About Leo Dry Fruits and Spices Trading Limited

BUSINESS OVERVIEW

Leo Dry Fruits and Spices Trading Company specializes in the manufacturing, processing, trading, and marketing of a diverse range of products under the brands "VANDU" and "FRYD." Its offerings include whole and blended spices, plain, roasted, and flavored dry fruits, ghee, seasonings, and frozen/semi-fried products, among others. Ghee is marketed under the "VANDU" brand, produced by trusted manufacturers adhering to strict quality standards, while other grocery products are sourced from third-party suppliers. The company also acts as an anchor distributor for Campa Cola soft drinks.

Operating in two verticals—trading and manufacturing/processing, the company sells bulk and branded spices and dry fruits while producing blended spices and grocery products at its unit in Thane, Maharashtra. Key raw materials are sourced from domestic and international markets, with a focus on quality, pricing, and inventory management. A dedicated quality assurance team ensures superior standards through rigorous testing.

Currently, the company derives most of its sales from Maharashtra, with plans to expand into other states and global markets, positioning itself as a reliable player in the FMCG sector. As on September 30, 2024, the Company has employed approximately 46 permanent employees at various levels of the organization. The Bankers of the Company is HDFC Bank Limited.

INDUSTRY ANALYSIS

INDIAN SPICES INDUSTRY
India is the world’s largest spice producer. It is also the largest consumer and exporter of spices. The production of different spices has been growing rapidly over the last few years. Production in 2022-23 stood at 11.14 million tonnes compared to 11.12 million tonnes in 2021-22. During 2022-23, the export of spices from India stood at US$ 3.73 billion from US$ 3.46 billion in 2021-22. During 2021-22, the single largest spice exported from India was chilli followed by spice oils and oleoresins, mint products, cumin, and turmeric.

India produces about 75 of the 109 varieties which are listed by the International Organization for Standardization (ISO). The most produced and exported spices are pepper, cardamom, chilli, ginger, turmeric, coriander, cumin, celery, fennel, fenugreek, garlic, nutmeg & mace, curry powder, spice oils and oleoresins. Out of these spices, chilli, cumin, turmeric, ginger and coriander makeup about 76% of the total production.

The largest spices-producing states in India are Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Assam, Orissa, Uttar Pradesh, West Bengal, Tamil Nadu and Kerala.

India is the largest exporter of spice and spice items. During 2023-24 (until February 2024), the country exported spices worth US$ 3.67 billion. For FY23, the country exported spices worth US$ 3.73 billion. In July 2023, the exports of spices from India increased to US$ 298.77 million from US$ 293.84 million in June 2023. From 2016-17 to 2022-23, the total exported quantity from India grew at a CAGR of 5.85%. For FY23, total volumes of chilli, cumin, turmeric, and ginger exports were 0.51, 0.18, 0.17 and 0.05 million tonnes. During 2022-23, the export of turmeric, coriander, garlic, curry powder, other spices such as asafoetida, tamarind, etc., expanded both in value and volume as compared to 2021-22.

India exported spices and spice products to 159 destinations worldwide as of 2023-24 (until February 2024). The top destinations among them were China, the USA, Bangladesh, the UAE, Thailand, Malaysia, Indonesia, the UK, and Sri Lanka. These nine destinations comprised more than 70% of the total export earnings in 2023-24 (until February 2024). China imported spice valued at US$ 725.76 million from India, while the USA imported spices worth US$ 515.91 million. Bangladesh imported spices amounting to US$ 296.55 million. Additionally, the UAE imported spices worth US$ 214.76 million from India during 2023-24 (up to February 2024).

Chilli was the most exported spice from India. During 2022-23, China imported US$ 409.44 million in chilli. During the same period, the USA imported US$ 96.38 million in chilli. The main products imported by the USA are celery, cumin, curry powder, fennel, fenugreek, garlic, chilli, and mint products.

BUSINESS STRENGTHS

1. Experienced Leadership : Promoted by Mr. Kaushik Sobhagchand Shah, Mr. Ketan Sobhagchand Shah, and Mr. Parth Ashish Mehta, with extensive experience in trading and branding, the management ensures effective decision-making, operational excellence, and strong industry networks.

2. Diverse Product Range : A wide portfolio includes whole and blended spices, flavored dry fruits, ghee, seasonings, and other grocery products, catering to varied consumer preferences across multiple segments.

3. In-house Processing : Equipped with FSSAI-accredited facilities, the company handles blending, grading, and packaging in hygienic conditions. Quality control ensures premium products with proper storage and preservation.

4. Strong Consumer Value : Focusing on B2B, B2C, and D2C segments, the company delivers value through product innovation, cost efficiency, and long-term client relationships, fostering sustainable growth.

5. Broad Market Reach : Sales span offline and online channels, including bulk unbranded trading, branded retail through e-commerce platforms like Amazon, and direct sales via the company’s website.

BUSINESS STRATEGIES

1. Expanding Market Presence : Focus on entering new states and global markets while increasing distribution reach. Recent sales have spanned Maharashtra, Delhi, Gujarat, Haryana, Karnataka, Tamil Nadu, and Uttar Pradesh. Strategies include leveraging modern and general trade channels, appointing distributors for faster delivery, and optimizing inventory to mitigate regional risks.

2. Enhancing Branding and Digital Activities : Strengthening brand visibility through exhibitions, offline promotions, and digital platforms like Amazon and Flipkart. Plans include expanding digital outreach via social media and e-commerce, and investing in offline marketing such as hoardings, roadshows, and advertisements in theatres and newspapers.

3. Boosting Operational Efficiency : Focus on cost reduction through automation and technology upgrades to enhance productivity and meet customer demands. Increasing production volumes and sales helps in spreading fixed costs and improving profit margins.

4. Ensuring Quality Standards : Emphasis on stringent quality checks from procurement to packaging, adhering to FSSAI standards. Regular quality reviews ensure high standards in raw materials and finished products.

5. Diversifying and Strengthening the Product Portfolio : Expanding product offerings to cater to evolving customer needs, including frozen and semi-fried products under the "FRYD" brand. Aiming to optimize the range to serve diverse culinary requirements and enter new customer segments.

6. Leveraging Market Expertise and Relationships : Enhancing growth by fostering customer satisfaction, timely order completion, and renewing relationships with existing buyers, focusing on building trust and loyalty.

BUSINESS RISK FACTORS

1. Limited Operational History : Being a relatively new player in the market, the company began trading operations in 2021 and manufacturing in 2022 under the "Vandu" brand. Sustaining or increasing long-term revenue remains uncertain.

2. Dependence on Trading Activities : A major portion of revenue is derived from trading activities, relying heavily on third-party vendors for product sourcing. Risks include delays, quality issues, unfavorable vendor terms, or vendors shifting focus to competitors, which may adversely affect operations.

3. Outsourcing of Certain Products : Products like ghee, flavored dry fruits, and frozen/semi-fried items are procured from third-party suppliers. Any disruption in supplier relationships, quality issues, or increased costs could affect margins and supply chain efficiency.

4. Price Fluctuations in Raw Materials : The prices of raw materials and traded products are subject to volatility, influenced by domestic and international market dynamics. Rapid price changes may impact production costs and profitability. Passing these costs to customers can pose challenges, affecting financial performance.

5. Regional Revenue Dependency : Over 90% of revenue is generated from Maharashtra. Any adverse social, political, or economic developments in this region could significantly affect business performance. Expansion into other geographies poses challenges such as competition, local laws, and market barriers.

6. Trademark Dependency : Operations rely on the "Vandu" trademark licensed from a promoter's proprietorship firm. Revocation of the license agreement could lead to loss of brand usage rights, adversely affecting market position and operations.

NOTE : Leo Dry Fruits and Spices Trading Company faces several risks, including reliance on third-party suppliers, regional revenue concentration, fluctuating raw material prices, dependency on a licensed trademark, and challenges in geographical expansion. These factors may significantly impact operations, profitability, and long-term growth.