Aelea Commodities IPO: Aggressive Disaster or Diamond in the Rough?

Aelea Commodities Introduction

Aelea Commodities is a trading company specializing in various commodities. Their product portfolio includes sugar, wheat flour, rice, maida, and cashews. The company operates a processing facility located within the Gujarat Agro Infrastructure Mega Food Park

Brief about Aelea Commodities

Summary of the business of Aelea Commodities

Aelea Commodities is a trading company specializing in various commodities, including sugar, wheat flour, rice, maida, and cashews.

History of Aelea Commodities

Company was originally incorporated as Private Limited, in the name and style of “Aelea Commodities Private Limited” on November 05, 2018.

Promoters & Board of Directors of Aelea Commodities

• The Promoters of our company is Hozefa S Jawadwala, Satyanarayan Patro, Ashok Patel and Firoz Gulamhusein Hathiyari.

Board of directors of Aelea Commodities

Share Holding pattern of Aelea Commodities

Qualitative Factors of Aelea Commodities

• Experienced Promoters and Management Team.
• Existing Client Relationship.
• Quality Service.
• Well established systems and procedures.

Strategy of Aelea Commodities

• Expand our existing manufacturing capacities to capitalize on industry opportunities.
• Increasing Operational efficiency.
• Continue to focus on innovation and grow our business across customer segments.
• Enhance customer base by entering new geographies to establish long-term relationships.
• Branding the finished product.
• Procuring Raw Material in advance to manage price fluctuation and market demands.

Industry Outlook

HISTORY OF THE CASHEW
The word cashew comes from the Tupi-Indian word Acaju, which means “nut”. Instead of growing like conventional nuts, they grow out of the base of cashew apples like little tails. However, for this reason, they are the only ‘nut’ that sells solely without a shell. The outer shell causes skin irritation.

The seed has a double shell containing an allergenic phenolic resin containing an anacardic acid. This composition is a potent skin irritant. Chemically, this resin is related to the more well-known allergenic oil urushiol, a toxin in poison ivy. Some people are allergic to cashew nuts. What is much more common is the allergy to the outer coating on the fruit’s skin. The cashew was first discovered by Europeans in Brazil around 1558. Because of the irritating shells, they were thought to be inedible at first. Over time, there was a realization that it was the fruit skin, not the irritating seeds. It was the local native tribe, the Tupi-Indians that showed the Europeans otherwise. Consequently, the Portuguese were shown to roast the cashews to get the irritant off.

Europeans found the cashew seed to be quite tasty. However, they also used the cashew apple pulp to make wine. The natives had learned to eat cashews from the local capuchin monkeys. The primates use primitive tools to break the shells off and throw the nuts in a way.

The Modern History of the Cashew.
As a consequence of finding out how to reach the cashew seed, the Portuguese brought cashews to Goa in about 1560. Ultimately, the nut thrived in the new climate and then travelled to India soon after. The Indian people discovered healing properties in the nut, and cashews became very popular. In the second half of the 16th century, cashews spread to Southeast

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Asia and Africa. Eventually, many countries and cultures currently depend on cashew seeds as a food staple and for commerce.

The modern history of cashew shows that they reached the United States around 1905. Afterward, cashews became popular in the mid-1920s when the General Food Corporation started to ship them regularly to the United States and Europe. Ultimately, the cashew became popular. By 1941, looking at the number of imports from India annually was 20,000 tons of cashews.

GLOBAL CASHEW PRODUCTION
Cashew nuts are a popular nut. They are also the most expensive nut in the world. The cashew tree is native to South America, and today, it is grown in many countries including India, Vietnam and Nigeria. The cashew plant is a tropical evergreen that can grow up to 30 meters tall and has an average lifespan of 50 years. The cashew tree has a unique shape with leaves on the top of its branches and short leaves on the trunk that provide shade for the lower branches.

From 2010 to 2020, this statistic depicts the global production of cashew nuts (in shell). Globally, roughly 4.18 million metric tons of cashew nuts in shell were produced in 2020, an increase over 2019 output levels.
Africa produced more than half of the world’s raw cashew nut output between 2014 and 2018, with West Africa accounting for 42% and East Africa accounting for 10% of annual production, respectively. Asia accounted for 43% of total annual revenue on average, while Latin America and the Caribbean accounted for 5%. Africa accounted for 63 percent of worldwide raw cashew nut production growth between 2000 and 2018.
All 46 countries that produce cashew nuts on a large scale are developing countries, including 18 of the world’s least developed countries. However, not all cashew-producing countries participate equally in the global value chain. The majority of cashew nuts harvested in Africa are exported uncooked, before being shelled in primarily two countries: India and Vietnam. Two illustrations demonstrate this pattern: Africa exported 90% of worldwide raw cashew nut exports between 2014 and 2018, whereas India and Vietnam imported 98 percent of global raw cashew nut imports over the same time.

The Cashew Market size is estimated at USD 7.82 billion in 2024, and is expected to reach USD 9.20 billion by 2029, growing at a CAGR of 3.31% during the forecast period (2024-2029).

• In recent years, there has been a global trend that looks favorably at vegan and plant-based diets. People who embrace a plant-based vegan diet prioritize alternative sources of protein instead of those derived from animals, resulting in the soaring demand for nuts and nut-infused foods. An increasing number of cashew-infused product manufacturers have attracted young and old consumers with the launch of new and innovative products, such as cashew-butter yogurt in the United States and roasted spice-coated cashew kernels in India. However, the application of cashew kernels in consumers’ diets has been steady in South America, with multinational manufacturers penetrating the market with assorted cashew products, suiting the healthier diet regime across the country. Brazil, on the other hand, has always been a price-sensitive consumer of cashew kernels. The resurgence in the Brazilian economy has been troubled by the mounting fiscal deficit, and thus, it is leading the consumption of cashews to depend heavily on the inflation rates.
• Increasing demand for flavored cashews and favorable government initiatives are further fueling the consumption of cashew nuts in the African region. The consumption of cashew kernels, whole or pieces, has had limited exposition to the consumers in West and East Africa, which is attributed to the untapped retail market for ready- to-eat cashews for the consumers in the region. However, the Competitive Cashew Initiative, formerly known as the African Cashew Initiative, has been playing a vital role in the marketing of high-quality raw cashew kernels in Benin, Côte d’Ivoire, Mozambique, and Ghana, which further enhanced the production and processing efficiencies in these countries in various ways, such as the promotion of SAP software in the cashew value chain in West Ghana.

Cashew Market Trends

• This section covers the major market trends shaping the Cashew Market according to research experts:
• Rising Consumption of Cashew as a Healthy Snack
• Edible cashews have been used as a snack for a long time. Cashews are also used as one of the main ingredients in preparing various sweet and savory dishes, especially in Asian cuisine. Moreover, cashews are used in mueslis, energy bars, cookies, chocolates, and ice creams. Cashews are known to be high in nutrients, such as copper, which improve bone health, as one ounce of cashew contains 622 micrograms of copper. Nevertheless, cashews have an inflation-driven consumption pattern, as reported by the International Nut and Dried Fruit Council.
• Cashews are relatively high in fiber compared to peanuts, and they help gain a healthy weight by improving digestive function. Such high-value nutrition has prompted snack manufacturers to launch several cashew-based snacks to meet the demand, such as ready-to-drink cashew milk, which acts as a lactose-free milk substitute. Due to increasing health consciousness among consumers in the European region, there has been a growing trend of cashew nut consumption, making the region one of the leading consumers in the world.
• To meet the rising global demand for cashew nuts, many countries have increased their production capacities across the world. According to National Horticulture Board, in India, Cashew production has increased from 0.70 million metric tons in 2020 to 0.77 million metric tons in 2021. Therefore, the increased consumption of cashew nuts as a healthy snack and rising production are anticipated to drive the cashew market in the coming years.

Asia-Pacific Dominates the Market
Asia-Pacific has been a consistent importer of cashew kernels despite the presence of large cashew-producing countries, such as India and Vietnam, in the region. In terms of consumption, India is the leading country in the world. As Vietnam leads in the production of cashews worldwide, it is also a significant exporter of the same to other international markets.
Asia-Pacific is the largest consumer of cashew nuts in the world. In recent years, there has been an increasing interest in the use of cashew nuts in regular diets and healthy ready-to-eat snacks. The rising number of manufacturers producing innovative cashew-based consumables has taken both young and geriatric consumers by stride. For example, roasted and spice-coated cashew nuts that appeal to the local palate were introduced in India.

The demand for cashews in Asia has persistently increased as the imports for shelled cashews increased exponentially by over 700% from 4,321 metric tons in 2017 to 30,688 metric tons in 2021 in China, with Vietnam being the major import partner according to the ITC trade map. China leads the region in cashew import, followed by Japan, Thailand, and India, respectively.

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Nuts have become a primary component in the Chinese diet since the inception of the National Health Policy called ‘Dietary Guidelines for Chinese Residents,’ which emphasizes daily nut consumption. The increased cashew nut imports may also be attributed to the new product campaign of selling ‘daily nuts,’ including cashews, in ready-to-eat packages, by Chinese nut manufacturers, thus driving the cashew nut market in the country.

CASHEW INDUSTRY – AN INDIAN OVERVIEW

India is among the largest cashew-producing countries in the world. The cashew industry has large economic significance as it employs more than 10 lakh people on farms and factories in rural areas. The cultivation of cashews in India covers a total of 0.7 million hectares of land, and the country produces over 0.8 million tonnes (MT) annually. Between 2019-20 and 2021-22, India’s cashew nut production grew from 0.70 million tonnes (MT) to 0.77 million tonnes (MT). In India, cashew cultivation is spread along the coastal regions of the peninsula. Cashew is mainly grown in states like Maharashtra, Kerala, Karnataka, Tamil Nadu, Andhra Pradesh, Goa, Orissa, West Bengal, and some parts of the North-Eastern region. According to data published by the National Horticulture Board (NHB), Maharashtra stands first in annual cashew nut production during 2021-22 at 0.20 million tonnes (MT), growing from 0.19 million tonnes cashew nut produced in 2020-21.

Besides the vast scale of cashew production, India is also known for pioneering cashew processing and exporting cashew kernels across the globe. The cashew processing industry was earlier concentrated in Kollam (Kerala), Mangalore (Karnataka), Goa, and Vettapalam (Andhra Pradesh), but now it is spread across many states of India. Over the years, India has emerged as the global processing hub for the cashew industry.

EXPORT TREND
India is the largest cashew exporter, with more than 15% of the world’s export share. India primarily exports Cashew Kernels and very small quantities of Cashewnut shell liquid. During 2022-23, the cashew exports by value stood at US$ 363.19 million as against US$ 453.1 million in 2021-22, registering a decline of 19.84%. Between April and July 2023, cashew exports stood at US$ 110.51 million
.
In terms of volume, India’s cashew exports increased from 70.5 million kg in 2020-21 to 76.8 million kg in 2021-22 and then declined to 70.21 million kg in 2022-23. Importing of raw cashew nuts has played a key role in the growth of the Indian cashew industry, which accounts for almost half of the domestic and export demand for cashew kernels in the country. To address the same, the Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW), under the Mission for Integrated Development of Horticulture (MIDH) and Rashtriya Krishi Vikas Yojana (RKVY), had implemented various initiatives that led to increased domestic production of cashew. It includes massive area expansion under cashew cultivation and replacing senile cashew plantations with high-yielding varieties in traditional
and non-traditional states. DAC&FW also approved the roadmap program to extend the cashew cultivation area by 1.20 lakh hectares presented by the Directorate of Cashew nut & Cocoa Development (DCCD).

EXPORT DESTINATIONS
India exports cashews to over 60 countries spread across different parts of the world. The key export destinations for India are UAE, Japan, Netherlands, Saudi Arabia, the USA, the UK, Canada, France, Israel, and Italy. As per the APEDA statistics on the exports of cashew kernels and cashew nut shell liquid, UAE was the largest importer of Indian cashews, valued at US$ 127 million, accounting for 34.9% of overall exports during 2022-23 as compared to US$ 131.5 million in the previous year. In FY23, in volume terms, India’s cashew exports to UAE stood at 17.21 million kg, growing by 3.54% from 16.6 million kg of exports recorded in the previous year.
The Netherlands and Japan were among the top three importers of Indian cashews, with a share of exports at 10% each. India’s cashew exports in FY23 to Japan and the Netherlands were valued at US$ 36 million each. The top 10 importing countries of Indian cashews had a share of 78% of the total exports, which implies the huge significance of traditional markets. This strong growth in cashew exports across export destinations continues to drive economic growth and employment generation in India’s key cashew-growing states.

CASHEW KERNELS
Cashew kernels are obtained through processing (roasting / steaming, shelling and peeling) of raw cashewnuts. Cashew Kernels, for commercial purposes, are graded based on their colour, shape and size. The grade details are given under the heading – Commercial Information. Cashew kernels are also available as roasted, salted, flavoured and coated with spices, honey, etc. Value added products like cashew powder, cashew butter, cashew drink, etc. are also available in the market.
Standard specifications for Indian cashew kernels for export have been laid down by the Government of India under the Export (Quality Control and Inspection) Act 1963. Cashew Kernels are graded into white/scorched wholes, pieces, splits, butts etc. Depending on the shape, size & colour of the kernel. The Govt.of India Act prescribes 33 different grades of cashew kernels. Only 26 grades are commercially available and exported. They are:

The individual products under this sub-head are as below:

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• W – 180, is the ‘ King of Cashew ‘ – They are larger in size and very expensive.
• W – 210, are popularly known as ‘ Jumbo ‘ nuts.
• W – 240, it is an attractive grade which is reasonably priced.
• W – 320, are the most popular among cashew kernels and highest in terms of availability, worldwide.
• W – 450, are the smallest and cheapest white whole kernels and hence the favourite among low priced Whole grades.

Scorched wholes are another grade of cashew kernels, which have a slight brown colour due to longer roasting. They have all the other characteristics of white kernels and have the same nutritional qualities. Butts, splits and pieces are priced lower and are ideal for cooking, preparation of sweets and savoury snacks.

Export of Cashew Kernel and import of Raw Cashew Nuts in India.

India Export
The country has exported 859.64 MT of Cashew Nut Shell Liquid (CNSL) to the world for the worth of Rs. 2.91 crores/
0.39 USD Millions during the year 2020-21. Major Export Destinations (2020-21): The major importing countries of Cashew Nut Shell Liquid (CNSL) from India are Korea Rp, Belgium, Japan, Mexico and Nepal.

Product: Cashew

India Import of Agro Food Products Product Group Report/Item Wise

Business Data of Aelea Commodities

Products of Aelea Commodities

• Cashew
  • Plain Cashew
  • Roasted
  • Salted Cashew
• Sugar
  • Plain Sugar
• Pulses & Other Products
  • Soybean
  • Pulses
  • Rice
  • Wheat Flour
  • Other products

Product wise break-up of Aelea Commodities

Customer (Top 10) of Aelea Commodities

Supplier (Top 10) of Aelea Commodities

Machinery/Plants/Factory of Aelea Commodities

Capacity Utilisation

Competition

operate in competitive environment having large number of organised and unorganised players. All the cashew nut producing face competition at the National and International Level. However, the Company’s quality of Cashew has considered to be an advantage to cater to market needs in different geographies. Over the years, the company has amassed substantial experience in executing contracts, enabling the provision of high-quality services promptly, meeting customer demands efficiently

Peer companies comparison

As on March 31, 2023:

(₹ in Lakhs, otherwise mentioned)

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Subsidiary companies

• SUPREME COMMODITIES DMCC

Group companies

• Rabh Ventures Private Limited.

Business risk factors

• Reliance on certain industries for a significant portion of Aelea Commodities sales could have an adverse effect on our business.
• The top ten customers of Aelea Commodities product and top ten suppliers for raw material contribute a substantial part of total revenue and source of Raw Material. We do not have long term agreement with the customer or supplier. The loss of any Customer or a decrease in the volume of order by any customer or any disruption in supply of raw material by any supplier may adversely affect Aelea Commodities revenues and profitability.
• The Processing of Raw Cashew nuts involves number of stages and during the process the cashew nuts may get broken resulting in reduction in sale price.
• The procurement of raw material is subject to seasonal factors. Consequently, Aelea Commodities inability to accurately forecast demand for Aelea Commodities products, may have an adverse effect on business, results of operations, cash flows and financial condition.
  • RCN is an agricultural product and cultivation of the raw material is seasonal. The cashew nuts are harvested during February to May. On account of seasonality of the raw material forecast for the demand for the finished goods and procurement of raw material for production is very important. Any mis judgment in the procurement of Raw Material will result into either out of stock raw material at competitive price or surplus in stock which will block the working capital funds in turn affect the business, result of operations, cash flow and financial conditions.
• Company had negative cash flows in the past years, details of which are given below. Sustained negative cash flow could impact growth and business

Financials

Key Performance Indicators

(₹ in Lakhs)

Balance Sheet

(₹ in Lakhs)

Profit & Loss

(₹ in Lakhs)

Cash Flow

(₹ in Lakhs)

Capital structure

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SWOT

• Strengths:
  • Diverse Product Portfolio: Aelea Commodities trades in various commodities, including sugar, wheat flour, rice, maida, and cashews³. This diversification can provide stability.
  • Strategic Location: Their processing facility is situated within the Gujarat Agro Infrastructure Mega Food Park, enhancing logistical efficiency⁵.
  • Experience: The company has processed over 6000 MT of raw cashews annually³.
• Weaknesses:
  • Narrow Focus: While diversification is a strength, focusing primarily on cashews may limit growth opportunities.
  • Market Volatility: Commodity markets can be volatile, affecting profitability.
• Opportunities:
  • Expansion into New Markets: Aelea could explore exporting cashews to other countries.
  • Value Addition: Investing in value-added processing (e.g., flavored cashews) could boost margins.
  • Sustainable Practices: Growing demand for sustainable and organic products presents an opportunity.
• Threats:
  • Commodity Price Fluctuations: External factors (weather, global supply, etc.) impact commodity prices.
  • Competition: The agricultural trading sector is competitive, with other players vying for market share.
  • Regulatory Challenges: Compliance with trade regulations and quality standards is crucial.

IPO Details

Aelea Commodities IPO Details

Ipo funds utilisation for

(₹ in Lakhs)

Litigation involved

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