IPO Alert: Keventer Agro files papers with SEBI to go public

The Fast-Moving Consumer Goods Industry is currently the fourth largest contributor to the Indian economy. In FY 2020, the FMCG market in India was around ₹6.75 trillion and is expected to reach ₹11.20 trillion by FY 2025. At an aggregate level, the FMCG market is expected to grow at a CAGR of 11% from 2020 to 2025.

Mandala Capital-backed Keventer Agro Ltd recently filed a draft red herring prospectus with the Securities Exchange Board of India to raise funds through an initial public offering.

The IPO consists of a fresh issue of ₹3.5 billion and an offer for sale of up to 10.77 million shares by the existing shareholders. As per the prospectus, the OFS includes 15.35 million compulsory convertible preference shares, which will be converted up to a maximum of 9.15 million shares prior to the filing of the red herring prospectus with the RoC(Registrar of Companies), solely for the purpose of the offer.

Keventer Agro will utilize the net proceeds from the issue worth ₹1.55 billion for repaying the debt and ₹1.10 billion will be used for funding capital expenditure requirements.

Company Overview

Keventer Agro is an FMCG company with interests in packaged, dairy, and fresh food products. The company has a comprehensive range of products span across various brands and categories with more than 90 SKUs(stock-keeping units) and a presence across the value chain in the fresh, frozen, and ambient long-shelf-life food product categories.

The Kolkata-based company has franchised brands that include Frooti, Appy, Appy Fizz, and Bailey, under a pact with Parle Agro. It has frozen food, UHT milk, milkshakes, and bananas under the Keventer brand. Keventer Agro also has arrangements with various contract manufacturers for ice cream products.

Financials

As of March 2021, the total income was recorded at ₹8.36 billion versus ₹9.58 billion a year ago. Net loss for the period stood at ₹762 million against a profit of ₹34.2 million last year. Adjusted total borrowings were at ₹2.36 billion.

Meanwhile, Keventer Agro has a franchisee agreement with Parle Agro Private limited for manufacturing, filling, packing, selling, and distribution of some of its products. Because of the agreement the company is subjected to certain restrictions in terms of pricing of the product(MRP), advertising, and any change in the structure of the product.

In the future, Parle Agro might take certain actions that influence the economic and marketing aspects of the business, which may not be acceptable to Keventer Agro and that might affect its operations.