Shanthala FMCG Products IPO Review: Shanthala FMCG products is coming up with its Initial public offering. This is an SME (small and medium-sized enterprise) which is going to be listed on NSE SME. The IPO will be open for subscription on 27th October 2023 and closes on 31st October 2023.

In this article about Shanthala FMCG Products IPO Review, we shall see about the company, financials, strengths and more.

Shanthala FMCG Products IPO Review – About The Company

Shanthala FMCG Products Limited is a distributor of FMCG products for some of the largest FMCG companies in India, such as ITC, MK Agrotech and Hindustani Unilever.

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The company operates in Coorg district, Karnataka, through two proprietary firms: Shanthala Enterprises and Shanthala Traders. The company offers a range of products, including branded packaged foods, personal care products, education and stationery products, matches and agarbatti, tobacco products, and beauty and well-being products.

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In 2023, Shanthala FMCG products’ revenue composition is predominantly from the sale of ITC products, contributing to 79.44% of the total revenue. The remaining 20.56% is accrued from other FMCG brands such as MK Agrotech, Hindustan Unilever, and others.

Industry Overview

The FMCG sector is one of the largest and fastest-growing sectors in India, driven by increasing consumer demand, higher product prices, and rising brand awareness. The sector contributes significantly to India’s GDP and employs about 3 million people in various factories.

The sector mainly consists of household and personal care products, which account for half of the FMCG sales in India. The sector has been benefiting from favorable government policies, expanding rural and youth markets, new product launches, and e-commerce platforms.

The FMCG market reached US$ 56.8 billion as of December 2022, with urban areas contributing 65% and rural areas contributing more than 35% to the annual sales.

The sector is expected to grow at a compound annual growth rate (CAGR) of 10-12% over the next decade, supported by good harvests, government spending, on the food processing industry, and the retail sector. The food processing market size reached US$ 307.2 trillion in 2022 and is projected to reach US$ 547.3 trillion by 2028, growing at a CAGR of 9.5% during 2023-2028.

The retail sector was valued at $883 billion in 2020 and is expected to grow to $1.3 trillion by 2024. There are approximately 12 million retail distribution outlets in the country, offering ample opportunities for distributorship in FMCG.

Financial Highlights

Shanthala FMCG Products Limited delivered a resilient financial performance. The company reported a marginal increase in Revenue from ₹39.5 crore to ₹40.7 crore and a 21% growth in PAT from ₹14 Lakh to ₹17 lakhs between March 2021 and March 2023. 

Despite reducing its net debt from ₹3.5 crore in 2021 to ₹2.6 crore in 2023, the debt-to-equity ratio remains high at 3.12, above the healthy benchmark of 1. The net worth of the company rose slightly from ₹1.2 crore to ₹1.4 crore in the same period. 

As of FY2023, The company achieved an ROE of 12.38% and an ROCE of 19%. 

Financial Metrics 

(Source: RHP of the company)

Competitors of the company

According to the company’s RHP, there are no other listed companies in India that operate in the same business sector as Shanthala FMCG Products.

Strengths of the company:

  •  Competitive Edge: As a distributor for major FMCG market leaders such as ITC, MK Agrotech, and Hindustan Unilever in India, Shanthala FMCG products leverages its partnerships to gain a competitive edge in the market 
  • Diverse Product Portfolio: The company distributes a wide variety of products, including personal care, education and stationary products, tobacco products, beauty, home care, and food care products. This diversification attracts more large brands to their portfolio and helps in risk management.
  • Strong Customer Relationships: Shanthala FMCG has long-standing relationships with local retailers and wholesalers in their region, spanning over three decades. This helps in customer retention and repeat business.
  • Experienced Management Team: The company boasts a management team with strong industry expertise and a successful track record. The team’s operational, customer relationship, marketing, and business development experience enables the company to capitalize on current and future market opportunities.

Weaknesses of the Company

  • Dependence on Third-Party Manufacturers: The company relies entirely on third-party manufacturers for its product supply. Any disruption in supply or non-availability of products could adversely affect the company’s sales and profitability.
  • Lack of Formal Supply Agreements: Shanthala FMCG does not have formal supply agreements with its manufacturers. There’s no guarantee that these parties will continuously provide products as per the company’s quantity and quality requirements.
  • Geographical Concentration: The majority of the company’s business is concentrated in Coorg district, Karnataka. This concentration subjects the company to various risks and limits its ability to diversify across states.
  • Seasonal Demand Variations: The company’s operations are impacted by seasonal demand for its products. While the festival season sees a surge in demand and consumption, the performance during the rest of the year may not be as strong.

Shanthala FMCG Products IPO Review – GMP 

 As of 23rd October 2023, The GMP for the IPO of Shanthala FMCG products is not yet available. 

Key IPO Information

IPO Size16.07Cr
Fresh Issue16.07Cr
opening date 27th october 2023
closing date31st october 2023
face value ₹10 per share
price band₹91 per share
lot size 1200 shares
Minimum lot 1 (1200 shares)
maximum lot 1 (1200 shares)
Investment amount ₹109,200
listing date 8th November 2023

Promoters: B. Manjunath Mallya, Shobitha Malya, Sneha Vinayak Kudva and Yogish Mallya are the Promoters of our Company.

Book Running Lead Manager: First Overseas Capital Limited 

Registrar to the Offer: Bigshares Services Private Limited

The Objective of the Issue: 

The company intends to utilize the Net Proceeds as following

  • Funding additional working capital requirements
  •  General Corporate Purposes

In Closing

Shanthala FMCG Products, a prominent distributor of major Indian FMCG brands, is poised to leverage the sector’s anticipated double-digit growth over the next decade. By expanding its product range and geographical footprint, the company aims to seize these emerging opportunities, fostering its own growth and prosperity.

However, it is important to note that this is an SME IPO where the minimum investment amount is 1,09,200 which is higher than a mainline IPO. 

What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Niharika Jadhav

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