What you must know about TGIF Agribusiness IPO?

About TGIF Agribusiness Ltd

TGIF Agribusiness Ltd  was incorporated in the year 2014 to engage in the business of open field cultivation of fruits and vegetables. In terms of plantation specifics, the company is into the cultivation of pomegranates, dragon fruit and timber plantations. In addition, TGIF Agribusiness Ltd also grows and harvests seasonal vegetables and fruits like lemons, watermelons, and chilies. Its farmlands are spread across nearly 110 acres and are located in Ajari, Kasindra and Kojra in the state of Rajasthan. Its marketing is done predominantly through a business-to-business (B2B) selling model to retailers, wholesalers, retail chains, hypermarkets and mandis. It is also planning to foray into Direct to Home (D2H) model for the delivery of produce, but that is yet to be activated.

Highlights of the TGIF Agribusiness Ltd (BSE SME IPO)

Here are some of the highlights of the TGIF Agribusiness IPO on the SME segment of the Bombay Stock Exchange (BSE).

• The issue opens for subscription on 08th May 2024 and closes for subscription on 10th May 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a fixed price issue. The price for the fixed price issue is set at ₹93 per share. Being a fixed price issue, the question of price discovery does not arise.
   
• The IPO of TGIF Agribusiness Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, TGIF Agribusiness Ltd will issue a total of 6,87,600 shares (6.88 lakh shares approximately), which at the fixed IPO price of ₹93 per share aggregates to fresh fund raising of ₹6.39 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 6,87,600 shares (6.88 lakh shares approximately) which at the fixed IPO price of ₹93 per share will aggregate to overall IPO size of ₹6.39 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 34,800 shares. Hem Finlease Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Niraj Gemawat and. Rachana Gemawat. The promoter holding in the company currently stands at 99.80%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 73.28%.
   
• The fresh issue funds will be used by the company towards the purchase of agricultural equipment and irrigation systems as well as to meet working capital needs. Part of the funds will also be used for general corporate purposes.
   
• Hem Securities Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

The IPO of TGIF Agribusiness Ltd will be listed on the SME IPO segment of the BSE.

TGIF Agribusiness IPO – Key Dates

The BSE SME IPO of TGIF Agribusiness IPO opens on Wednesday, 08th May 2024 and closes on Friday, 10th May 2024. The TGIF Agribusiness Ltd IPO bid date is from 08th May 2024 at 10.00 AM to 10th May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 10th May 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on May 14th 2024, will be visible to investors under the ISIN Code – (INE0SMU01015). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO allocation and minimum investment lot size

TGIF Agribusiness Ltd has already announced the market maker allocation at 34,800 shares as inventory for market making. Hem Finlease Private Ltd will be the market maker for the IPO. The breakdown of the overall IPO of TGIF Agribusiness Ltd in terms of allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹1,11,600 (1,200 x ₹93 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹2,23,200. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Financial highlights: TGIF Agribusiness Ltd

The table below captures the key financials of TGIF Agribusiness Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The previous years data is not comparable as the company performance has been very volatile. For the latest year, TGIF Agribusiness Ltd has reported very strong numbers. The PAT margins stand at 56.63%, while the ROE at 73.95% and the ROA at 69.36% are also fairly attractive. However, the revenues are yet to catch up with the growth in assets in the latest year. Sustaining this profits will be the key to valuations; and that may be slightly tough.

The company has latest year EPS of ₹6.85 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price of ₹93 per share at 13-14 times P/E ratio. However, if one looks at the 8-months EPS for FY24 at ₹4.28, it translates into full year extrapolated EPS of ₹6.42 per share. That is not going to make any difference to the valuations. Investors in the IPO have to remember two things. There has been a huge withdrawal of capital by partners in FY22, which explains the sharp fall in capital base and the sharp spike in ROE ratios for FY22. The company is quite small and the business model is subject to evolving regulation. Investors must approach this IPO with caution.