Kerala-based Penver Products has filed draft prospectus with SEBI for launching its IPO. The company, a diversified seafood company, is engaged in the business of processing and exporting aquaculture and capture fishery products. While Penver Products IPO is still far as the company will need to secure regulatory clearances, here are a few things you should know about the company:
Penver Products IPO: Business background
The company is present across various segments of the seafood value chain including farming, feed distribution, processing and overseas distribution. Penver Products caters to consumers in the US, Europe and Far East through food distribution and retailing channels. The company’s product range comprises of farm-cultivated Litopenaeus Vannamei shrimp (L. Vannamei) and varied capture fishery products such as squids, wild shrimps, octopus, cuttlefish and wide variety of fishes.
Currently, the company has an aggregate farming area of 823.37 acres, out of which 351.56 acres is owned farms on leased land and 471.81 acres of contract farming arrangement. Penver Products sell the seed and feeds to the farmers and has the first right of refusal on the shrimps being cultivated on their farm land.
Penver Products IPO: Export Oriented
Penver Products is an export oriented company, deriving majority of its revenues through sales to international customers. Out of its revenue from sales of products in FY2018, India accounted for only 10.56%. It is noteworthy that the company started selling its products in the local market only in FY2018 and was completely into exports in the prior years.
Penver Products IPO: Focus on the US market
The United States is the most important market for the company and it derived 65.8% of its revenues in FY2018 from the US market. In fact, it is the only market where the company has done forward integration through an associate distribution arm, named Blue Sea Products LLC. Penver Products has 25% equity stake in Blue Sea Products. Apart from being a distributor for Penver Products, Blue Sea Products sources seafood products from various global locations for the purpose of distributing the same in the US. As a result of its well-entrenched network, the company has been able to develop direct relationships with food distribution companies such as Chicken of the Sea Frozen Foods, Limson Trading Inc., Sunnyvale Sea Foods, Censea Inc., Pacific Coral Seafood Co Inc. and Arista Industries Inc.
Penver Products IPO: Use of funds
Penver Products IPO will include a fresh sale of shares worth INR2.42 billion (INR242 crore). These funds will be used towards
- Setting up a new shrimp processing unit at Voduru Village in Nellore – INR94.2 crore
- Setting up a new pre processing centre at Thamminipatnam in Nellore – INR16.1 crore
- Setting up a new hatchery facility at Rajupalem Village in Prakasham – INR16.3 crore
- Prepayment or repayment of all or portion of certain borrowings – INR15.7 crore
- Establishing a 4 megawatt captive solar facility at Nellore – INR28.3 crore
- General Corporate purposes
The public offer will also include an Offer for Sale (OFS) of up to 4,108,000 shares by promoter selling shareholders. These shareholders include Philips Thomas (1,027,000 shares), Vinod Kumar K P (1,027,000 shares), Madhukrishna Ganta (1,027,000 shares) and Abdul Kareem A (1,027,000 shares). All four are the promoters of the company.
The company is fully owned by the promoters and has no external investors. As of the date of the draft prospectus, promoters and members of promoter group held approximately 96.55% of the equity share capital of the company.
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Penver Products IPO: High growth but volatile earnings
The company has done well in growing the business in recent years. It was also helped by the outbreak of Early Mortality Syndrome (EMS) that reduced the supply of quality shrimps from countries such as China, Vietnam, Malaysia and Thailand. As the table states, Penver Products’ topline has expanded almost 3.5 times from FY2014. However, this growth did not directly result in earnings growth, although profits have grown significantly in the last couple of years. Nevertheless, earnings have been volatile moving from close to no profits to INR47.6 crore in the last three years.
Penver Products’ financial performance (in INR crore)
|Profit after tax||5.9||3.2||0.0||9.3||47.6|
|Net margin (%)||2.8||1.4||0.0||2.3||6.8|