Shree Tirupati Balajee Agro IPO- Investment Rationale, Issue Details, Peer Comparison, Risks & More: DRChoksey

Deven Choksey Research Report

Shree Tirupati Balajee Agro Trading Company Ltd. will launch its initial public offering for subscription on Sept. 05 and the offer concludes on Sept. 09. The manufacturer and seller of flexible intermediate bulk containers has fixed the price band in the range of Rs 78 to Rs 83 per share at a face value of Rs 10.

The Rs 170-crore IPO comprises of a fresh issue of up to 1,47,50,000 equity shares and an offer for sale of up to 56,90,000 equity shares.

Objects of the Offer:

1. Repayment or pre-payment of borrowings.

2. Investment in subsidiaries HPPL, STBFL, and JPPL for repayment of borrowings.

3. Working capital requirements of the company.

4. General corporate purposes.

Key Strengths

• Diverse customer base

• Cost-effectiveness of FIBCs

• Multi-market Company

• Growing demand for sustainable packaging solutions

Future Growth Strategies

• Focus on core competence

• Global and Domestic Presence

• Continue to improve operating efficiencies through technology enhancements

• Recycling

Outlook and Valuation

Shree Tirupati Balajee Agro Trading Company Ltd. achieved a revenue growth of 10.2% CAGR from FY22 to FY24. Over the same period, Ebitda increased at a CAGR of 41.5%, reaching Rs 619 million in FY24, up from Rs 309 million in FY22, driven primarily by a reduction in selling and distribution expenses. The Ebitda margin improved to 11.5% in FY24, compared to 7.0% in FY22.

PAT grew at a CAGR of 62.5% between FY22-FY24 to Rs 361 million in FY24 from 137 million in FY22. The improvement in PAT is largely attributable to increased other income while enhanced operating performance and stable depreciation expenses further added to the improved profitability.

The global FIBC consumption market is experiencing growth driven by escalating environmental concerns and increasing demand for lightweight, biodegradable bulk packaging materials, which aim to reduce the overall weight of bulk packaging.

The company’s diverse multi-product portfolio and adaptability to customer requirements enhance its market position. By offering a comprehensive range of FIBCs, it not only retains customers but also gains a competitive pricing edge.

Additionally, Shree Tirupati Balajee Agro’s ability to produce customized bags and liners with tailored specifications and attractive printing further strengthens its market appeal. Focused on in-house research and development, the Company is advancing plastic processing solutions.

The company holds two pending patents for an innovative weaving process that improves FIBC strength using Mesh Technology in single and double-loop jumbo bags, without increasing GSM.

At the top end of the price band, the company is valued at a 18.8x P/E multiple based on FY24 EPS, which is below the median of its peers. We believe the Company is better positioned relative to its peers, owing to superior operating performance, improved margins, and better return ratios.

Shree Tirupati Balajee Agro’s robust financial performance, alignment with emerging market trends and extensive market reach collectively underscore its competitive advantage. These factors, combined with its significant growth potential, position the Company more favorably compared to its peers in the industry.

We recommend a ‘Subscribe’ rating on the IPO of Shree Tirupati Balajee Agro Trading Company.

Key Risks

• Pending criminal litigation against promoter

• Risk of adverse impact from plastic packaging bans on business operations

• Geographical concentration

• Market risk

• Regulatory risk

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