Unpacking the Vandan Foods Ltd. IPO: A Detailed Analysis with a Crucial Shariah Status Update

Navigating the world of Initial Public Offerings (IPOs) demands thorough research into a company’s business, its financial health, and market sentiment. For many investors, particularly within the Muslim community, an additional and fundamental layer of scrutiny involves assessing an investment’s adherence to Islamic Shariah principles. Today, we’re taking an in-depth look at the Vandan Foods Ltd. IPO, covering its operational landscape, financial performance, IPO specifics, and, most importantly, its confirmed Shariah status.

Crucial Shariah Status: Vandan Foods Ltd. Declared Non-Shariah Compliant

For Muslim investors, aligning investment opportunities with Islamic Shariah principles is a non-negotiable requirement. Based on the detailed screening notes from the provided assessment, Vandan Foods Ltd. is explicitly categorized as Non-Shariah Compliant.

The primary reason for this non-compliance is clearly stated: The company failed the third rule because its total debt is more than 33% of its total assets. In Islamic finance, a high ratio of interest-bearing debt relative to total assets often indicates excessive reliance on interest-based financing, which is impermissible. While the company’s business operations and impermissible income appear to pass Shariah screening, this critical financial metric flags it as unsuitable for Shariah-conscious investors.

Therefore, for Muslim investors strictly prioritizing Shariah compliance, Vandan Foods Ltd. IPO is not considered a Shariah-compliant investment option due to its debt structure.

For other investors who are still interested in understanding the operational and financial specifics of this IPO, please read on for a comprehensive analysis.

Understanding Vandan Foods Ltd.: A Journey through Diverse Food Processing

Vandan Foods Ltd., incorporated on December 15, 2015, has evolved significantly through various stages of the food processing industry. Initially, the company began its journey in the catering business. It then diversified into the trading of agro commodities, an activity it pursued from the financial year 2018 until 2023. Demonstrating a clear strategic shift, from the financial year 2024 onwards, the current management has refocused its primary operations on the manufacturing of Castor Oil and its various derivatives.

Currently, Vandan Foods Ltd. specializes in the production of:

• Refined F.S.G. (First Stage Grade) Castor Oil: This high-grade castor oil is a versatile product used across numerous industries, including lubricants, paints, pharmaceuticals, and textiles. Its applications extend to various chemical derivatives, cosmetics, hair oils, fungistatic compounds, embalming fluid, printing inks, soap, greases, hydraulic fluids, and textile finishing materials. Historically, castor oil has also been recognized for its traditional uses in remedies for skin conditions, constipation relief, and promoting hair health.
• Castor De-Oiled Cake (Castor Meal): This valuable byproduct of castor oil extraction serves as a natural and nutrient-rich fertilizer. Packed with essential plant nutrients like nitrogen, phosphoric acid, and and potash, it provides an eco-friendly alternative to chemical fertilizers and enhances soil microbial activity. The company is also planning to introduce High Protein Castor Meal (HPCM) for use in animal feed, indicating future product line expansions.

Operating on both Business-to-Business (B2B) and Business-to-Consumer (B2C) models, Vandan Foods Ltd. maintains a wide supply network across several Indian states, including Gujarat, Haryana, Andhra Pradesh, Delhi, Bihar, Rajasthan, and Telangana. The company’s manufacturing facilities are strategically located in Dhinoj Patan, Gujarat, enabling efficient production and distribution.

Vandan Foods Ltd. IPO: Key Details at a Glance

The Initial Public Offering of Vandan Foods Ltd. is structured as a Fixed Price Issue. The subscription window for this IPO commenced on Monday, June 30, 2025, and is scheduled to conclude on Wednesday, July 2, 2025. The company aims to raise a total of ₹30.36 Crores through this offering, which consists entirely of a fresh issue of 26,40,000 equity shares.

Here are the essential details for prospective investors:

• IPO Open Date: June 30, 2025 (Monday)
• IPO Close Date: July 2, 2025 (Wednesday)
• Issue Price: ₹115 per equity share
• Face Value: ₹10 per equity share
• Lot Size: 1200 Shares
• Minimum Investment (Retail): ₹1,38,000 (for 1 lot)
• Total Issue Size: 26,40,000 shares (aggregating up to ₹30.36 Crores)
• Net Offered to Public: 25,08,000 shares (aggregating up to ₹28.84 Crores)
• Issue Type: Fixed Price Issue IPO
• Listing Platform: BSE SME
• Tentative Allotment Date: July 3, 2025 (Thursday)
• Initiation of Refunds: July 4, 2025 (Friday)
• Credit of Shares to Demat: July 4, 2025 (Friday)
• Tentative Listing Date: July 7, 2025 (Monday)
• Cut-off time for UPI mandate confirmation: 5 PM on July 2, 2025

Company Financials: A Deep Dive into Performance

An in-depth review of Vandan Foods Ltd.’s financial information provides critical insights into its performance trends over recent periods.

• Exceptional Revenue Growth: Vandan Foods Ltd. has demonstrated truly remarkable top-line growth, with revenue skyrocketing from ₹1.61 Crores in FY2022 to an impressive ₹72.66 Crores in the first nine months of FY2025. This indicates a very rapid expansion in its business operations and market reach following its strategic shift.
• Strong Profitability Turnaround: The company has successfully transitioned from a net loss of ₹0.11 Crores in FY2022 to consistent and significantly growing profitability, reporting a Profit After Tax of ₹4.54 Crores in 9M FY2025. This turnaround showcases the increasing viability of its current business model.
• Fluctuating Borrowings and Shariah Concern: A critical point is the trend in total borrowings. After substantially reducing debt to ₹0 in FY2024, borrowings surged to ₹13.89 Crores by December 2024. As highlighted in the Shariah status, this high debt level relative to assets is the direct reason for the non-Shariah compliant assessment and warrants close attention from investors, as it implies higher financial risk and increased interest expenses.

Key Performance Indicators (KPIs): Decoding Efficiency and Valuation

Key Performance Indicators offer a more granular perspective on Vandan Foods Ltd.’s operational efficiency and how its valuation might be perceived.

• Market Capitalization: ₹96.43 Crores (as of Mar 31, 2024)
• Return on Equity (ROE): 45.41% (as of Mar 31, 2024) – This high percentage suggests that the company is very effectively utilizing shareholder funds to generate profits.
• Return on Capital Employed (ROCE): 37.33% (as of Mar 31, 2024) – Indicates strong efficiency in generating profits from the total capital (both equity and debt) employed in the business.
• Return on Net Worth (RoNW): 27.92% (as of Mar 31, 2024) – Another robust indicator of the company’s profitability in relation to its equity.
• EBITDA Margin: 7.48%
• Price to Book Value: 6.92

These KPIs generally point towards a company that has been operating efficiently and generating healthy returns.

Objectives of the Issue: Where the Funds Will Go

Vandan Foods Ltd. proposes to utilize the net proceeds from this IPO for several strategic objectives, aiming to bolster its financial position and drive future growth:

1. To Meet Working Capital Requirements: ₹8.57 Crores will be allocated to fulfill the company’s escalating working capital needs, crucial for supporting its growing operations and sales volume.
2. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the Company: ₹3.00 Crores is earmarked for debt repayment. This measure aims to de-leverage the balance sheet and potentially reduce financial costs.
3. Funding the capital expenditure requirement for expansion of the Dhinoj Facility (CAPEX): ₹8.29 Crores will be invested in expanding the company’s manufacturing facility in Dhinoj, Gujarat, signifying plans for increased production capacity and market reach.
4. General Corporate Purpose: ₹7.51 Crores will be used for various general corporate requirements, providing the company with operational flexibility and supporting unforeseen business needs.

IPO Subscription Status & Grey Market Premium (GMP)

As of June 30, 2025, at around 05:00 PM (Day 1), the Vandan Foods IPO subscription status is as follows:

The Grey Market Premium (GMP) for Vandan Foods BSE SME IPO is currently ₹20, representing a 17.39% premium over the issue price. This implies an estimated listing price of ₹135 (IPO Price of ₹115 + GMP of ₹20). GMP is an unofficial indicator and reflects market sentiment, which can fluctuate.

Conclusion and Investor Outlook

Vandan Foods Ltd. operates in a growing segment of the food processing industry, demonstrating impressive revenue growth and a clear path to profitability in recent periods. The company has strategic plans for capital deployment, including capacity expansion and debt management.

However, the definitive Non-Shariah Compliant status due to its high debt-to-asset ratio is a critical factor for Muslim investors. For all investors, the rapid surge in recent financial figures and the inherent risks associated with SME IPOs, especially concerning valuation and sustainability, warrant thorough scrutiny.

Prospective investors should conduct comprehensive due diligence by carefully examining the Red Herring Prospectus (RHP) to understand the company’s complete risk factors, business model, and future prospects. An informed investment decision is always one based on a thorough analysis tailored to individual financial goals and risk tolerance.

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