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Zaffran Limited

ROUND 2 CASINO ROYALE SENIOR SECTION C CUIM KENGERI

AGENT MUTEEB AGENT DHEERAJ TEAM 18

Zaffran Limited

Business Model: When tobacco giant ITC flagged off its agri-business in 1988, it was operating in a protected economy, procuring agri-products from mandis and exporting them. However, the '90s saw the opening up of the Indian economy, bringing opportunity for manyalong with more than a few challenges. Similarly, it paved the way for our company Zaffran Ltd to foray into the FMCG sector with diverse products and features. The products range from daily cereals, child food, stationery to flavoured tobacco among many more. At present the dominant business model followed by Zaffran Ltd is Make quality FMCG and market them most efficiently. This has resulted in - Mass production at factories based on standardisation and mass production by the upstream entity. - High standardisation of goods - National product brands - Pursuit of efficiency in logistics

The revenue will come from sales of ZafCo products. Essentially there will be co-branding and co-ownership of brands. Since there will be several brands within the same product range there will be minimum risk for Zaffran Ltd that they lose successful brands. In any case brands will be co-owned Zaffran would invite business partners whose products will be distributed through its existing sales network within the local area.

The backbone of the new model would be an Information System backbone which would connect up large number of divisions into a huge family of suppliers and downstream partners. The FMCG marketer will be managing a veritable information juggernaut which will allow for e-shopping, direction to the nearest store, information on thousands and tens of thousands of products

Zaffran Limited
Projected Key Financials of the company:
Income statement
Income Statement
Currency: Rs. Cr

Year Total income


Sales Income from financial services

2012(BASE)
1668 1661 7 1487 287 25 58 648 66 17 84

2013
1835 1827 8 1635 316 27 64 713 73 18 92

2014
2018 2010 8 1799 348 30 70 784 80 20 101

2015
2220 2211 9 1979 382 33 77 862 88 22 111

Total expenses Raw materials, stores & spares Power, fuel & water charges Compensation to employees Indirect taxes Selling & distribution expenses Interest paid Depreciation

Profits PBDITA (Operating profit) PBIT PBT PAT

576 493 476 333

634 542 524 366

697 596 576 403

767 656 633 443

Key Assumptions: Sales will grow at 10% year on year which is just below the 12% average for the FMCG industry. Depreciation is charged at 11% on gross block on a WDV basis. Interest rate is 14%. Indirect taxes involve a major portion of expenses as the company is also into Tobacco products and has to be huge excise duty. Raw material accounts for 25% of the expenses as it is a FMCG company and needs considerable raw material.

Zaffran Limited
Balance Sheet
Year
Total liabilities Net worth Paid up equity capital (net of forfeited equity cap.) Reserves and funds Borrowings Fixed deposits Current liabilities & provisions

2012 1329 897 54 843 120 0 312 1329 492 345 399 93

2013 1462 987 54 933 132 0 343 1462 541 380 439 102

2014 1608 1085 54 1031 145 0 378 1608 595 418 482 113

2015 1769 1194 54 1140 159 0 416 1769 654 460 531 124

Total assets Fixed assets Investments Current assets Loans & advances

Assumptions: No equity has been raised in the past years. With Increase in operations more borrowings have been undertaken. Funds from borrowings have been consistently invested in fixed assets and other machineries. Advances include payments made to suppliers

Cash flow Statements


2012 Net Profit Before Tax Add: Net Cash from operating Activities PBIT Add: Depreciation Less: Tax @30% Cash Flow from Investments Cash Flow from Financing activities Borrowings Interest Current Liabilities NET CASH FLOW 476 2013 524 576 2014 2015 633

434 493 84 143 -45 -29 -20 -17 8 835

477 542 92 157 -35 -62 -12 -18 -31 904

525 596 101 173 -38 -68 -13 -20 -34 995

577 656 111 190 -42 -75 -14 -22 -38 1094

Zaffran Limited
IPO PROSPECTUS

Summary of Industry: The burgeoning middle class Indian population, as well as the rural sector, present a huge potential for this sector. The FMCG sector in India is at present, the fourth largest sector with a total market size in excess of USD 13 billion as of 2012. This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025. This sector is characterized by strong MNC presence and a well-established distribution network. In India the easy availability of raw materials as well as cheap labour makes it an ideal destination for this sector. There is also intense competition between the organised and unorganised segments and the fight to keep operational costs low. This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and demand for these goods remains more or less constant, irrespective of recession or inflation. Hence this sector will grow, though it may not be a smooth growth path, due to the present world-wide economic slowdown, rising inflation and fall of the rupee. This sector will see good growth in the long run and hiring will continue to remain robust. Company Summary: Zaffran Limited is a fresh and upcoming FMCG company which deals with a lot of products in an eco-friendly environment. It has a well-established distribution network and uses information technology to create and sustain value for shareholders as well as all the other stakeholders. Financial data Financial Data Unless indicated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated financial information for fiscal 2012, 2013, 2014, and 2015 prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) and the Companies Act and restated in accordance with the ICDR Regulations. Our fiscal year commences on April 1 and ends on March 31, so all references to a particular fiscal year are to the 12 month period ended March 31 of that year. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. All decimals have been rounded off to two decimal points. There are significant differences between Indian GAAP, IFRS and U.S GAAP. Accordingly, the degree to which the financial information prepared in accordance with Indian GAAP and restated in accordance with the ICDR Regulations, included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the readers level of familiarity with Indian accounting practices, Indian GAAP, the Companies Act and the ICDR Regulations. Any reliance by persons not familiar with Indian accounting practices, Indian GAAP, the Companies Act and the ICDR Regulations on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited. We have not attempted to

Zaffran Limited
explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. Financial statements are already included above. The ISSUE: This being the first public issue of equity shares of our Company, there has been no formal market for the Equity Shares. The face value of the Equity Shares is ` 10 per Equity Share, the Floor Price is 10 times the face value and the Cap Price is 20 times the face value. The Issue Price (as determined by our Company in consultation with the BRLMs on the basis of assessment of market demand for the Equity Shares offered by way of the Book Building Process should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing.

Risk Factors:

Increasing rate of inflation, which is likely to lead to higher cost of raw materials. The standardization of packaging norms that is likely to be implemented by the Government by Jan 2013 is expected to increase cost of beverages, cereals, edible oil, detergent, flour, salt, aerated drinks and mineral water. Steadily rising fuel costs, leading to increased distribution costs. The present slow-down in the economy may lower demand of FMCG products, particularly in the premium sector, leading to reduced volumes. The declining value of rupee against other currencies may reduce margins of many companies, as Marico, Godrej Consumer Products, Colgate, Dabur, etc who import raw materials.

TERMS OF THE ISSUE The Equity Shares being issued are subject to the provisions of the Companies Act, our Memorandum of Association and Articles of Association, the terms of the Draft Red Herring Prospectus, the Red Herring Prospectus and the Prospectus, the Bid cum Application Form, the Revision Form, the allocation advice including the Anchor Investor Allocation Notice(s) or the Revised Anchor Investor Allocation Notice(s) and other terms and conditions as may be incorporated in the Allotment advices and other documents/ certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to all applicable laws, regulations, guidelines, rules and notifications relating to the issue of capital and listing of securities issued from time to time by SEBI, GoI, Stock Exchanges, Registrar of Companies, RBI and/or other authorities, as in force on the date of the Issue and to the extent applicable.

Zaffran Limited
Ranking of Equity Shares The Equity Shares being offered shall be subject to the provisions of our Memorandum of Association and Articles of Association and shall rank pari-passu with the existing Equity Shares of our Company including rights in respect of dividends. The Allottees in receipt of Allotment of Equity Shares under this Issue will be entitled to dividends and other corporate benefits, if any, declared by our Company after the date of Allotment. For further details, please refer to Main Provisions of the Articles of Association on page 241. Mode of Payment of Dividends We shall pay dividends to our shareholders as per the provisions of the Companies Act and our Articles and Memorandum of Association. Face Value and Issue Price The face value of the Equity Shares is ` 10 each and the Issue Price is 100 per Equity Share. The Anchor Investor Issue Price is 100 per Equity Share. At any given point of time there shall be only one denomination for the Equity Shares. The Floor Price is 100 per Equity Share and the Cap Price is 200 per Equity Share. Compliance with SEBI regulations Our Company shall comply with applicable disclosure and accounting norms specified by the SEBI from time to time. Rights of the Equity Shareholder Subject to applicable laws, our Equity Shareholders shall have the following rights: Right to receive dividends, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll either in person or by proxy; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation, subject to any statutory and other preferential claims being satisfied; Subject to applicable law including any RBI rules and regulations, right of free transferability; and Such other rights, as may be available to a shareholder of a listed public company under the Companies Act, the terms of the listing agreement executed with the Stock Exchanges, and our Memorandum of Association and Articles of Association.

Size of The Issue: 1500000 equity shares Amount to be raised = Rs 150000000

Zaffran Limited