Is Shree Tirupati Balajee Agro IPO a Aggressive Trap?

Shree Tirupati Balajee Agro Introduction

Shree Tirupati Balajee Agro Trading Company Limited is a prominent manufacturer specializing in Flexible Intermediate Bulk Containers (FIBCs), which are large, flexible bags used for industrial packaging1. The company also produces other packaging products such as woven sacks, woven fabric, narrow fabric, and tapes

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Brief about Shree Tirupati Balajee Agro

Summary of the business of Shree Tirupati Balajee Agro

Shree Tirupati Balajee Agro is engaged in the business of manufacturing and selling of Flexible Intermediate Bulk Containers (FIBCs)
i.e. large flexible bags and other industrial packaging products such as woven sacks, woven fabric and narrow fabric, tapes in the Indian domestic market and overseas. offer customised products and cater to the bulk packaging solutions of clients from diverse industries like chemicals, agrochemicals, food mining, waste disposal industry, agriculture industry, lubricants and edible oil by supplying them our FIBC products for transportation purposes and their packaging requirement. We provide a labor-saving alternative for packaging and transportation, making loading and unloading of vessels, containers, or trucks more efficient.

Shree Tirupati Balajee Agro History

Company was originally incorporated as ‘Shree Tirupati Balajee Agro Trading Company Private Limited’, at Pithampur, Dhar, Madhya Pradesh as a private limited company under the provisions of Companies Act, 1956, pursuant to certificate of incorporation dated October 23, 2001 issued by the Registrar of Companies, Madhya Pradesh and Chattisgarh. Upon the conversion of our Company into a public limited company, pursuant to the approval accorded by our Shareholders at their extra-ordinary general meeting held on November 20, 2023, the name of our Company was changed to “Shree Tirupati Balajee Agro Trading Company Limited” and a fresh certificate of incorporation consequent upon change of name upon conversion to public limited company was issued to our Company by the RoC on November 21, 2023.

Shree Tirupati Balajee Agro Promoters & Board of Directors

• Promoter is Binod Kumar Agarwal.

Shree Tirupati Balajee Agro Board of directors

Shree Tirupati Balajee Agro Share Holding pattern

Shree Tirupati Balajee Agro Strength

• Diverse customer base
• Cost-Effectiveness of FIBCs
• Multi- product portfolio
• Integrated Manufacturing Facility
• Quality Standard Certifications & Quality Tests
• Experienced Promoter and senior management team
• Multi-market Company
• Product Development Capabilities
• Growing Demand for Sustainable Packaging Solutions

Shree Tirupati Balajee Agro Strategies

• Focus on core competence.
• Multi- Location Facilities.
• Developing the new product line.
• Global and Domestic Presence.

Industry Outlook

Indian FIBC Industry

Flexible intermediate bulk containers (FIBCs) were first introduced in India in the early 1990s. Since then, India has developed into one of the world’s key producers. Accordingly, the country is eager to globalize and export FIBC goods, given its sustainably expanding sizable local market.

For a nation, participating in international trade has its own advantages. These include studying best practices, foreign exchange, manufacturing efficiency, and undiscovered markets. The Indian exchequer benefits in terms of foreign exchange profits.

According to IFIBCA (Indian Flexible Intermediate Bulk Container Association), nearly 85% of production in the industrial sector is exported, with acceptance for exports in close to 65 nations across 6 continents. It is anticipated that domestic demand and exports will both see exponential growth throughout the ten-year period from 2020 to 2030.

The industries where FIBCs are widely used are Chemicals, Food Products, Pigments, Waste Management, Pharmaceuticals & Aggregates, Fertilizers, etc. Food products include grains and seeds, among others. These are also used in the mining and construction industries. In 2023, chemicals and petrochemicals accounted for around 32% of the market share, while construction materials stood at around 26%, and food and Agriculture stood at around 25%.

Indian trend in Installed Capacity

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The installed capacity of the FIBC Industry grew by around 3.4% y-o-y (year-on-year) in 2023. It is expected to reach around 212.5 million units by the end of 2024. Growing demand over the years, especially from the chemicals, construction, and food agriculture sectors has helped the FIBC sector reach healthy capacity utilization levels resulting in players going for capacity expansion. In addition, steady export growth has further supported this capacity expansion. The United States, Germany, and the United Kingdom are a few of the countries importing FIBCs from India.

Further, the FIBC industry grew at a CAGR of 1.8% during 2020-2023, owing to continuous innovations and process improvement across the value chain and steady traction due to continuous improvement in product quality. This growth will be further driven by continued demand from the construction and chemicals & petrochemicals sectors, increased exports, new market ventures, and rising awareness about the usage of sustainable products.

Indian FIBC Consumption

The consumption of the FIBC Industry improved by around 7.3% y-o-y in 2023. It is expected to reach around 69.1 million units by the end of 2024. In 2022, there was a decline in the consumption pattern on account of the high base effect in the pharmaceutical industry. The chemical & petrochemicals sector had around 31.6% market share in 2022. The subdued demand was on account of geopolitical tensions as it increased the raw material costs for many chemicals, increased inflation, and lower margins as chemical prices declined globally due to increased competition from China post-revival of the economy. Additionally, the exports from China have increased over the period– a cause of concern for Indian manufacturers.

Further, the food grade FIBCs are becoming an ideal choice for the commercial food industries. The food & agriculture sector had around 25% market share in 2023. The low demand was attributed to disrupted food supply chains due to the pandemic, climatic changes like heat waves damaging the crops and decreasing the yields, low rainfall owing to low production, and increasing cost of inputs like fertilizers and fuel.

The minerals and ores sector had seen a y-o-y increase of 3.1% in 2023 after a y-o-y decline of around 9.5% in 2022 due to a decline in exports. The fall in exports was mainly observed during the months of June-November 2022 because

of the imposition of export duties. For instance, in May 2022, the duty on iron ore concentrates was increased to 50% from 30%. This duty was subsequently reversed in November 2022.

The iron ore produced in India is primarily used for domestic steel production and India’s steel production has increase from 2023 backed by infrastructure growth in the country. Also, increased activities in the construction sector alongside the thriving real estate and automobile sectors are expected to boost the demand from this sector.

Moreover, the FIBC industry’s consumption is likely to reach 69 million units at the end of the 2024. It has been growing at a CAGR of 5% during 2020-2023, owing to the increasing consumption from the chemicals & petrochemicals, food & agriculture, construction & mining sectors. In addition, the government has included the chemicals sector as a priority sector under the ambitious ‘Make in India’ initiative of the government.

‘Make in India’ has played a pivotal role in driving some of the key initiatives to stimulate growth in the chemicals industry (organic and inorganic). The government has already taken some crucial steps to create favourable conditions, in terms of policies and infrastructure, to attract global and domestic investments in the Indian chemicals industry. Similarly, likely growth in various industries in the domestic market is expected to support the inorganic chemicals market going forward.

Furthermore, the retail industry is developing in Tier-1 and Tier-2 cities, in addition to major cities and metros in the country. The growing retail sector in India will increase the demand for flexible packaging. Additionally, transitioning demographic profiles, rising disposable incomes, growing urbanization, and changing consumer tastes & preferences are driving the growth of the organized retail market in India. Besides, the disposable income in India has increased at a CAGR of 10.7% in the last decade and is exhibiting a good growth trajectory.

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Indian FIBC Production

According to IFIBCA, the FIBC market in India has grown by almost 38% in the last 10 years. FIBCs offer a convenient way to store and transport food products. This is because they are lightweight, easy to handle, and can be stacked to save space. India is a major exporter of food products. Food-grade FIBCs are used to transport food products to overseas markets. However, the production of the FIBC industry declined by around 3.3% y-o-y in 2022 but increased by 8% y- o-y in 2023. It is expected to reach around 151.1 million units by the end of 2024. The FIBC market was valued at 926 USD million in 2023 and has grow at a CAGR of 6.7% during the period, 2020-2023.

Food-grade FIBCs are typically used to transport dry, flowable food products, such as flour, sugar, rice, and cereal. They are also used to store food products in bulk quantities. The food-grade FIBC Production was nearly 28% of the total production of FIBC in India in 2021.

Food-grade FIBCs, also known as food contact FIBCs, are bulk bags specifically designed for the storage and transportation of food products. They are made from virgin polypropylene resin and manufactured in clean & hygienic facilities. Food-grade FIBCs are also subject to rigorous testing and certification to ensure that they meet the highest safety and quality standards. Another growth driver is the surging e-commerce, which has led to an increased demand for food delivery services.

Moreover, the food-grade FIBC grew at a CAGR of 11.5% during 2017-2021. The growth is attributable to rapidly growing Indian and global food industries, driven by population growth and rising incomes.

India has taken over China to become the most populous country in the world. Food is a basic human necessity. As a result, the growing food demand has raised the demand for food packaging. Besides, there is a rising awareness about food hygiene and safety among consumers. Furthermore, technological advancements in FIBC manufacturing are giving rise to the development of stronger, lighter, and more durable FIBCs. This is making FIBCs more attractive to users and is expected to drive demand. Similarly, the FIBC industry is attracting increased investment from both domestic and foreign investors. This is expected to lead to the expansion of existing production facilities and the establishment of new ones.

Indian FIBC Export

According to IFIBCA, India has a 75% share in European FIBC imports and a 72% share in the US import market. India’s dominance in the export market is attributable to a growing focus on quality, excellent engineering capabilities, backward integration, and ethical business practices. Further, the growth is supported by the increasing demand from sectors like food and agriculture, chemical and petrochemicals, construction materials, etc.

The exports of the FIBC industry grew by 8.6% y-o-y in 2023, however it had marginally declined around 1.1% y-o-y in 2022. It is expected to reach around 82.1 million units by the end of 2024. Over 50% of the units produced in India are exported. The top five countries are the United States, Germany, the United Kingdom, France, and Spain. The export numbers grew at a CAGR of 8% during 2020-2023 and reached around USD 493 million in 2023.

Accordingly, Indian exporters have a number of competitive advantages such as:

• Cost-Competitiveness: Indian FIBC exporters are able to offer their products at competitive prices due to the lower cost of labour and other inputs in India.
• Product Quality: Indian FIBC exporters offer high-quality products that meet international standards.
• Government Support: The Indian government is supporting the growth of the FIBC industry through various initiatives, such as export subsidies and tax incentives, making Indian FIBC exports more competitive.

In addition, the following may also contribute to the increase in Indian FIBC exports in the coming years:

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• Growing Trade Agreements: India is entering into more free trade agreements with other countries. This minimizes trade barriers, making Indian FIBC exports more competitive in overseas markets.
• Improved Logistics Infrastructure: The Indian government is investing in improving the country’s logistics infrastructure. This will make it easier and more cost-effective for Indian FIBC exporters to ship their products to overseas markets.
• Increasing Awareness of Indian FIBC Brands: Indian FIBC brands are becoming increasingly well-known in overseas markets. This is due to the efforts of Indian FIBC exporters to participate in international trade shows and promote their brands through digital marketing channels.

Key Growth Drivers of India FIBC Market

• Lower production cost in Domestic Market
  • India is a major FIBC manufacturer and exporter registering rapid growth. However, the FIBC industry is labour- intensive due to customization requirements. In recent years, global economic developments have resulted in increasing labour costs year by year. Whereas the price of raw materials has fluctuated. In India, one of the key factors contributing to lower production costs is the relatively low labour costs. India has a large workforce, which translates into a vast pool of skilled and semi-skilled labourers available at competitive wage rates. This abundant labour force allows FIBC manufacturers to keep their production costs in check. Further, production costs are higher in key FIBC production locations like Turkey, European countries, and the United States. Accordingly, Indian enterprises are expanding their production capacity to meet the global FIBC market demands. As a result, the shift in procurement from high-cost production regions to India, a low-cost production hub, is driving the industry growth.
• Growing Potential and Acceptance of Indian Products
  • The FIBC market in India has great potential for growth due to the following factors:
  • Increasing exports from India, particularly in food processing, pharma, and chemical, require customized bulk packaging solutions.
  • Improving transportation and storage infrastructure in India.
  • Government policies encourage the use of recyclable packaging materials, which FIBCs comply with.
  • Increased demand for customized storage and transportation solutions in various industries.
  • Shortage of skilled labor in India, which makes FIBCs more attractive as they are easy to handle and cost- effective.
  • In addition, the FIBC utilization rate in India is lower than in the European and American markets, which provides further room for growth.
• Increasing Demand from End-Use Industries
  • FIBCs are used in a wide range of industries, including food & beverage, pharmaceutical, chemical, construction, and agriculture. The growth prospects of these industries further raise the demand for FIBCs. FIBCs are also used to package a variety of food and beverage products, such as rice, wheat, sugar, flour, and milk powder, pharmaceutical products, such as tablets, capsules, and powders, and chemical products, such as fertilizers, pesticides, and herbicides.

Accordingly, the increasing volume of global trade is also driving the demand for FIBCs, as they are a cost-effective and efficient way to transport bulk goods.

• Growing Demand for Sustainable Packaging Solutions
  • FIBCs are a more sustainable packaging solution than traditional packaging materials, such as drums and sacks. FIBC bags are reusable, recyclable, lightweight, and efficient. Further, FIBC bags are made from polypropylene, which is a recyclable material. This means that FIBC bags can be recycled at the end of their life, which further reduces wastage. In addition, these bags are lightweight and efficient for transportation, which can help reduce greenhouse gas emissions. The increasing awareness about sustainability is thus expected to drive the demand for FIBCs.

Key Challenges of India FIBC Market

• Low Entry Barriers
  • The Indian FIBC industry is fragmented due to a large number of small-scale players with insufficient R&D and technical capabilities. This leads to product homogeneity and fierce market competition, rendering profit margins low.
• Intense Competition
  • The entry of international FIBC manufacturers into the Indian market has further intensified competition, making it even more difficult for domestic players to thrive. Accordingly, worker retention is a top priority for the company in this labor-intensive industry. Losing workers can disrupt production and incur the costs of hiring and training new ones.
• Fluctuating Raw Material Prices
  • Due to fluctuating raw material prices, dynamic changes in regulatory standards, growing environmental concerns, limited effective recycling of mixed plastic waste, ineffective plastic recycling, and lack of modern and advanced packaging machinery in India, the market is expected to face major challenges in the supply side chain. Due to the ongoing geopolitical tensions, the raw material prices are further expected to be volatile, which might impact the Indian FIBC industry.

Shree Tirupati Balajee Agro Business Data

Shree Tirupati Balajee Agro Verticals

• FIBC
• Woven Sacks
• Woven Fabrics & Narrow Fabric
• Tape

Shree Tirupati Balajee Agro Product wise break-up

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Shree Tirupati Balajee Agro Revenue contribution from Geography presence

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Shree Tirupati Balajee Agro Customer dependency

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Shree Tirupati Balajee Agro Supplier dependency

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Shree Tirupati Balajee Agro Machinery/Plants/Factory

Shree Tirupati Balajee Agro Capacity Utilisation

• UNIT I (Operated by Company): Plot No.192, Sector-1, Pithampur, Dist. Dhar – 454 775, Madhya Pradesh, India.

• UNIT II (Operated by Company): Plot No.640, Sector-3, Pithampur, Dist. Dhar – 454 775, Madhya Pradesh, India.

• UNIT III (Operated by Subsidiary Company i.e. Shree Tirupati Balajee FIBC Limited): Plot No. AP 14, Apparel Park, SEZ, Phase II, Industrial Area, Pithampur, Dist. Dhar – 454 775, Madhya Pradesh, India.

• UNIT IV (Operated by Subsidiary Company i.e. Honourable Packaging Private Limited): Plot No. 640 A, Sector-3, Pithampur, Dist. Dhar – 454 775,  Madhya Pradesh, India.

Competition

compete with large, organised companies as well as smaller regionally based competitors. Some of our competitors may have greater resources than those available to us. While product quality, brand value, timely delivery, customer network, etc. are key factors in customer decisions among competitors, however, price and quality are the deciding factor in most cases. Among listed companies of similar size and product portfolio in India, we face competition from many private players and may face competition from Kanpur Plastipack Ltd., Rishi Techtex Ltd., Jumbo Bag Ltd., EMMBI Industries Ltd. and Commercial Syn. Bags Ltd etc. The organised players in the industry compete with each other by providing high quality, consistent and time bound products and value-added services. We have a number of competitors offering products similar to us. We ensure the product quality, timely delivery, product innovation, customisation in products which helps us to maintain strong relationship with our customers which in turn provides edge over our competitors.

Shree Tirupati Balajee Agro Peer companies comparison

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Shree Tirupati Balajee Agro Subsidiary companies

• Shree Tirupati Balajee FIBC Limited (“STBFL”) (52.14% Holding)
• Honourable Packaging Private Limited (“HPPL”) (97.73% Holding)
• Jagannath Plastics Private Limited (“JPPL”) (99.85% Holding)

Shree Tirupati Balajee Agro Group companies

• AON Textiles Private Limited
• Foamnet Plastics Private Limited
• Ever Bags Packaging Private Limited
• Stable Textile Private Limited

Shree Tirupati Balajee Agro SWOT ANALYSIS

• Strengths
  • Diverse Product Range: The company manufactures a variety of packaging products, including FIBCs, woven sacks, and tapes, catering to different industrial needs.
  • Established Market Presence: With over two decades in the industry, Shree Tirupati Balajee Agro has built a strong reputation and customer base both domestically and internationally.
  • Robust Manufacturing Capabilities: The company operates five manufacturing units, ensuring high production capacity and efficiency.
  • IPO Funding: The recent IPO will provide significant capital for debt repayment, working capital, and other corporate purposes, strengthening the financial position.
• Weaknesses
  • Dependence on Raw Material Prices: Fluctuations in the prices of raw materials like polypropylene can impact profit margins.
  • High Competition: The packaging industry is highly competitive, with many players offering similar products, which can affect market share and pricing power.
  • Debt Levels: Prior to the IPO, the company had notable debt levels, which could have impacted financial stability.
• Opportunities
  • Market Expansion: There is potential for expanding into new markets, both geographically and in terms of product offerings.
  • Technological Advancements: Investing in new technologies can improve production efficiency and product quality, providing a competitive edge.
  • Sustainability Trends: Increasing demand for eco-friendly packaging solutions presents an opportunity to develop and market sustainable products.
• Threats
  • Economic Downturns: Economic instability can reduce demand for industrial packaging products.
  • Regulatory Changes: Changes in environmental regulations could require additional investments in compliance and sustainable practices.
  • Supply Chain Disruptions: Any disruptions in the supply chain, such as raw material shortages or logistical issues, can impact production and delivery schedules.

Shree Tirupati Balajee Agro Business risk factors

• All manufacturing facilities are situated at Pithampur, Madhya Pradesh resulting in concentration in a single region. Any interruption for a significant period of time, in these facilities may in turn adversely affect our business, financial condition and results of operations.
• Poly Propylene granules, Poly Propylene (LDPE) and High-Density Polyethylene (HDPE) of different grades is our primary raw material constituting a significant percentage of our Company’s total expenses. The business is susceptible to adverse impacts from fluctuations in crude oil prices affecting polymer costs, and risks associated with foreign exchange movements during polymer imports. Additionally, increases in raw material prices, supply shortages, and cost overruns pose potential adverse effects on our operations. Increases in the prices of raw materials, their availability, quality and cost overruns could have adverse effect on us.
• Majority portion of domestic sales are derived from the western zone and any adverse developments in this market could adversely affect our business.
• Shree Tirupati Balajee Agro historical revenues have been largely dependent on few Customers and our inability to maintain such business may have an adverse effect on our results of operations.
• Shree Tirupati Balajee Agro revenues are highly dependent on clients concentrated in the packaging of products and manufacturing sector. An economic slowdown or factors affecting this segment may have an adverse effect on our business, financial condition and results of operations.
• A significant portion of our revenues are dependent on our exports to our international customers. Company generates major portion of sales from our operations in certain countries especially USA, Germany, Sweden, UK, Spain, France, Australia, Canada, Lithuania and Singapore. Any failure to fulfil the requirements of our international customers may adversely affect our revenues, result of operations and cash flows.

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Is the Popular Foundations IPO a Trap for the Unwary

• In addition to the existing indebtedness our Company or our Subsidiaries, may incur further indebtedness during the course of business. We cannot assure that our Company or our Subsidiaries would be able to service the existing and/ or additional indebtedness.

Shree Tirupati Balajee Agro Financials

Shree Tirupati Balajee Agro Key Performance Indicators

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Shree Tirupati Balajee Agro Assets & Liabilities

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Shree Tirupati Balajee Agro Profit & Loss

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Shree Tirupati Balajee Agro Cash Flow

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Shree Tirupati Balajee Agro Capital structure

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IPO Details

Shree Tirupati Balajee Agro IPO Details

Object of the issue

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Litigation involved in Shree Tirupati Balajee Agro

Gray Market Premium

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