Friday Jul 05, 2024
Friday Jul 05, 2024
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Maharaja Foods Ltd., holding company sole shareholder Thavamalar Guganathan (centre) with two of her sons Chairman Vijayanath and Managing Director Vithyanath Guganathan
– Pic by Shehan Gunasekera
Amidst growing number of de-listings, a spirited woman-owned but youth-managed SME is taking a bold step and conveying a bigger message via a Rs. 125 million Initial Public Offering (IPO) which is though small is historic.
The company is the majority export-oriented Maharaja Foods Ltd., (MFPL) which is offering 20% stake via issuance of 25 million shares at Rs. 5 each. Official opening is 4 July.
Modest in value, the IPO however is breaking new grounds. MFPL is the first women-owned enterprise with founders’ origins from Velani, Jaffna in northern province to be listed on the Colombo Stock Exchange.
It will also be the maiden CSE listing under the USAID CATALYZE Sri Lanka Private Sector Development (PSD) Activity’s Funding Readiness Program, aimed at facilitating equity capital for SMEs through CSE listings and private investors. SME-listing specialist Atarah Capital will act as the Financial Advisor and Manager to the Offer and Sponsor of the IPO.
Founded in 1995 with one outlet in Wellawatte by late Sivasaraman Guganathan hailing from Jaffna, and since his in 2016 and his wife Thavamalar with three sons pursued the venture taking it global. The company is managed by her two domiciled sons, Chairman Vijayanath and Managing Director Vithyanath Guganathan.
MFPL specialists in value added food essential products, 64% of which is exported. The ‘Maharaja’ brand range comprises rice-based and flour-based products (accounting for 40% of the sales), spices, fish-based products, and grocery items, serving both local and overseas consumers through its network of distributors in Sri Lanka, France, United Kingdom and Australia. Its consumers are primarily Asian expatriates and others living in these markets. Its first export – rice – was to Europe way back in 1995.
In FY24, MFPL achieved a revenue of $ 1 million, up 138% from the previous year and $ 200,000 in FY22. Revenue is forecast to grow to Rs. 694 million in FY25 from Rs. 497 million in FY24 and to Rs. 1 billion in FY27. After tax profit is expected to grow from Rs. 31 million in FY24 to Rs. 112 million in FY27. MFPL enjoyed an EBITDA margin of 9% and 11% in FY23 and FY24 which is expected to improve to 15% in FY25 and to 18% by FY29. Net profit margin which was 6% in FY24 is forecast to grow to double digits from FY26 onwards.
IPO to fund expansion, more exports
MFPL’s manufacturing and processing facility is in Wattala and from the Rs. 125 million IPO proceeds Rs. 25 million will be invested in the expansion of the facility whilst Rs. 44 million will go to setting up of a raw rice plant and rice polishing plant as well as a gingelly oil plant. It will also use Rs. 20 million to part settle borrowings which are at Rs. 157 million as at end FY24 and Rs. 30 million as working capital.
Chairman Vijayanath said MFPL sees great potential for exports of the company with US, Canada, Scandinavia and the Middle East emerging as new markets. “With rising migration the need for our range of products among the Asian community is on the rise hence our expansion plans and need for zero-cost equity via IPO,” said Vijayanath who was educated in Royal College, Colombo and holds a Degree in Business Management specialising in Economics and Consulting from Aston University. “Yes, consumer food market is highly competitive, but our Maharaja brand has gained a lot of trust for quality,” he added. MPFL plans to launch a new range of wet products such as condiments, ready-to-eat curries etc and increase focus on products such as Sri Lankan specialised tea and the beverage range. Being a Public Listed Company (PLC) will also enable MFPL to negotiate better terms with suppliers, service partners and bankers.
Vijayanath other and elder sibling Vithyanath who is currently reading for his MSc in Purchasing, Logistics and Supply Chain Management, said the proposed raw rice plant and rice polishing plant, will improve margins whilst MFPL will continue to source raw material cost-efficiently. Locally MFPL success has helped the agri-produce farming community. He said that Company plans to launch an online platform (e-commerce website) to sell directly to customers worldwide. Products would be shipped via international cross border shipping from Sri Lanka.
The parent company of MFPE is G.T.V. Global Holdings., an investment holding company with Thavamalar Guganathan as the sole owner. Other subsidiaries specialise in courier and cargo consolidation services, international and domestic parcel delivery services and logistics, which generates over Rs. 600 million in revenue.
Championing more women entrepreneurs
Thavamalar Guganathan who continues to oversee the business as Executive Non-Independent Director of MFPL apart from personally involved in identification of the right spice mixes that enriches Maharaja products, recalled that after the demise of her husband, she was determined to continue his vision.
“Within a period of 8 years under my leadership, we were able to upscale corporate governance structures and finance governance best practices to a level that MFPL met the eligibility criteria for a listing in the CSE, along with sound financial performance,” she said. The Company has brought in top professionals Seyed Rizvi Mowlana, Melanga A Doolwala and Imran Furkan as Independent Non-Executive Directors.
MFPL is majority-run by women employees and Thavamalar said she encourages women to consider entrepreneurship even whilst being employed. “I am very keen to increase foreign exchange earnings via exports and job creation thereby making a positive contribution to the economy,” she added.
MFPL IPO Financial Advisor and Manager to the Offer and Sponsor Atarah Capital Managing Director Rohan Senewiratne said: “We are delighted with our efforts to introduce a company with founders originating from the Northern Province to be listed in the CSE. Furthermore, MFPE is a women-owned enterprise, hence the listing would encourage women entrepreneurship in Sri Lanka, and inspire others to consider listing as an attractive option to raising equity capital.”
IPO offers immediate upside of 14.6%
Atarah Capital Head of Investment Banking Chandana Wijesundera said with an IPO price per share of Rs. 5, offers an immediate upside of 14.6% for primary investors in relation to the value derived through peer company PE multiple based valuation. The IPO is also attractively valued at an implied forward PER Based on FY25E earnings; to be lower than the selected peer group (i.e: PER 17.1x as of 30 April 2024).
Furthermore promoters have committed to continue their shareholding, demonstrating confidence in future business growth.
The MFPE Group is part of the portfolio of companies that have been supported by USAID CATALYZE PSD Activity through its Funding Readiness Program. This program builds capacity for growth and catalyzes funding for micro, small and medium enterprises in the Food, Agri and ICT sectors in Sri Lanka, with a special focus on women-led businesses.
MFPE Group has their own product portfolio manufactured in-house, as well as being involved in the export of other third-party products (consumables, household items etc.) that are demanded by the expatriates of Asian origin residing globally. With a dedication to nourishing the nation and embracing innovation, MFPE Group continues to redefine excellence in the food industry, embodying resilience, and a steadfast commitment to providing healthy, high-quality offerings for generations to come.
MFPL Board of Directors are, Chairman/Non-Independent Executive Director Vijayananth Guganathan, Managing Director/Non-Independent Executive Director Vithyanath Guganathan, Non-Independent Executive Director Thavamalar Guganathan, Independent Executive Director Seyed Rizvi Mowlana, Independent Non-Executive Director Melanga A. Doolwala and Independent Non-Executive Director Imran Furkan.
