Annapurna Swadisht Ltd - A Swadisht FMCG investment?

Company Details:

Annapurna Swadisht Limited is a manufacturer of snacks and food products, namely, Fryums, cakes, candy, namkeen, chips, and Gohona Bori. Company was incorporated in the year 2015, and over the years, it is being able to establish itself as a brand name in the Eastern India. They have a unique price point of Rs. 5 which makes them the dominant player in Rural Areas.
Annapurna Swadisht Limited sells 12 Lakh+ packets of products daily. The company is one of the largest FMCG players in Eastern India in fast growing segments in Fryums, Cakes, Candies, Namkeen, and Potato Chips.
Company’s products are marketed under own brand names Jackpot, Chatpata Moon, Balloon, Finger, Rambo, Makeup Box, Dhamaka, Phoochka, Jungle Adventures, Ringa, Bachpan Ka Pyaar, Kurchure, Cream Filled Cake Vanilla, Cream Filled Cake Litchi, among others.
They have been certified by Food Safety and Standards Authority of India (FSSAI) for the quality management systems.

Products and Distribution:

  • Currently they have 38 SKUs across 6 product lines
  • 300 plus distributors in West Bengal, Bihar, Odisha, Jharkhand and Assam
  • 80 plus Super stockists in key markets (5 states mentioned above)
  • 5,00,000 plus retail touchpoints across 200+ towns & 70,000+ villages

Manufacturing Capacity:

Currently they have 2 Manufacturing Units in West Bengal. Capacities are built in proximity
to markets of consumption to reduce freight costs.
(1) in Asansol with a constructed area of approx. 50,142 sq. ft. and
(2) in Siliguri with a constructed area of approx. 35,000 sq.
Daily production capacity of Asansol unit is 15 MT of Fryums and daily production capacity of manufacturing unit at Siliguri is 10 MT of Fryums. (Total 25 MT of capacity)
Currently, both facilities are operating at ~100% utilization as on June 30, 2022.

Capacity expansion plans:

They are more than doubling their capacities to 60 MT by December 2022. They are adding two more manufacturing units in West Bengal (Gurap and Dhulagarh). They are aiming to secure backward integration in Gurap unit with flour mill.
Currently total Capex of approx. INR 21 crore+ is underway for above (Funding mainly from funds raised in IPO).

Financials:

Annapurna Swadisht Ltd has been growing rapidly in last 3 years on lower base. They have grown from topline of 13.75cr in 2019-20 to 61.05cr in 2021-22.
Furthermore, they have clocked 29cr revenue in Q1 of 2022-23 and looks to maintain similar growth trajectory.

They have grown 15% MoM from April 2020 till June 2022, which is nothing short of an incredible growth journey!

Geographical Revenue Breakup (2021-22)
West Bengal – 68.5%
Bihar – 7.6%
Jharkhand – 22%
Odisha – 0.9%
Assam – 0.7%

Investment Thesis:

*They are in highly growing Indian Snacks Market:
The snacks industry of India is the most promising and booming segment of the FMCG category. There is a rise in demand for snacks in India; it is driving the companies to grow and operate in this segment lucratively. According to Renub Research latest report, the India Snacks
Market is expected to reach US$ 23.36 Billion by 2026.
The packed snacks such as instant and ready-to-cook snacking food items act as the primary growth drivers for the snacks industry in India. The consumption of package snacks is growing in India due to hygienic factors, easy availability, numerous choices, and a rise in its citizens’ personal disposable income. Study suggests that the Indian Snacks Market size is expected to grow with a double-digit CAGR of 13.24% from 2020 to 2026.

*They are adding new flavours and products to nearly double their SKUs to 50 by December 2022. They are also aiming at expanding presence across price points to mitigate any potential customer concentration risk.

*Annapurna Swadisht Ltd is growing at a phenomenal rate and plans to grow similarly in future (atleast for next couple of years with enhanced capacity). Management is expecting to close the current financial year (2022-23) at around 180-200cr of revenue (which is 3x of their 2022 revenue of 60cr).

*OPM has been increased from 5.5% in 2020 to around 8% in 2022. With scale, expect OPM to further improve.

*With current capacity of 25MT, they can clock up to 15cr per month (as per management). With 60MT capacity (most likely to be from Jan 2023), they can clock up to 30-35cr per month and around 360-420cr per annum. If they can penetrate other eastern states as they have with West Bengal, they can grow very well for next 2-3 years atleast with current enhanced capacity.

Risks:

*This is a microcap company which was recently listed and is only listed in NSE SME board. Investing in a SME stock without due diligence can erode your capital quickly.
*At current market price, company is trading at 2.2 Market cap to Sales (considering same runrate of Q1 2023) and P/E of around 50, which is not cheap by any means. (We could argue that an FMCG company growing at such rate could command such valuations).
*Geographical concentration risk: 68.5% of the revenue was from West Bengal. Need to keep this in mind. (Though management is trying to penetrate Bihar, Jharkhand, Odisha and Assam)

Disclaimer: Invested 1 lot. This is not an investment advise. Please do your own diligence before taking buy/sell decision.
If anyone else is tracking the company, please provide your valuable inputs.

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Couple of Management Interview/discussions available:

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@Chethan_Ck

Thank you for initiating this thread; I am also invested here.

Key strengths: a. Focus on East / North East markets, traditionally underserved by big, organised FMCG players. Their major competition seems to be unorganised players.
b. Being able to cater to the tail end of the distribution chain, again those small ticket distributors who are difficult-to-service for big FMCG.

However, this is (very) recently listed company, without a single quarter of results post listing. I am waiting for the HY results, due in a week’s time. Disclosures (or lack there of!) should be helpful; let’s see.

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Investor presentation:

ANNAPURNA_10102022145903_IntimationtoSEforInvestorMeetsigned (1).pdf (4.9 MB)

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Good set of results by the company!

Growth continues! Expect good increase in revenue of H2 2022-23 as new capacity would be online by December this year.

H1 2022-23 Revenues at 65.7crs Vs 24.32crs (250% increase YoY)
H1 2022-23 PAT at 2.87crs Vs 1.25crs (125% increase YoY)

Q2 2022-23 Revenues at 36.7crs Vs 29crs Q1 2022-23 (26% increase QoQ)

Q2 2022-23 PAT at 1.56crs Vs 1.31crs Q1 2022-23 (19% increase QoQ)

ANNAPURNA_11112022162118_OutcomeofBoardMeeting_Sept2022signed.pdf (1.5 MB)

Disclosure: Invested

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“Start of Packaging and Marketing of Edible Oil in
the State of West Bengal, Jharkhand, Bihar, Orrisa and Assam”.

ANNAPURNA_07122022185057_AnnapurnaPressRelease_EdibleOil.final.pdf (1.6 MB)

I am not sure why they are getting into edible oil. I believe the margins are less in that segment. Does anyone have an idea on this?

New investor presentation.

ANNAPURNA_07122022123351_ANNAPURNA_INVESTORPRESENTATION.pdf (3.4 MB)

Few notes:

Total capacity to be 68MT by Sep 2023. Current capacity is 35MT. (Increased from 25MT)
One thing I observe is in the previous investor presentation, they had mentioned that capacity would be 60MT by December 2022. Little worried that they moved the dates to September 2023.

475 distributors (from 300) and 90 super distributors (from 80) across 5 states.

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My understanding / take-aways from the recent investor presentation (Dec. 2022)…

  1. Focus continues to be on the East / North East. West Bengal accounts for more than 50% of revenue; looking to expand in Assam, Bihar and Jharkhand. Looking to get a foothold in Odisha.
  2. Fryums account for most of their sales. However, they are making a play for Namkeen, potato chips, cakes and candy. Per their recent press release, they have launched edible oil (packaging and sale), using the same distribution network. Have close to 60 SKUs.
  3. Seem to be putting their fixed assets to good use, as reflected by a healthy asset turnover ratio.
  4. Price points of Rs. 5 & Re. 1 – strategy seems to be to cater to people with low disposable income, with a focus on quality and branding.
  5. Plan is to augment capacity to 68MT (both own and contract) by Sep. 2023.

Key monitorable: Promoter / senior management quality is untested. Integrity, attitude towards non-control shareholders, capital allocation skills and ability to execute & scale need to be tracked. However, I have not come across significant concerns / red flags so far.

Disc: Invested; views biased.

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I have a few concerns about the “Olonkar” brand:

  1. The company talks about entering into D2C business with a BigBasket tie-up for their Olonkar brand of local delicacies like papad, gohona bori, pickles etc. But I have not been able to find any of their products on Big Basket.

  2. Their business mainly targets consumers with low disposable income. Their business model works on the same principle. They supply goods to dealers on low ticket size of order and the price of the products are also between ₹1 - ₹5. However, the “Olonkar” brand seems to be a premium product, with prices of products ranging between ₹190 - ₹700.

  3. Has any one been able to do a channel check about the company’s products?

Annapurna Swadisht Limited (NSE Emerge: ASL): We are pleased to inform you that we have
successfully completed the trail run on January 23, 2023 at our new manufacturing Plant at
Siliguri, West Bengal. The additional daily production capacity of the new plant is 15 MT per day of fried extruded snacks and 10 MT per day of Cakes and Rusks aggregating to 25 MT per day. The new plant is expected to start commercial production w.e.f. February 15, 2023.

We are also pleased to share that we have achieved a turnover of Rs. 10,852.94 Lakhs for the
nine months period ended December 31, 2022 and Rs.4,291.04 Lakhs during the quarter
ended December 31, 2022.

ANNAPURNA_24012023152159_Intimation_SE_ASL.pdf (1.4 MB)

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Good to see that the overall capacity would be 60MT from Feb 15.

Also good 16% increase in sales to 42.9crs for Q3 compared to 36.7crs sales of Q2.

Once they utilise complete capacity, we can see very good amount of sales numbers.

Disclaimer: Invested, biased

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