Aries Agro Limited

Price band: Rs 120-Rs 130
Issue opens: December 14, 2007
Issue closes: December 19, 2007.
IPO grade: No grading

Business
Manufacturing of micronutrients and other nutritional products for plants and animals at Mumbai, Kolkata, Hyderabad and Bangalore with installed capacity of 21,600 TPA. Manufacturers plant nutrients, insecticides and veterinary products.

Subsidiaries:
Aries Agro Care - trade in seeds for vegetables and field crops.
Aries Agro Equipment - trading of mini tractors.
Commencement date (proposed) – March 31, 2008.

Financials
Income
FY2002-2003: Rs 19.51 crore
FY 2006-2007: Rs 77.40 crore
CAGR = 41%

Net profit
FY2004-2005: Rs 1.06 crore
FY 2006-2007: Rs 8.44 crore
CAGR = 181%

Objectives

Increase manufacturing capacity by 79,200TPA
Install packaging capacity of 9,000TPA.
Buy new plant and machinery for Mumbai plant
Capital expenditure for mobile marketing – read buying some vehicles.
Renovation of office building.
Invest Rs 7.36 crore in Golden Harvest, which is setting up a project to manufacture chelated micronutrients and invest in another company MAPCO. Finance working capital requirements.

Outlook

Really big plans.
Capacities will grow five-fold by September 2008.
P/E = 18 to 20 times.
Mcap/Sales= 2.18

Simply put a costly affair.

Some observations:
FY2006-2007 revenues appear inflated. The Rs 70 crore topline comes with trading revenue of Rs 30.75 crore. The trading revenue in FY2005-2006 was just Rs 8.20 crore. Buying turnover is the easiest trick in the world of business. Though we don't say that Aries is doing that, as we don't have any evidence.

Company incurred losses in FY2002-2003 and FY2003-2004.
Also note that the company talks highly about its presence for last three decades and its high standards of corporate governance. But we fail to understand why all this translates into a meagre Rs 70 crore topline.
Company has already made the payment for one time settlement of its dues to IFCI arising out of lease finance transaction where Aries defaulted in 2002.
One must also note that company has defaulted on a lease finance obligation of just Rs 2.53 crore in 2001.

Simply put, Avoid and invest at later date.