is the second largest contributor towards their total revenue, and contributed 25.47%, 25.51%, % and 3.78% & 13.31% to revenue from operations in period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively,
• They procure breeder seeds from the Government bodies which includes government universities such as Anand Agriculture University, Junagadh Agriculture University, Dantiwada Agriculture University. They enter into short term agreements/ understanding with farmers to grow foundation seeds for them in their agriculture land. They have specific team who inspects the growth of the breeder seeds grown in the farms by the farmers. Once the final Inspection is completed by the inspection team, the final foundation seed plants are transported to their processing Facility at Ahmedabad.
• As on September 30, 2023, their total outstanding indebtedness was ₹ 2906.38 lakhs, out of which 2760.41 Lakhs was secured and balance of Rs.102.45 Lakhs unsecured.
• It has availed term loans from HDFC Bank.
• Peers:

• Vishwas Agri Seeds has established a robust sales and distribution network, in Gujarat, Maharashtra, and Rajasthan.
• As part of the expansion plan, the company has a focus on new geographical area and have entered into Clearing & Forwarding (C&F) agreement in Madhya Pradesh. They have taken a warehouse on lease in Jaipur Rajasthan to store seeds to meet the demand of their products in the state of Rajasthan.
• The company plans to reduce trade payable period from 2.93 months to 1.98 months by making early or advance payment to trade payable to avail discount on bulk purchases, which could result in better profit margins.
• The total estimated Issue Expenses are ₹ 190 lakhs, which is 7.36 % of the total Issue Size.
• From fiscal FY21 to FY23, revenues have increased marginally while profit margins have increased significantly.
• Group Company, namely Vraj Hybrid Seeds Limited, Krushikar Farmers Producer Co. Limited, are engaged inter-alia in the business of agriculture seeds, which is similar line of business as of the Company.
• Company has extended certain corporate guarantees for securing the credit facilities availed by Vraj Hybrid Seeds Limited, their Group Company from HDFC Bank.
• Vishwas Agri Seeds IPO is coming at a PE ratio of 16.1x (fy23 earnings) and 9.5x (Fy24 annualized earning).However annualizing in this case is not appropriate as business is seasonal in nature. sales during the first half (i.e., between the months of April and September) are significantly greater than our sales during the second half.
• Iam not much inclined to apply in Vishwas Agri Seeds at this moment but will keep a watch on it based on response on Day3. In seeds segment I have a positive view on Kaveri Seeds on any downturn. There is also risk from overcrowding due to big rush of SMEs in next few days.
• There is an element of risk as Market conditions right now are quite bad for new listings. This can spread to SMEs as well particularly with many SME IPOs lined up.
• It may be noted that many times my expectations have proved to be wrong & I have been forced to sell or hold the stock in loss. Current market conditions call for lot of caution.
• GMP as per Social media is around Rs. 5. It may be noted that such rates are perhaps in thin deals and may not be even indicative. I steer clear of any deals in GMP however lucrative they may appear, nor I have any access to any grey market operator.
• Isk Advisors are the lead book running manager with few issues handled but mostlly these issues have fared well on the bourses.They have managed SME IPOs like Sadhav Shipping Limited,Magson Retail And Distribution Limited,Sealmatic India Limited, Technopack Polymers Limited, Maruti Interior Products Limited IPO, Advait Infratech Limited.
• Sunflower Broking Private Limited is the Market Maker. They have been market makers for many SME IPOs like Sadhav Shipping, Kalahridhaan Trendz, Vinsys IT Services , Shri Techtex, Ahasolar Technologies,Pentagon Rubber,Magson, Remus Pharmaceuticals,zSotac Pharmaceuticals, Patron Exim, Sealmatic India, Transvoy Logistics India, DHARNI Capital Services, RBM Infracon , Aristo Bio-Tech and Lifescience, Vital Chemtech etc.
• SME IPO are much more risky and volatile than mainboard IPOs.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management. I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. These certifications are for 3 year period and are no more valid. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF/IPO investments have high degree of inherent risk.