Vandan Foods

• Vandan Foods is coming out with an initial public offering (IPO) of 26,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 115 per equity share.
• The issue will open on June 30, 2025 and will close on July 02, 2025.
• The shares will be listed on SME Platform of BSE.
• The share is priced at 11.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Nirbhay Capital Services.
• Compliance Officer for the issue is Aayushi Naresh Bhatia.

Profile of the company

Vandan Foods was engaged in the catering business prior to financial year 2018. However, from financial year 2018 till financial year 2023, the company was engaged in the trading of agro commodities. Thereafter, from the financial year 2024 its current promoters have been actively managing the business of manufacturing of Castor Oil and its derivatives. It is currently operating on a B2B business model primarily focusing on Refined F.S.G. Castor Oil, Castor De Oil Cake.

Castor Oil, nonvolatile fatty oil obtained from the seeds of the castor bean, Ricinus Communis, of the spurge family (Euphorbiacee). It is used in the production of synthetic resins, plastics, fibres, paints, varnishes and various chemicals including drying oils and plasticizers. Castor Oil is viscous, has a clear and colourless to amber or greenish appearance, a faint characteristic odour and a bland but slightly acrid taste, with a usually nauseating aftertaste. Castor Oil is obtained from castor beans either by pressing or by solvent extraction. In addition to the uses mentioned above, castor oil and its derivatives are used in cosmetics, hair oils, fungistatic (fungus-growth-inhibiting) compounds, embalming fluid, printing inks, soap, lubricants, greases and hydraulic fluids, dyeing aids and textile finishing materials.

Being an ISO Certified company, the company endeavour to satisfy customers by continuous improvement through process innovation and quality maintenance. It focuses on producing quality product to increase customer satisfaction and develop a positive brand image in the industry. It ensures that the castor seeds are sourced from reputable suppliers. Regular testing for containments and quality metrics is essential. Its management and team have enabled it to maintain continuing customer relations, by continuously improving the product quality and consistency, ensuring enhanced customer satisfaction and retention. It has outsourced testing of quality of raw material and finished products to laboratories and manufacturing the same strictly as per quality norms so as to provide the quality output to its customers at competitive prices.

Proceed is being used for:

• Meeting working capital requirements
• Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company
• Funding the capital expenditure requirement for expansion of its Dhinoj Facility 
• General corporate purpose
• Meeting public issue expenses

Industry Overview

The global castor oil market was valued at $1.4 billion in 2022, growing at a CAGR of 5.1% from 2023 to 2032. The market is expected to reach $2.3 billion by 2032. Throughout the forecast period, castor oil is expected to see high demand from the pharmaceutical and cosmetics sectors. Rising healthcare costs and public awareness of preventive care and self-management drive demand for cosmetics and pharmaceutical products. The product’s increasing use in creating skincare, cosmetic, and soap goods is also expected to increase its demand. India is one of the largest importers of edible oil, despite having the title of the world’s fourth largest producer of oilseeds. This trend is attributed to the rising demand for edible oils in the private and industrial sectors. The India castor oil market reached a volume of 102.5 Kilo Tons in 2023.

Increase in demand for sebacic acid and rise in use of bio based products in cosmetics, lubricant and pharmaceutical industries are propelling the castor oil market value. Castor Oil is widely employed in various skin care products used against inflammation, acne and dry skin. Rise in demand for nutritionally balanced cattle feed is also augmenting demand for castor oil in the agriculture sector. Manufacturers in the industry are adopting advanced technologies and automating the oil extraction processes to increase their production capabilities. Availability of advanced oil extraction machinery is offering lucrative castor oil business opportunities for leading companies in the market.

Castor oil is widely employed in various industries including food & beverage, cosmetics, chemicals and pharmaceuticals. Castor Oil is also termed as Ricinus oil as it is extracted from the seeds of Ricinus Communis. It helps moisturize skin, induce labor, relieve constipation and clean dentures. Castor Oil extensively used in skin care as it holds several benefits, including reducing inflammation, managing acne, increasing hair growth and getting rid of dead skin cells. Rising utilization of the product to reduce the symptoms of constipation, lower the feelings of incomplete bowel movements, and ensure less strain during defecation is anticipated to drive the industry’s growth. The growth of the pharmaceutical sector in various economies of North America, Europe, and Asia Pacific is projected to fuel the demand for the product. 

Pros and strengths

Quality control and quality assurance: The company has received ISO 9001:2015 certificate, certifying that its quality management system is in accordance with the requirements of ISO 9001:2015 with regard to manufacture of castor oil and castor de oiled cake. Quality is an ongoing process of building and sustaining relationships. The company has the practice of testing the products for quality before they are dispatched to the customers and has outsourced testing of quality of its products to laboratories which have fully equipped quality control department with experienced and qualified staff that looks after the quality, strength and durability of its products in order to facilitate a smooth manufacturing process.

Diversified business model and customer base: In this dynamic and extremely competitive environment, the company has developed a diversified business model with its offerings ranging from castor doc and seeds to castor oil. Its revenue mix also signifies that it has been able to maintain a market for its products. Such a diversified business model reduces its dependency on a particular industry and ensures the flow of revenues throughout the year. Further, a diversified business model gives it a competitive edge over its peers. Also, it serves a diverse mix of end markets across the industry. Its differentiated product offerings have enabled it to build a sustainable business model which is reflected in its growth in revenue.

Scalable business model: The company’s business model is scalable. Its business model is customer-centric, and order-driven, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to the development of new markets both domestic and international by exploring customer needs and by maintaining the consistent quality output.

Risks and concerns

Significant revenue comes from limited customers: The company is dependent on a limited number of customers for a certain portion of its revenues. The company has garnered 42.12%, 75.69% and 100.00% of its total revenue from top 10 customers in FY24, FY23 and FY22 respectively. The loss of one or more such customers, the deterioration of their financial condition or prospects, or a reduction in their demand for its products could adversely affect its business, results of operations, financial condition and cash flows.

Business is subject to seasonal volatility: The major raw material used in its manufacturing operations is Castor Seeds. Due to the seasonal availability of these castor seeds, its business is seasonal in nature. The period during which its business may experience higher revenues varies from season to season depending upon the availability and thereafter harvesting of this raw material. During the crop season, it is able to procure these raw materials at reasonable terms and in substantial quantities, whereas during the off-season their availability is less and also there are price variations. Accordingly, its revenue in one quarter may not accurately reflect the revenue trend for the whole Financial Year. The seasonality of Castor Seeds and its impacts may cause fluctuations in its result of operations and financial conditions.

Geographical constrain: The company derives its revenue from various domestic regions. However, it derives a large portion of its revenue from state of Gujarat. The State of Gujarat contributed 92.62%, 87.63%, 93.53% and 80.70% of its total revenue for the period ended December 31, 2024 and for the financial year ended on March 31, 2024, March 2023 and March 2022, respectively. If the economic conditions of State of Gujarat become volatile or uncertain or the conditions in the financial market deteriorate, or if there are any changes in laws applicable to its industry or if any restrictive conditions are imposed on it or its business, there will be a severe impact on the financial condition of its business. Further, the ultimate customers located in this geography may reduce or postpone their spending significantly which would adversely affect its operations and financial conditions.

Outlook

Vandan Foods is engaged in the manufacturing of Refined F.S.G. Castor Oil and Castor Oiled Cake. The company operates as both B2B and B2C models; the company emphasizes quality control, inventory management, and business development to ensure customer satisfaction. The company has diversified business model and customer base coupled with scalable business model. On the concern side, a certain amount of the company’s revenue is generated from certain key customers, and the loss of one or more such customers, the deterioration of their financial condition or prospects, or a reduction in their demand for its products could adversely affect its business, results of operations, financial condition and cash flows. Moreover, its revenues are highly dependent on its operations in the geographical region of state of Gujarat. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and result of operations.

The company is coming out with an IPO of 26,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 115 per equity share to mobilize Rs 30.36 crore. On performance front, the total revenue from operations for the year ended on FY24 was Rs 4873.04 lakh as compared to Rs 1159.35 lakh during the FY23. Moreover, profit after tax increased to Rs 264.43 lakh in FY24 from Rs 64.28 lakh in the FY23.

The company intends to focus on adhering to the quality standards of the products. Quality of the product is very important for the company from both customer and end user point of view. Maintaining strict quality control measures throughout the manufacturing process to ensure consistency and durability of its product and timely corrective measures in case of quality diversion are keys for maintaining quality standards of the products. Providing the desired and good quality products help it in enhancing customer trust and maintaining long term relationships with them.