Surya Food & Agro Limited IPO

by Manshu on November 6, 2007

in IPO/NFO

Business of Surya Food & Agro Limited 

Surya Foods is in the business of manufacturing biscuits for the last 15 years and is one of the leading manufacturers of biscuits in the country. Priyagold which is the brand under which the biscuits of the company are sold is quite well known and the trademark “Hak se Maango” is quite well known in the FMCG sector.  Surya Foods is also present in the fruit juices segment and has the brands – “Fresh Gold” and “Treat”. An interesting and positive development for the company has been the awarding of a contract to run 130 kiosks in railway stations by the Indian Rail Catering Corporation. By operating in a busy place like a railway station the company will get a substantial boost to its revenues. 

Financials of Surya Foods & Agro Limited   

 

In the last three fiscals Surya Foods has not shown growth in the topline with the revenues shrinking from Rs.28,372 lakhs to Rs.26,974 lakhs. In the corresponding period the profits have grown a from Rs.248.10 lakhs to Rs.283.67 lakhs. If anything there is a wide fluctuation in the profits that the company has made in the last five years. These have been Rs.33.94, Rs.444.12, Rs.248.1, Rs.130.16 and Rs.283.67 lakhs in the last five years respectively.  The EPS for the year ended March 31 2007 is Rs.16.36 and this will be a key figure to determine what is the P/E multiple at which Surya Foods is offering its shares. This is because if you take the average of the last three years it comes out to be Rs.20.43 however the EPS for year ended 2005 is 35.87, 2006 is 18.82 and hence the figure of 35.87 skews up the average to the higher side. 

Risks faced by Surya Food & Agro Limited   

 

There are various legal proceedings going on against Surya Foods both in the nature of criminal and civil. The cases if held against Surya foods will impact the business negatively.  Though the company is a veteran in the biscuit manufacturing its proposed expansion into chocolates is a new field and as such poses all the threats that any new entrant who is not well established faces. 

Objective of the IPO   

 

Surya Foods IPO is intended at raising money in order to increase its biscuit manufacturing facility and setting up a Chocolate Plant. The expense of the former is expected to be Rs.3958.56 lakhs and the latter is expected to be Rs.5852.67 lakhs respectively. Other than this the proceeds from the IPO will also be used for meeting working capital requirements and public issue expenses. 

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