Star Agriwarehousing Files for ₹450 Cr IPO; Temasek to Partially Exit

Star Agriwarehousing and Collateral Management, supported by global investor Temasek, has filed a draft red herring prospectus with SEBI on December 4, 2024, for an Initial Public Offering (IPO). The proceeds from this IPO aim to address the company's working capital needs.

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The initial public offering (IPO) will consist of a fresh issuance of equity shares worth up to ₹450 crore, along with an Offer for Sale (OFS) of 2.69 crore equity shares by the company’s promoters and an investor, as detailed in the draft red herring prospectus (DRHP) filed on Wednesday.

Under the OFS, Claymore Investments (Mauritius) Pte, a subsidiary of Temasek Holdings, plans to sell 1.19 crore equity shares, while the promoters will divest the remaining 1.5 crore shares.

Currently, Claymore owns an 11.83% stake in Star Agriwarehousing and Collateral Management, with the promoters holding the remaining 88.17%.

The company is also exploring the possibility of raising ₹90 crore through a pre-IPO placement. Should this placement materialize, the size of the fresh issue will be adjusted accordingly.

Headquartered in Maharashtra, the company intends to allocate ₹120 crore from the fresh issue proceeds to partially meet its working capital needs and an additional ₹125 crore for the working capital requirements of its subsidiary, FFIPL.

Key Details of the IPO

• Fresh Issue: ₹450 crore worth of equity shares.
• Offer-for-Sale (OFS): 2.69 crore equity shares from existing shareholders, enabling partial exits.

Prominent Stakeholders in the OFS:

• Claymore Investments (Mauritius) Pte: A Temasek Holdings subsidiary, offering 1.19 crore shares.
• Promoters: Contributing 1.5 crore shares to the OFS.

Current Shareholding Structure

• Promoters: Hold an 88.17% stake.
• Claymore Investments: Own 11.83%.

Business Profile of Star Agriwarehousing

Star Agriwarehousing specializes in agricultural marketing and offers a suite of services, including:

• Procurement and trade facilitation.
• Warehousing and collateral management.
• Financing and digital marketplace services.
• Technology-based solutions for agricultural operations.

Strengths

Comprehensive Agricultural Presence: Operates 2,189 warehouses across 379 locations in 19 states, acting as critical procurement and delivery hubs.

Technology Integration: Employs a tech-driven approach for operational efficiency and value-chain optimization.

Synergistic Business Model: Cross-leverages its services to expand its customer base and enhance value.

Experienced Leadership: The management team brings extensive agricultural industry expertise.

Weaknesses and Challenges

Dependence on Warehousing Operations: The business relies heavily on its warehouse network; any disruptions could significantly impact operations.

Contractual Risks: Over 62% of professional warehouses operate on revenue-sharing terms, while 36% are leased. Renewals or favorable terms for these agreements are uncertain.

Collateral Management Risks: This segment faces reputational and operational challenges, potentially affecting financial stability.

Legal Proceedings: Ongoing legal disputes involving the company, its directors, promoters, and subsidiaries could have adverse effects if resolved unfavorably.

Sector Vulnerabilities: Seasonal variations, weather patterns, and policy changes pose risks to business performance and profitability.

Financial Highlights

Revenue Growth: FY24: ₹989.25 crore (41.82% increase from ₹697.56 crore in FY23).

Profit Growth: FY24: ₹46.66 crore (162.30% increase from ₹28.75 crore in FY23).

Star Agriwarehousing's robust financial performance and strategic positioning in the agricultural sector highlight its growth potential, but investors should remain mindful of the operational and market risks involved.