Shellz India IPO (15-19 Oct) Analysis

Shellz India Limited is engaged in the manufacturing and marketing of confectionery products in India, with a diversified product portfolio comprising over 300 SKUs across categories including choco delights, jellies, baked treats and other confectionery formats. The company also manufactures and supplies food and bakery ingredients, and markets its consumer products under two brands, Hugs and Tosca.

The flagship Hugs brand is positioned largely at mass market price points, with a majority of products priced at Rs.10 or below, and is distributed through a network of over 300 super stockists reaching kirana outlets across around 24 states as of March 31, 2026.

The Tosca brand targets relatively higher unit selling price, mass premium segments, with a focus on e commerce and quick commerce channels, including newer cereal based offerings such as Tosca Oat Choco. Beyond its own brands, the company undertakes private label manufacturing for third party customers and exports its products to markets including the Middle East, South Asia and Europe.

As per an industry report by Ken Research cited in the RHP, the Indian confectionery market was valued at Rs.93,100 crore in Fiscal 2025 and is projected to grow to Rs.1,25,800 crore by Fiscal 2030 at a CAGR of 6.3%, having already grown at a CAGR of 9.1% between Fiscal 2019 and Fiscal 2025. Low priced confectionery under Rs.10 continues to drive the bulk of consumption, particularly in Tier 2 and Tier 3 cities, which forms the core of the company's target market.

Key Basics

This is a Fresh Issue only, of up to 33,50,400 Equity Shares of face value Rs.10 each, aggregating up to Rs.[TBD] Lakhs. There is no Offer for Sale component. The Issue is being made under Regulation 229(2) of the SEBI ICDR Regulations and the Equity Shares are proposed to be listed on the SME Platform of BSE Limited (BSE SME).

Particulars	Details	Particulars	Details
Issue Type	Fresh Issue only	Face Value	Rs.10 per Equity Share
Fresh Issue	Up to 33,50,400 Equity Shares	Offer for Sale	Not Applicable
Price Band	[TBD]	Lot Size	[TBD]
Anchor Investor Bidding Date	October 14, 2026	Bid or Offer Opens	October 15, 2026
Bid or Offer Closes	October 19, 2026	Listing At	BSE SME
Book Running Lead Manager	Socradamus Capital Private Limited	Registrar to the Issue	Bigshare Services Private Limited

The disclosed weighted average cost of acquisition per Equity Share is Rs.109.30 for shares acquired through primary issuances and Rs.34.91 for shares acquired through secondary transactions. As the Price Band had not been determined as of the date of the RHP, the markup over these cost bases for incoming investors cannot yet be assessed.

How Will the IPO Money Be Used?

The company proposes to utilise the Net Proceeds from the Fresh Issue towards repayment or prepayment, in full or in part, of certain outstanding borrowings, funding incremental working capital requirements, and general corporate purposes.

The company also expects to achieve the benefits of listing on BSE SME, including enhanced visibility and brand recognition and the creation of a public market for its Equity Shares.

Object	Estimated Amount (Rs. Lakhs)
Repayment or prepayment of certain outstanding borrowings	2,200.00
Funding incremental working capital requirements	2,300.00
General corporate purposes	[TBD] (capped at 15% of Gross Proceeds or Rs.1,000.00 Lakhs, whichever is lower)

The Gross Proceeds, Net Proceeds and the General Corporate Purposes allocation remain undetermined pending finalisation of the Issue Price, and will be updated in the Prospectus prior to filing with the Registrar of Companies.

The fund requirements for these objects are proposed to be entirely funded from the Net Proceeds, and the proposed utilisation has not been appraised by any bank, financial institution or independent agency.

Financial Performance

Revenue, EBITDA and Profitability

The table below sets out the company's restated financial performance for the three Fiscal Years ended March 31, 2026, as disclosed in Rs. Lakhs in the RHP. Figures for Fiscal 2026 are on a consolidated basis, while Fiscal 2025 and Fiscal 2024 are on a standalone basis.

Particulars (Rs. Lakhs)	FY2026	FY2025	FY2024
Revenue from Operations	19,261.52	18,697.32	16,241.26
EBITDA	3,014.81	2,278.70	1,893.66
EBITDA Margin	15.65%	12.19%	11.66%
Profit After Tax (PAT)	1,337.05	830.20	525.45
PAT Margin	6.94%	4.44%	3.24%
Basic and Diluted EPS, Bonus Adjusted (Rs.)	15.37	9.59	6.09
Return on Equity (RoE)	26.87%	24.57%	21.56%
Return on Capital Employed (RoCE)	19.11%	17.50%	15.89%

The company's revenue, EBITDA margin and PAT margin have all improved consistently over the three years under review, with EBITDA margin rising from 11.66% in Fiscal 2024 to 15.65% in Fiscal 2026 and PAT margin more than doubling from 3.24% to 6.94% over the same period.

For the three months ended June 30, 2026, the company reported revenue of Rs.4,724.10 Lakhs, EBITDA of Rs.852.32 Lakhs (an EBITDA margin of 18.04%) and PAT of Rs.407.88 Lakhs, continuing the margin improvement trend seen over the full years.

Balance Sheet and Cash Flow

Particulars (Rs. Lakhs)	FY2026	FY2025	FY2024
Total Assets	21,372.45	16,736.20	14,703.61
Total Shareholders Funds (Net Worth)	5,895.24	4,058.20	2,699.41
Total Borrowings (Long Term and Short Term)	10,082.57	7,818.47	7,092.61
Debt to Equity Ratio	1.71	1.93	2.63
Trade Receivables	4,859.69	3,555.14	5,571.49
Cash and Cash Equivalents	114.16	2.18	171.10
Net Cash Flow from Operating Activities	(1,130.59)	2,210.80	836.65

The company's Debt to Equity ratio has improved steadily from 2.63 times in Fiscal 2024 to 1.71 times in Fiscal 2026, though it remains elevated in absolute terms. Operating cash flow swung from a positive Rs.2,210.80 Lakhs in Fiscal 2025 to a negative Rs.1,130.59 Lakhs in Fiscal 2026, driven mainly by a build up in loans and advances and trade receivables during the year, even as profitability improved.

Working capital cycle days increased from 151 days in Fiscal 2025 to 171 days in Fiscal 2026, and further to 197 days for the three months ended June 30, 2026, reflecting a lengthening cash conversion cycle alongside the company's revenue growth.

How Does It Compare to Peers?

The company operates exclusively in the confectionery segment, and the RHP notes that there is no listed company with a comparable business model focused solely on confectionery manufacturing, as most listed food and FMCG companies operate across diversified categories such as bakery, snacks, dairy and processed foods.

The RHP nonetheless presents a comparison with the closest comparable listed company, Annapurna Swadisht Limited, using Fiscal 2026 figures.

Particulars (Rs. Lakhs)	Shellz India Limited	Annapurna Swadisht Limited
Revenue from Operations	19,261.52	52,008.05
EBITDA Margin	15.65%	13.50%
PAT Margin	6.94%	6.00%
Return on Equity	26.87%	9.96%
Debt to Equity Ratio	1.71	0.69
Working Capital Cycle (Days)	171	111

While Annapurna Swadisht Limited operates at roughly 2.7 times the company's revenue scale, the company reports a higher EBITDA margin, a higher PAT margin and a markedly higher Return on Equity.

This stronger return on equity is achieved with a considerably higher Debt to Equity ratio than the peer, 1.71 times against 0.69 times, so part of the company's superior equity returns reflects higher financial leverage rather than operating efficiency alone. The company's working capital cycle is also longer than the peer's, at 171 days against 111 days, indicating relatively slower cash conversion.

Key Risks

● Significant existing indebtedness with a history of repayment delays and a recalled loan. As of June 30, 2026, total sanctioned and outstanding indebtedness stood at Rs.11,283.04 Lakhs and Rs.10,949.12 Lakhs, respectively, with a Debt to Equity ratio of 1.72 times. The RHP discloses certain instances of delay in servicing borrowings that have been reported in the company's credit history records, and states that one unsecured loan has already been recalled by the lender, requiring repayment in accordance with the lender's demand.

● A history of insolvency and cheque dishonour proceedings against the company. Six operational creditors had filed applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 against the company, all of which were ultimately dismissed or withdrawn upon settlement, and the company and its Promoters have also faced criminal complaints under Section 138 of the Negotiable Instruments Act relating to dishonour of cheques issued to suppliers.

● Operating cash flow turned negative in Fiscal 2026. Net cash from operating activities swung to a negative Rs.1,130.59 Lakhs in Fiscal 2026 from a positive Rs.2,210.80 Lakhs in Fiscal 2025, even as reported profitability improved, driven by an increase in loans, advances and trade receivables during the year.

● Planned relocation of the entire manufacturing operation from Delhi to Sonipat, Haryana carries execution risk. The company proposes to shift its entire confectionery manufacturing operation to a new facility, a process that involves relocating machinery, obtaining fresh regulatory approvals, and retaining or recruiting skilled manpower, with no assurance that the transition will be completed without cost overruns or disruption to production and supply.

● The company's Delhi manufacturing unit operated without a valid factory licence for over a year. The factory licence lapsed on March 31, 2025 and was not renewed until May 21, 2026, during which period the company's primary manufacturing facility operated without a valid and subsisting licence, exposing the company and its officers to potential regulatory action, although no such action has been taken to date.

● The Price Band, minimum lot size and the Issue amount, Net Proceeds and General Corporate Purposes allocation had not been finalised as of the date of the RHP.

● The company depends on cocoa, sugar, milk solids, cereal flours and edible fats as key raw materials, sourced mostly through purchase orders and short term arrangements rather than long term supply agreements, exposing it to price and availability fluctuations; cost of materials consumed represented between approximately 74% and 91% of total expenses over the years under review.

● The company has been involved in past disputes and litigation with vendors and suppliers, including matters relating to non payment of dues and cheque dishonour, which could affect supplier relationships and procurement terms going forward.

● The company carries pending litigation, tax and statutory or regulatory proceedings across the Company, its Subsidiary, Group Companies and Promoters, with an aggregate disclosed exposure running into several crores of Rupees.

● The company's working capital cycle has lengthened over the period under review, from 151 days in Fiscal 2025 to 171 days in Fiscal 2026 and to 197 days for the three months ended June 30, 2026, which could increase reliance on external financing if the trend continues.

● The company's revenue remains concentrated in North India by distribution reach, with 112 of its 191 super stockists as of June 30, 2026 located in North India, increasing exposure to region specific demand and competitive conditions.

Positives to Note

● Consistent improvement in profitability over the review period. EBITDA margin rose from 11.66% in Fiscal 2024 to 15.65% in Fiscal 2026 and further to 18.04% for the three months ended June 30, 2026, while PAT margin more than doubled from 3.24% to 6.94% over the same three year period, reflecting improving operating leverage and cost control.

● Declining leverage alongside growth. The Debt to Equity ratio improved from 2.63 times in Fiscal 2024 to 1.71 times in Fiscal 2026 even as the company expanded its revenue base and funded capital expenditure, suggesting a gradually strengthening balance sheet ahead of the Issue.

● Established, diversified distribution reach. The company's products are sold through over 300 super stockists across approximately 24 states as of March 31, 2026, with a presence across kirana outlets, supplemented by private label manufacturing and exports to the Middle East, South Asia and Europe, which diversifies its revenue base beyond its own branded products.

● Favourable industry tailwinds. The Indian confectionery market is estimated at Rs.93,100 crore in Fiscal 2025 and is projected to grow at a CAGR of 6.3% through Fiscal 2030, with low priced, mass market confectionery such as the company's core Hugs portfolio continuing to drive the bulk of consumption, particularly in the Tier 2 and Tier 3 markets where the company has an established presence.

● Active product innovation and brand diversification. Beyond the mass market Hugs brand, the company is developing the comparatively premium Tosca brand for e commerce and quick commerce channels, including newer, differentiated formats such as Tosca Oat Choco, an oat and cereal based bar positioned with meaningfully less sugar than certain leading chocolate bars based on the company's internal comparisons.