Abram Food, a regional FMCG player with a growing footprint in North India, has filed for its maiden public issue on the BSE SME platform. The IPO is entirely a fresh issue of 14.28 lakh equity shares aggregating to approximately INR 13.99 crore at a fixed price of INR 98 per share. With no Offer for Sale (OFS), the promoters are looking to raise capital to fund future growth rather than provide an exit, a positive sign for long-term investors.
However, Abram Food IPO review shows that evaluating the offering requires more than just financials—it calls for a closer look at the business model, growth drivers, risks, and long-term scalability.
Abram Food IPO Review: Investment Thesis
Abram Food represents a proxy play on the formalization of India’s essential staples sector—a quiet but powerful shift from loose, unbranded food grains to hygienically packaged, value-assured goods. Its B2B2C model offers a low-friction entry into semi-urban and rural India, where the next leg of FMCG growth is expected. Unlike high-burn premium brands, Abram’s capital-light, regional-first approach is tuned to India’s price-conscious consumer and evolving food safety norms.
This IPO provides exposure to:
- A transition from unbranded to branded staples in India’s heartland
- Margin expansion through operational leverage
- A relatively de-risked entry valuation in a high-consumption sector
While not a disruptor, Abram Food could be a consistent compounder—if it scales operations, manages working capital efficiently, and evolves brand presence.
Abram Food Business Model Analysis
Abram Food operates in the “essential staples” segment of the FMCG sector, with a primary focus on food grains and basic commodities such as chana dal, besan, multigrain atta, maida, sooji, edible oil, and spices. The company also manufactures cattle feed, extending its presence into the agri-based nutritional supply chain.
The business follows a B2B2C model, supplying packaged products through a network of distributors and retail channels under its regional brand “Kherliwala.” The emphasis is on midstream value addition—processing, grading, and hygienic packaging of everyday staples that consumers typically buy unpackaged in the traditional market.
Core Strengths of the Business Model:
- Volume-led scale play: The company operates on high turnover and thin margins, optimized by operational efficiency.
- Low marketing dependency: Unlike branded FMCG giants, Abram’s model limits spending on mass advertising, preserving cash flows.
- Backward integration readiness: Its ability to procure directly from mandis/farmers enhances pricing power and quality control.
- Regulatory Compliant: With ISO and FSSAI certifications, Abram ensures compliance and customer trust in health-conscious markets.
Strategic Insight
Abram is not a premium brand-led FMCG company but a scaled processor of everyday staples, aligned with mass consumption. This positions it to capture India’s shift from unpackaged to branded staples in Tier 2 and Tier 3 towns.
Sector and Industry Linkage
The Indian packaged food industry is projected to grow at a CAGR of 11-13% till 2029. As per IBEF and Nielsen data, categories like flour, pulses, and edible oils are increasingly moving toward packaged and branded formats. However, more than 70% of this market still remains unorganized.
Abram Food is operating in this white space: between unorganized vendors and top-tier FMCG companies like ITC and Adani Wilmar. Its ability to capture market share in semi-urban and rural markets without heavy brand premium requirements could offer high operating leverage.
Competitive Moat Analysis
Abram’s current competitive advantage lies in a combination of:
- Operational Efficiency: High throughput, low overhead model allows better utilization of capital.
- Regional Brand Equity: “Kherliwala” holds familiarity in target geographies, offering a local trust factor.
- Distribution Depth: Embedded relationships in Rajasthan and Delhi-NCR lower the cost of entry and provide shelf space.
However, these are not sustainable moats unless continuously reinforced. The business lacks:
- Patentable product or IP
- Proprietary supply chain tech
- Deep brand premium that can support pricing power
In essence, Abram’s strength is executional excellence, not structural defensibility. Scaling up without diluting this core will be key.
Abram Food IPO Review: Use of Proceeds
While specific allocation details are not deeply elaborated in the prospectus, a fixed-price SME IPO typically uses funds for:
- Working capital augmentation
- Capex (machinery, storage, packaging facilities)
- Brand visibility and marketing
- Repayment/prepayment of certain debts
Investors should expect working capital to consume the lion’s share, given the business model’s nature (inventory-heavy with distributor credit cycles).
Financial Overview and Significance
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 33.16 | 36.00 | 64.04 |
| PAT | 0.48 | 1.02 | 3.26 |
| EBITDA Margin (%) | 3.1% | 5.43% | 7.92% |
| EPS (INR) | 1.39 | 2.94 | 9.05 |
| Return on Net Worth (%) | 15.41% | 24.54% | 38.62% |
Interpretation:
- The company has shown impressive operating leverage. Revenue CAGR from FY23 to FY25 is ~24.5% while EBITDA CAGR is over 70%, indicating scale benefits.
- PAT tripled in FY25, primarily due to improved margins and operational efficiency, not just top-line growth.
- Post-IPO debt-to-equity improves drastically from 0.85X to 0.32X, reducing financial risk.
- However, negative cash flows from operations in all three years signal a working capital strain—an area of concern.
📐 Valuation Assessment: Strengths and Caveats
At a fixed issue price of INR 98 and FY25 restated EPS of INR 9.05, Abram Food’s IPO is valued at a P/E of ~10.8x, which appears modest given its profitability metrics. With a Return on Net Worth (RoNW) of 38.62%, improving margins (EBITDA margin rising from 3.1% in FY23 to 7.92% in FY25), and a revenue CAGR of ~24.5% over three years, the company presents a case for fair to slightly undervalued pricing. Its post-issue NAV stands at INR 22.62, implying a P/B of 4.33x, and a market cap-to-sales multiple of ~0.79x based on FY25 revenue.
Peer comparison strengthens the valuation appeal: SME players like AVT Natural and Anik Industries trade at similar or higher multiples with lower RoNW and EPS. While Abram operates at a smaller scale, its operating efficiency is superior, supporting the valuation.
However, several quantifiable risks temper the bullish view:
- Negative operating cash flows have persisted for three years: INR (83.7 lakh) in FY23, INR (78.5 lakh) in FY24, and INR (67.0 lakh) in FY25, indicating stress in cash conversion despite PAT growth.
- Receivables and inventory together locked up over INR 15 crore in FY25 (~23% of revenue), pointing to a working capital-heavy cycle.
- A significant share of IPO proceeds (INR 13.99 crore) is expected to be used for working capital, which may not yield visible RoI in the near term.
- FY25 valuation assumes peak margins; a reversion from 7.92% to FY23 levels could depress EPS and inflate actual forward P/E.
- Pre-IPO debt stood at INR 7.13 crore (D/E: 0.85x), improved to 0.32x post-IPO, but reflects historical financing pressure.
- On the SME platform, low float (~27.7%) may lead to limited liquidity and elevated post-listing volatility.
Abram Food IPO Review: Forward Outlook (2025–2030)
Abram’s growth roadmap will likely hinge on:
- Geographic Diversification: Immediate targets include Uttar Pradesh, Haryana, and Madhya Pradesh. Expansion may occur via regional hubs and third-party co-packers to limit capex intensity.
- Product Mix Enhancement: Likely to introduce blended spices, instant mixes (e.g., besan-based pakora mix), or ready-to-cook atta variants to increase basket value per customer.
- Retail Format Presence: Entry into modern retail chains and digital grocery marketplaces like BigBasket or JioMart to improve brand recognition.
- Backward Integration: Long-term capex may go into direct procurement from farmer-producer organizations (FPOs) to gain better price stability and margin control.
- Branding Strategy: Moderate investment in regional advertising (radio, bus panels, kirana store branding) to deepen Kherliwala’s recall.
Success in the above areas will depend on disciplined capital allocation, strategic hires in supply chain/logistics, and gradual brand evolution.
Abram Food IPO Review: Risks
The following section presents a summarized view of key risk factors associated with the company, as disclosed in its Draft Red Herring Prospectus (DRHP):
- Litigation Exposure: The company faces 33 legal proceedings totaling INR 1.84 crore, involving civil, tax, and regulatory matters across promoters, directors, and group entities. Adverse outcomes may impact finances and reputation.
- Low Capacity Utilization Risk: As of FY25, the company operated at only 69.4% capacity for flour and 1.1% for spices, despite having installed capacities of 730 MT and 182.5 MT annually, respectively. In FY24, flour utilization was just 29.33%. Persistent underutilization points to demand gaps, inefficiencies, or weak market penetration—resulting in higher per-unit costs, wasted infrastructure potential, and limited scalability of operations.
- Customer Concentration Risk: In FY25, top 10 customers contributed 73.86% of revenue. Similar dependency was seen in FY24 (74.86%) and FY23 (86.05%), indicating over-reliance on few distributors, which increases revenue volatility and customer attrition risk.
- Seasonal Volatility & Weather Sensitivity: Being agri-based, operations are affected by rainfall patterns and extreme weather. Seasonal demand fluctuations cause revenue inconsistency across quarters, impacting working capital and full-year comparability.
- Product Concentration – Chana & Chana Dal: Over INR 57.25 crore in FY25 revenue came from Chana and Chana Dal alone. Any decline in their production or demand may significantly affect business performance and profitability.
- Heavy Capex with Unclear ROI: Company plans to invest INR 3.85 crore from IPO proceeds in machinery. However, it lacks clarity on how this capital expenditure will tangibly enhance revenue, production capacity, or product diversification in the near term.
- Limited Product Portfolio Risk: 89.39% of FY25 revenue came from Chana-based products. Inability to adapt to changing customer preferences could lead to obsolescence, inventory losses, and lower sales.
- Geographical Concentration: 99.92% of FY25 revenue came from Rajasthan and Delhi-NCR. Such high regional dependence heightens exposure to local disruptions, competition, and market saturation risks.
- Commodity Price Volatility: Profitability is sensitive to fluctuations in Chana, Besan, and Dal prices—affected by crop yields, supply-demand mismatches, and policy changes—beyond the company’s control.
- Secured Borrowings: As of 31 March 2025, the company owes INR 7.13 crore in secured loans. Default risks could lead to asset forfeiture, severely impacting operations and financial stability.
- Low Promoter Acquisition Cost: Promoters acquired shares at an average cost between INR 1.75 to INR 11.44, much below the IPO price. This pricing gap may raise investor concerns over valuation fairness.
Final Words
While Abram Food IPO review shed light on growth in revenue and profitability, concerns remain around negative cash flows, low capacity utilization, high customer dependence, and limited product/geographic diversity. Suitable for high-risk, long-term investors. Cautious investors should wait for better visibility on execution, cash efficiency, and post-IPO performance.
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