IPO Analysis Research

JNK India

• JNK India is coming out with a 100% book building; initial public offering (IPO) of 1,60,15,988 shares of Rs 2 each in a price band Rs 395-415 per equity share.  
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors. 
• The issue will open for subscription on April 23, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 197.50 times of its face value on the lower side and 207.50 times on the higher side.
• Book running lead managers to the issue are IIFL Securities and ICICI Securities.
• Compliance Officer for the issue is Ashish Soni.

Profile of the company

The company is in the business of manufacturing the process fired heaters, reformers and cracking furnaces (together, the ‘Heating Equipment’) that are required in process industries such as for oil and gas refineries, petrochemical and fertilizer industries. It has capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning Heating Equipment and cater to both domestic and overseas market. The Indian heating equipment market is closely competed among seven companies with the Company and Thermax being the most prominent and comparable players. Over the years it has diversified into flares and incinerator systems and have been developing capabilities in the renewable sector with green hydrogen. 

The company’s business model involves collaboration with its customers, from the initial consultation, specification and design stage to the final installation of the Heating Equipment. Due to its long-standing relationship with customers and its capability to provide customized solutions with a proven track record in product development and execution catering to the diverse needs of its customers, it has a competitive advantage, since there are very few competitors with similar capabilities. As of December 31, 2023, it has served 21 customers in India and 8 customers overseas. Further, 7 out of the 12 oil refining companies in India, are its customers and it has supplied or are in the process of supplying Heating Equipment to 11 of the 24 operating oil refineries across India. Some of its domestic Customers include Indian Oil Corporation, Tata Projects, Rashtriya Chemicals & Fertilizers and Numaligarh Refinery. Further it has catered to overseas customers such as a leading engineering, procurement and construction (EPC) company in Europe, a leading oil & gas exploration & production company in Oman and a middle east arm of European EPC company in oil and gas. Also it has enjoyed repeat orders from certain large domestic customers such as Rashtriya Chemical & Fertilizers, Tata Projects, Numaligarh Refinery and Indian Oil Corporation. 

Proceed is being used for:

• Funding working capital requirements.
• General corporate purposes.

Industry overview

The demand potential for the heating equipment i.e., process fired heaters, reformers, and cracking furnaces have been estimated for Oil & Gas downstream segments only. Overall demand for heating equipment from Indian refineries, petrochemicals and fertilizer (Urea) segments between Fiscal 2024 and Fiscal 2029 is estimated at Rs 270,890 million i.e., approximate Rs 45,000 million on an annualized basis. 61% of this demand would come from petrochemicals followed by 37% from refineries and 2% from fetilizers (Urea). 46% of this demand would come from cracking furnaces followed by 24% from low capex heaters, 16% from high capex heaters, and 14% from reformers. Heating equipment suppliers indicated that order booking has grown by 25% in the last 2 years and the market is showing an upward trend – cumulative order booking for heating equipment in the last 6 years was approximately Rs 150,000 million i.e., Rs 25,000 million on annualized basis. 

The process fired heaters market has high barriers to entry and there are only a handful of suppliers, despite surge in demand. The market has high entry barriers as the engineering of industrial process fired heaters requires a complex understanding of various oil products. If the operation of a process fired heater is interrupted for even one day, users could incur significant losses, which is why suppliers undergo a thorough selection process. Since energy efficiency is one of the key performance indicators of any refinery, petrochemicals and, fertilizer plants and is determined by the efficiency of the process fired heaters, the process fired heaters become a critical aspect for customers and hence selection of suppliers for process fired heater requires strong credentials and references. Besides, there are certain regulatory standards to be mandatorily adhered to in the industry. Therefore, there are limited suppliers who can supply these critical equipment. The Indian heating equipment market is closely competed among seven companies with JNK India and Thermax being the most prominent and comparable players. Bharat Heavy Electricals is also a participant however, its revenue from heating equipment is comparatively lower compared to its other flagship businesses. Other participants in the Indian heating equipment market are, Esteem Projects, Heurtey Petrochem Solutions, TR Engineering, and ITT Engineering India. 

Pros and strengths

Established track record with a diverse customer base: The company is in the business of manufacturing the process fired heaters, reformers and cracking furnaces (together, the Heating Equipment) that are required in process industries such as for oil and gas refineries, petrochemical and fertilizer industries. It commenced operations in 2010 and has a successful project completion track record of over 10 years. It has successfully completed projects which were based in far-reaching locations, which included its projects in India at Numaligarh, Assam; Kochi, Kerala; Barauni, Bihar; and overseas at Lagos, Nigeria. In recognition of its efforts, it has been accorded incentives by its customers for early completion of projects in India and overseas. Further, in March 2022, it was recognised for its safety compliance by one of the private refinery companies of a multinational industrial conglomerate from Nigeria and was awarded a certificate of appreciation towards ‘Safety Compliance and Campaign Performance’. Also, in November 2022, it was awarded a certificate of appreciation by the same refinery company, for providing four million safe manhours without a lost time incident and recognising its effective contribution towards installation of process fired heaters. 

Well-positioned to capture industry tailwinds through its demonstrated capabilities over time: The company has provided efficient solutions to its customers and has been selected by its customers repeatedly. It has stringent quality systems in place to ensure that the equipment supplied by it and/or services provided to customers meet or exceed the contractual and regulatory requirements. It has a team of experienced engineers and technicians who work closely with its customers to understand their specific needs and provide solutions that meet or exceed their expectations. It has an extensive workforce consisting of 69 employees in the engineering department. It also provides installation services to its customers to ensure that their products are installed correctly and function effectively. Further, since its inception it has been working closely with JNK Global. JNK Global is involved in the design, manufacturing, installation of process fired heaters. JNK Global is the only industrial-use process fired heater producer in Korea and is ranked amongst the top three industrial use process fired heater producers globally. Rise in global oil and gas refinery and petrochemical capacities are the key factors driving the growth in the global process fired heaters market. The company is able to leverage JNK Global’s global position, to bid for larger projects in collaboration with JNK Global. 

Diversifying product portfolio to cater to varied industries: The company’s Heating Equipment are required in process industries such as oil and gas refineries, petrochemicals, fertilizers, hydrogen and methanol plants etc. The company receives orders from domestic and overseas oil and gas refining, petrochemical and fertilizers companies. Its diversified Customer base has helped it in expanding its markets and improve profitability. The customers are primarily from, amongst others, the oil and gas, petrochemical and fertilizers industries. Heating Equipment such as process fired heaters and reformers are used in a typical refinery and are also an effective and efficient heating solution for a wide range of industrial applications, but proper design, installation, and operation are critical to ensure safe and reliable performance. Process fired heaters are the critical equipment in a refinery. Around 10 – 20 process fired heaters are used in any typical refinery. Of all the process fired heaters, four applications such as the CDU, VDU, delayed coker unit and catalytic reforming units are the most critical and the capex for these heaters is also high when compared with the other heater application areas in the refinery. It has recently diversified into waste gas handling systems which includes flares and incinerators systems as well. Flare system is a gas combustion device used in industrial plants such as petroleum refineries, chemical plants, natural gas processing plants, at oil or gas production sites with oil wells, gas wells, offshore oil and gas. 

Skilled and experienced Promoters and management team with committed employee base: The company is led by a qualified and experienced management team, with a deep understanding of the industry and its customers’ preferences and requirements. Its Promoters and Directors, Arvind Kamath, Goutam Rampelli and Dipak Kacharulal Bharuka and its Director Bang Hee Kim have an extensive experience in the Heating Equipment industry and have been instrumental in the growth of its business. its Promoters are supported by an experienced management team comprising Deepak Sake (vice president engineering with an experience of over 21 years, Mohsin Shaikh (assistant vice president projects) with an experience of over 15 years, and Vallathur Ravikumar Mudali (general manager, procurement department) with an experience of over one year, in the development and execution of projects in process fired heaters industry. Its qualified and experienced team enables it to identify new avenues of growth and helps it to implement its business strategies in an efficient manner.

Risks and concerns

High working capital requirement: The company’s business requires significant working capital for its business operation, furnishing of bank guarantees for participation in bids, financing inventory and any change in terms of credit or payment would affect its working capital. The working capital projections made by the company are based on certain key assumptions by its management and it may require alternative means of funding in Fiscal 2024, Fiscal 2025 and Fiscal 2026 even after the utilization of Net Proceeds. Its inability to meet its present working capital requirements or its enhanced working capital requirements will have an adverse impact on its results of operation, business and financial condition. Delays in payment under its existing contracts or an increase in inventory and work in progress and/or accelerated payments to suppliers, or an increase in the performance bank guarantee requirement could adversely affect its working capital, lower its cash flows and materially increase the amount of working capital requirements. Accordingly, it may require additional capital or financing from time to time to meet its working capital requirements. While there have been instances in the past, where it faced delayed payments under its contracts, a requirement to increase the inventory or work in progress, to accelerate payments to suppliers and to increase the performance bank guarantee requirement, it was able to manage within the available resources without having any adverse financial impact on its business.

Business subjects to certain risks due to operations in multiple jurisdictions: The company undertake in-house fabrication process at its leased facility, apart from engaging with third-party fabricators. Its facility is situated at a multi-product special economic zone at Mundra, Gujarat, where fabrication is undertaken for export purposes only. Further, it is expanding into other jurisdictions and planning to set up sales office in Europe and opening more branches in the Middle East and Africa. In addition, changes in laws and regulations, more stringent enforcement or alternative interpretation of existing laws and regulations in jurisdictions in which it currently operate can change the legal and regulatory environment, making compliance with all applicable laws and regulations more challenging. While there has been no past instance where its operations were affected by any of the above-mentioned risks, if any of these risks materialises, it could have a material adverse effect on its business, financial condition and results of operations. 

Carry out in-house fabrication at some leased facilities: While the company outsource most of its fabrication process to third-party fabricators and most of the fabrication takes place at the premises of the third-party fabricators, it also undertakes in-house fabrication process at two of its leased premises. In the event these existing leases are terminated or they are not renewed on commercially acceptable terms or at all, it may suffer a disruption in its operations. If alternative premises are not available at the same or similar costs, sizes or locations, its business and results of operations may be adversely affected. One of its facilities is situated at a multi-product special economic zone at Mundra, Gujarat, where fabrication is undertaken for export purposes only. Further, on situational basis and based on the requirement of its projects, it take certain facilities on lease basis and once the project is completed the facility is shut down and all the equipment and machinery are shifted to other facilities for other projects. This ensures project optimisation while providing it with logistical efficiency. One such facility was situated, at Jajpur, Odisha, where fabrication was undertaken only for one of its customer’s refinery and it terminated the facility pursuant to a termination letter dated April 1, 2024, due to commercial reasons. Its facilities may be subject to various operating risks, including those beyond its control, such as the breakdown, failure of equipment or industrial accidents, fire, power interruption and natural disasters.

Business may be subject to labour conflicts, strikes: The company is significantly dependent on workforce for its operations. The success of its operations depends on the availability of labour and maintaining a good relationship with its workforce. A shortage of skilled or unskilled personnel or work stoppages caused by disagreements with its workforce, strikes and lockouts because of disputes could have an adverse effect on its business, results of operations and financial conditions. As such, its relations with its employees to be amicable. While there is no instance of work stoppages caused by disagreements with its workforce, strikes, lockouts or labour disputes in the past, it cannot assure that it shall not experience any such disagreements, strikes, lockouts or labour disputes in the future. Such events could disrupt its operations and may have a material adverse effect on its business, financial condition and results of operations. It also engages third-party fabricators to perform either parts of its project or entire project. There could be a delay in the performance of duties by third-party fabricator or any conflict which may cause a delay in the completion of its projects. The company had subcontracted some fabrication work of heaters in relation to a project in Mexico. 

Outlook

Over the years, JNK India has developed a wide range of products to meet the evolving requirement of its customers. It offers a wide range of products primarily categorised under two segments – (a) Heating Equipment and (b) Flares, incinerators and others. It is one of the well-recognized process fired heater companies in India. It has capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning process fired heaters, reformers and cracking furnaces. It is an ISO 9001:2015, 14001:2015, 45001:2018 Certified Company led by a Qualified And Experienced Management Team. Due to its long-standing relationship with its customers and its capability to provide customized solutions with a proven track record in product development and execution catering to the diverse needs of the customers, it has a competitive advantage, since there are very few competitors with similar capabilities. On the concern side, the company’s insurance may not be adequate to completely cover any or all its risks and liabilities. There can be no assurance that any claim under the insurance policies maintained by it will be honoured fully, in part or on time, or that it has taken out sufficient insurance to cover all its losses. Its inability to maintain adequate insurance cover in connection with its business could adversely affect its operations and profitability. 

The company is coming out with an IPO of 1,60,15,988 equity shares of face value of Rs 2 each. The issue has been offered in a price band of Rs 395-415 per equity share. The aggregate size of the offer is around Rs 632.63 crore to Rs 664.66 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by Rs 1,144.09 million or 38.50% from Rs 2,971.36 million in Fiscal 2022 to Rs 4,115.45 million in Fiscal 2023. It recorded an increase in profit after tax by Rs 103.79 million or 28.84% from Rs 359.83 million in Fiscal 2022 to Rs 463.62 million in Fiscal 2023. Meanwhile, the company intends on accelerating and expanding to new geographies such as expanding to European countries and opening sales offices in the Middle East and Africa.  It will continue to expand its product portfolio and plan to provide diversified offerings to its customers through augmenting engineering capacities and technology partnership. It intends to selectively pursue strategic investment, partnerships and acquisition opportunities that complement its business and enhance technological capabilities, add credentials, or establish its presence in its targeted domestic and overseas markets. 

Varyaa Creations

• Varyaa Creations is coming out with an initial public offering (IPO) of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share. 
• The issue will open for subscription on April 22, 2024 and will close on April 25, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 15.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Akshita Agrawal.

Profile of the company

The company is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. The company also intends to focus on manufacturing and selling of jewellery‘s. The company manufactures its jewellery through job worker located in Mumbai. The company has earned its revenues from wholesale trading of gold, silver, precious stone, semiprecious stone and from sales of jewellery. Currently, its products are sold only through the offline market, i.e. from its registered office located in Mumbai. Its customers can also make inquiry through its online platform www.varyaacreations.com. Further, the company will also be selling its products through its own online platform, i.e. www.baubleberry.com. This online platform will facilitate and provide its customers with an experience of Phygital marketing, i.e., an option to browse variety of jewellery through its catalogue. 

The major raw material used for making its products is gold, precious stones, gemstones, semi-precious stone, silver etc. which is further provided to the job worker who manufacture the jewellery for the company. The job worker manufactures its products as per design and pattern provide by the company. Designing of its products are done in-house. It has not entered into any formal contract or agreement with the job worker. It gets its products manufactured based on the orders basis and as and when need basis. It procures gold, silver, gemstones, precious and semi-precious stones majorly through the bullion market and jewellery market dealers located in Mumbai. 

Its jewellery is widely sold through B2B and B2C platform. It also sells customized jewellery to customers. It offers its jewellery across different price points so as to maximize its potential customer base. It endeavours to maintain the finishing and quality of its jewellery by ensuring control quality, timely delivery and competitive prices. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. 

Proceed is being used for:

• Financing the establishment of new showroom; a) Capital expenditure cost for the proposed new showroom and Purchase of Inventory for the proposed new showroom; (b) Purchase of Inventory;
• General corporate purposes.

Industry overview

As of February 2021, India’s gold and diamond trade contributed around 7.5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports. The gems and jewellery sector are likely to employ around 8.23 million persons by 2022, from around 5 million in 2020. Based on its potential for growth and value addition, the Government declared the gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the 77 Reserve Bank or the Government of India.

India’s gems and jewellery market size was at $78.50 billion in FY21. Growth in exports is mainly due to revived import demand in the export market of the US and fulfilment of orders received by numerous Indian exhibitors during the Virtual Buyer-Seller Meets (VBSMs) conducted by GJEPC. India’s gems and jewellery exports reached $39.14 billion in 2021-22, a 54.13% rise from the previous year. In December 2022, India’s gems and jewellery exports was at $2.56 billion. The Government of India is aiming at $100 billion in jewellery export in the next five years (until 2027), up from $35 billion in 2020.

In the coming years, growth in the gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2% of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions on gold import is likely to provide a fillip to the industry.

Pros and strengths

Established brand: It is well known through its brand named ‘Varyaa’ in the local jewellery market in Mumbai. This brand name has helped by the company earn the trust and goodwill of its customer which further has an influence on their buying decisions. Its well established and recognizable brand and the reputation built by the company, has and will enable it to increase its clientele list in the future. 

Well established relationship with supplier: It maintains long terms business relationships with its key suppliers and manufacturer with whom it has a mutual understanding. This long standing partnerships with them has ensured the company timely delivery of its raw materials, supply of quality raw materials, manufacturing of quality jewelleries, specialized services and superior finishing of its jewelleries. This has been beneficial for it as it is able to successful executes its orders on time and develops strong relationships with its suppliers and customers.

Extensive product list: It has an extensive product list which includes earrings, necklaces, pendants, chains, finger rings, bracelets, anklets, nose pins, mangal sutra, pendant set, bangles in brass or silver for females of age groups as well as male accessories such as rings, cufflinks, button set, that cater to its customers taste, preference, choice and the ever-changing trends in the chain and jewellery designs. Its portfolio offers its customers a wide variety of traditional, Indo-western, & modern design and jewellery for special occasions such as weddings and festivals to daily-wear for all ages, genders and across various price points.

Risks and concerns

Dependent upon few supplier: Its top 10 suppliers contributed 93.60%, 91.65%, 98.53% and Nil of the purchases for the period ending on December 31, 2023 and for the financial year ending on March 31, 2023, 2022 and 2021, respectively. Further, 23 as on March 31, 2021, due to the outbreak of Coronavirus (COVID-19) pandemic globally and in India and restriction/ constriction on the purchase and sale of gold, silver, precious stone, semi-precious stone, its company had not purchased any additional inventory and sold its existing inventory itself. In its industry, generally there are no definitive agreements with the suppliers of the products it sells. It also does not have any long-term supply agreements with its suppliers or distributors and it procures its products on a purchase order basis. Since there are no fixed terms of trade, the discounts and schemes for its customers are decided based on the negotiation skills of the procurement team. If it is unable to continue to procure supplies at competitive prices, its margins and business will be adversely affected.

Fail to protect jewellery designs: It changes its jewellery designs on a regular basis and do not register such designs under the Design Act, 2000. As such, it would be difficult for the company to enforce its intellectual property rights in its designs, and if its competitors copy its designs, in particular the designs of its products available on its website or the designs given to third party job workers/ suppliers, it could lead to a loss of revenue, which could adversely affect its results of operations and financial condition. 

Highly fragmented and competitive: The Company would not only compete with organized players but also a high percentage of unorganized entities such as individual jeweler‘s, retailer stores, jewellery showrooms and galleries and small scale companies. Some of them may offer better designs and patterns to the clients and may be capable of providing more personalized services to each client due to the smaller number of orders placed with them. Further, these unorganized entities offer their services at highly competitive prices having well established presence in their local markets. Aggressive discounting by competitors, including liquidating excess inventory, may also adversely impact its performance in the short term. This is particularly the case for easily comparable pieces of jewellery, of similar quality, sold through stores that closely resemble to those that it operates. In addition, there are minimal entry barriers in this sector and hence it may also faces competition from new entrants.

Outlook

Varyaa Creations is engaged in the business of wholesale trading of gold, silver, precious stone, and semi-precious stone. Its product portfolio includes Necklace, Earring, Tops, Ring, Bracelet, Bangles, Gemstones, Diamonds, Lab Grown diamonds, Pearls and it also make customized jewelleries as per customer’s needs. Its products are sold only through the offline market, i.e. from its registered office located in Mumbai. On the concern side, it faces competition from both the organized and unorganized sectors of the jewellery retail business. It competes with its competitors on a regional or product line basis. Many of its competitors have substantially large capital base and resources than it does and offer broader range of products. It faces competition from listed Companies like PNGS Gargi Fashion Jewellery, Ashapuri Gold Ornament, Titan Company, Bhakti Gems and Jewellery, PC Jewellers etc.

The company is coming out with an IPO of 13,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 150 per equity share to mobilize Rs 20.10 crore. On performance front, the total income of the company for fiscal year 2023 was Rs 538.03 lakh against Rs 253.13 lakh total income for Fiscal year 2022. An increase of 96.40% in total income was due to increase in Sales. Profit after tax for the Fiscal 2023 was at Rs 78.93 lakh against profit after tax of Rs 57.98 lakh in fiscal 2022, a 36.12% increase. The profit is higher due to revenue increase, expense reduces and no tax expense in fiscal 2023 due to carried forward losses setoff in fiscal 2022. Meanwhile, it aim to focus on deepening its penetration in its existing markets and thereby increase its domestic presence by expanding its customer network. At present, it sells its products in Mumbai. It aims to focus on increasing its customer base by exploring domestic markets. It proposes to set up a showroom in Agra. Besides, it will continue to add new design to its existing product portfolio to cater to various customer and price segments in the jewellery markets. 

Faalcon Concepts

• Faalcon Concepts is coming out with an initial public offering (IPO) of 1950000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share. 
• The issue will open for subscription on April 19, 2024 and will close on April 23, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 6.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Navigant Corporate Advisors.
• Compliance Officer for the issue is Vinod Kumar.

Profile of the company

Incorporated in 2018, the company is engaged in designing, engineering, fabrication and installation of facade systems. It specialises in technically demanding facades. It offers various range of products to meet the demands of its customers. Over the years, it has developed a name for itself among its customers. Its product basket ranges from glazing /curtain walls, high end aluminium doors & windows, skylights, canopies, frameless glazing, MS structures, stone cladding, metal cladding, roofing & others. 

The company has completed a varied variety of projects for Schools, financial institutions, hospitality installations, corporate buildings, and luxury houses with success. Its clients are spread across India and the World, in communities from various states. Its team is totally responsible to produce a comprehensive turnkey package with all project specifics from the original design phase to the final installation for any commercial or residential facade project. It has offered its services for varied type of facade projects including residential buildings, commercial complexes, schools, parks etc. The company recognised list of clients include Espirit Techno Consultant, Galaxy Magnum Infra Height, Babbar Films, Maconns Infra, Silvers Stone Regency, St Xavier School Gurgaon High School etc. among others. It has also developed relations with some of the recognised suppliers in the company’s industry to fulfil its raw material supplies. The company has been ISO 9001: 2015 certified for developing Building façade. 

Proceed is being used for:

• Finance the capital expenditure for purchase of facade structural equipments.
• Part finance the requirement of working capital.
• General corporate purposes.

Industry overview

The India facade market size reached $2,638.2 Million in 2022. Looking forward, the publisher expects the market to reach $4,254.5 Million by 2028, exhibiting a growth rate (CAGR) of 8.23% during 2023-2028. The increasing construction activities, rising number of commercial spaces, and the growing number of remodeling and upgradation projects represent some of the key factors driving the market. The facade is an exterior front of a building that comprises roofing, street awnings, and ventilation louvers. It is produced using different materials, such as glass, brick, steel, aluminum, stone, concrete, metal, clay, and wood. It offers an aesthetic appeal to the building and enhanced waterproofing, fabrication, durability, and weather protection. It is generally used in energy efficient buildings for controlling light penetration, regulating internal temperature, and providing thermal insulation. It requires regular maintenance to ensure its longevity and functionality. It is commonly available in several shapes and sizes and can be created as per the requirements of the consumer.

The increasing construction activities in the residential areas on account of rapid urbanization and inflating disposable income levels represent one of the key factors driving the demand for façades in India. Moreover, the rising number of commercial spaces, such as shopping malls, restaurants, cafes, offices, hotels, and institutions, is contributing to the market growth. In addition, due to the growing environmental concerns, several measures are being undertaken by the government of India (GoI) to promote the use of sustainable construction materials and minimize carbon emissions. This, coupled with the launch of various government sponsored public housing programs due to the surging demand for affordable housing units, is driving the adoption of facades in the country. Apart from this, the increasing number of remodelling and upgradation projects for stadiums, airports, railway stations, metro, and hospitals is contributing to the market growth in the country. Furthermore, the rising popularity of polycarbonate facades in industrial and large-scale commercial buildings due to their numerous advantages, including easy installation, weather resistance, and low maintenance costs, is propelling the growth of the market. 

Pros and strengths

Leveraging the experience of its Promoter and employees: The company’s Promoters have played a key role in guiding, developing, and growing its business. Under the leadership and experience of its Promoters, the company has seen significant growth in the overall business. Its Promoters, have a proven background and experience in the Facade industry. Their leadership and vision have been instrumental in driving its growth since inception and implementing its business strategies. They are the guiding force behind all the corporate decisions and is responsible for the entire business operations of the Company along with the team of experienced and qualified professionals. Their industry knowledge and understanding also gives it the key competitive advantage enabling it to expand its geographical and customer presence in existing as well as target markets, while exploring new growth avenues.

Marquee client base and repeat orders: The company has undertaken projects across various segments in Residential, Commercial and Institutional buildings. The company value its relationships with its clients. Its motivated team of personnel and its work processes complement each other to enable it to deliver high levels of client satisfaction. Further, its quality of work and timely execution has allowed it to enhance its relationships with existing clients and to secure projects from new clients. Ability to successfully bid and win new projects is the result of its sustained focus on client satisfaction.

Designing and execution capability: The company is recognised for its capability to translate innovative architectural concepts in practical solutions, feasible in both technical and economic terms. Its success in the field is the result of constant research for innovation and improvement of the end user experience. Its designing and execution capability has enabled it to handle complex projects. Its designing and execution capability gives it a competitive edge over the peers.

Risks and concerns

Dependent upon few key suppliers: The company procure the material required for the development of facades. The major materials used in development of facades and other allied products are glass, aluminium composite panels, aluminum profiles, mild steel, GI sheet, sealant, gasket & hardwares, etc. It procures materials required in its installation of facade systems from domestic market. It procures a large portion of its material from few key suppliers, with whom it does not have any long-term supply contracts and therefore, it cannot assure that it shall always have a steady supply of raw material at prices favourable to it. For the Fiscals 2021, 2022, 2023 and seven months ended October 31, 2023, purchases from its top ten suppliers represented 82.56%, 96.74%, 80.59% and 74.82% of its total purchases respectively. Inadequate supply of its material either by a sudden change in the prices or imposition of any new taxes or loss of any of its existing major vendors for any reason could have a material adverse effect on its business operations and profitability. If it cannot fully offset increases in the cost, it would experience lower margins and profitability, which would have a material adverse effect on its financial condition and results of operations.

Requires significant amounts of working capital: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high outstanding amount due from its debtors which may result in a high risk in case of non-payment by these debtors.

Business requires the services of third parties: The company’s business generally requires the services of third parties, including sub-contractors and suppliers of materials. The timing and quality of facade it installs depends on the availability and skill of those third parties, as well as contingencies affecting them, including labour and material shortages and industrial action, such as strikes and lockouts. It cannot assure that skilled third parties will continue to be available at reasonable rates and in the areas in which it needs to execute its projects. As a result, it may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of contracted services, and any delay in project execution could adversely affect its profitability. There is also a risk that it may have disputes with its subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, or its failure to extend existing orders or issue new orders under a subcontract. In addition, if any of its subcontractors fail to deliver on a timely basis the agreed upon supplies and/or perform the agreed-upon services, its ability to fulfil its obligations as a prime contractor may be jeopardize.

Outlook

Faalcon Concepts deals with the planning, design, fabrication, and installation of façade systems. The company offers facades resistant to UV rays, acid rain, dust, noise, and other influences. The company’s product portfolio includes glazing/curtain walls, aluminium doors and windows, skylights, canopies, frameless glazing, MS structures, stone cladding, metal cladding, and roofing. The company has catered to customers in various states like Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, Karnataka, Gujrat, Punjab, Delhi and overseas. The company’s focus on quality and innovation helps it to complete in the segment it deals. Intensive care is taken to determine the standard of every material/ product dispatched. Additionally, the company also keeps itself abreast with the latest changes in technology. On the concern side, modernization and technology up gradation is essential to reduce costs and increase the output. Its equipment may become obsolete or may not be upgraded timely, hampering its operations and financial conditions and it may lose its competitive edge.

The company is coming out with an IPO of 1950000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share to mobilize Rs 12.09 crore. On performance front, the company’s total revenue decreased by 28.50% to Rs 1,324.81 lakh for the financial year 2022-23 from Rs 1,852.93 lakh for the financial year 2021-22. The company’s profit after tax increased by 83.57% to Rs 179.52 lakh for the financial year 2022-23 from Rs 97.79 lakh for the financial year 2021-22. Meanwhile, a key strategy for increasing and growing its business is to increase the strength of its relationship with its existing customers, reaching out for new customers & widen its customer base. The company’s strategy is to widen its customer base geographically as well as demographically. It intends to continue to invest in its existing services so as to provide better experiences to its existing clients and also provide services for increasing the client base of the company.

Ramdevbaba Solvent 

• Ramdevbaba Solvent is coming out with initial public offering (IPO) of 59,13,600 shares of Rs 10 each in a price band Rs 80-85 per equity share.  
• The issue will open for subscription on April 15, 2024 and will close on April 18, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 8.00 times of its face value on the lower side and 8.50 times on the higher side.
• Book running lead manager to the issue is Choice Capital Advisors.
• Compliance Officer for the issue is Pratul Bhalchandra Wate.

Profile of the company

The company is in the business of manufacturing, distribution, marketing and selling of Physically Refined Rice Bran Oil (Rice Bran Oil). It manufactures and sell Rice Bran Oil to FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. It also manufactures, market and sell Rice Bran Oil under its own brands “Tulsi” and “Sehat” through thirty-eight (38) distributors who in turn sell to various retailers across Maharashtra. Rice bran oil is the oil extracted from the hard outer brown layer of rice called ‘bran’. It is well known for its high smoke point of 232 degree C i.e. 450 degree F and mild flavour, making it fit for high-temperature cooking methods such as stir-frying and deep-frying. It has an ideal balance of Polyunsaturated Fats (PUFA) and Monounsaturated Fats (MUFA), in almost a 1:1 ratio. Since rice bran oil is made from bran, it is rich in Vitamin E, an antioxidant. It also produces De-oiled Rice Bran (DORB), which is a by-product in the extraction of Rice Bran Oil and sell the same as cattle feed, poultry feed and fish feed in the States of Maharashtra, Goa, Gujarat, Madhya Pradesh, Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu. Other by-products such as fatty acid, lecithin, gums, spent earth and wax are sold in the open market.

Proceed is being used for:

• Setting up of new manufacturing facility.
• Repayment in full or in part, of certain of outstanding borrowings.
• Funding the working capital requirements of the company. 
• General corporate purposes. 

Industry overview

Over the years, agricultural production in India has consistently recorded higher output. India ranked first in pulses & milk, second in vegetable primary, fruit primary wheat & rice and third in cereals, eggs primary in World Agriculture in 2019. An abundant supply of raw materials, increase in demand for food products and incentives offered by the Government has impacted food processing sector positively. During the 5 years ending 2020-21, Food Processing sector has been growing at an average annual growth rate of around 8.38 per cent as compared to around 4.87 per cent in Agriculture & allied sector (at 2011-12 prices). Food Processing Sector has also emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. The sector constituted as much as 10.54 per cent and 11.57 per cent of GVA in Manufacturing and Agriculture sector respectively in 2020-21 (at 2011-12 prices). 100% FDI is permitted under the automatic route in food processing industries. 100% FDI is allowed through Government approval route for trading, including through e-commerce in respect of food products manufactured and/or produced in India. The sector has witnessed FDI equity inflow of USD 5.72 billion during April, 2014 to September, 2022.

Edible oils and Fats are essential ingredients for a wholesome and balanced diet and they are vital items of mass consumption. The Department of Food and Public Distribution deals with issues related to the Vegetable Oil Processing Industries, Price Control, Inter State trade & commerce and also supply & distribution of vanaspati, oilseeds, vegetable oil, cakes and fats. The Directorate of Sugar and Vegetable oils is staffed with qualified technical people who assist the Ministry in the coordinated management of Vegetable Oils Policy, particularly relating to production/availability and monitoring of prices. India is a vast country and inhabitants of several of its regions have developed specific preference for certain oils largely depending upon the oils available in the region. For example, people in the South and West prefer groundnut oil while those in the East and North use mustard/rapeseed oil. Likewise several pockets in the South have a preference for coconut and sesame oil. Inhabitants of northern plain are basically consumers of fats and therefore prefer Vanaspati, a term used to denote a partially hydrogenated edible oil mixture of oils like soyabean, sunflower, ricebran and cottonseed oils.

Pros and strengths

Strategic location of manufacturing facilities: The company’s Manufacturing Facilities are situated near Nagpur, Maharashtra giving it the strategic advantage to supply and distribute Rice Bran Oil in Maharashtra and DORB across various states in India. It is the preferred partner for its FMCG clients for manufacturing Rice Bran Oil as it can be easily distributed to central and southern India from Nagpur. Its strategic location also enables it to sell DORB to the southern states of Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu, which is used by fish & poultry farmers, traders and certain end user industries for their products.

Easy availability of rice bran around manufacturing facilities: Rice bran oil is extracted from the hard outer brown layer of rice called bran. There are various rice mills which are situated near its Manufacturing Facilities ensuring the supply of rice bran to it on regular basis. Vidarbha region is one of the largest rice producing area in the State of Maharashtra and therefore rice bran is easily available at competitive prices. The ease of availability of rice bran in abundance, which is its main raw material, ensures the smooth operations of its Manufacturing Facilities, and production and sale of its finished products. In addition to the ease in availability, rice bran is also available to it at a competitive price which in turn enhances its ability to compete aggressively in pricing of its finished product as compared to its competitors.

Integrated operations and economies of scale: Manufacture of Rice Bran Oil mainly involves two processes: (i) solvent extraction of crude oil from rice bran; and (ii) refining the extracted crude rice bran oil. It has integrated operations involving the extraction of oil from bran and refining of the extracted oil enabling it to meet the time, cost efficiency, quality and quantity requirements. Its Manufacturing Facilities have been designed in such a manner that for its operations, materials from one production process are transferred to the following production process through pipelines in a seamless way. This integration allows it not only to save costs but also helps it achieve economies of scale by controlling the inputs / production based on each previous process, improving its efficiency and margins.

Risks and concerns

Depends on sale of products to certain FMCG companies: The company supplies rice bran oil in bulk to certain leading FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. It has historically derived, and may continue to derive, a significant portion of its income from sales to these FMCG companies. Any reduction in orders from its FMCG customers would adversely affect its income. The demand from its FMCG customers determines its revenue levels and results of operations, and its sales are directly affected by their production and inventory levels. Over the years, it has developed strong relationships with its FMCG customers through whom it has been able to increase the quality of its offerings. Its business depends on the continuity of business with these customers. It has not entered into any long-term agreements with its FMCG customers and instead rely on purchase orders to govern the volume and other terms of its sales of products. Consequently, there is no commitment on the part of its FMCG customers to continue to place new purchase orders with it and as a result, its cash flow and consequent revenue may fluctuate significantly from time to time. Further, it may not find other FMCG customers for the surplus or excess capacity, in which case it may be forced to incur a loss due to lack of utilization of its production capacity. 

Business operations require significant working capital: The company’s business operation requires significant working capital specifically for raw materials and finished goods to undertake manufacturing operations. The working capital requirements for FY 2025 of the Company is estimated at Rs 1,200.00 lakh and will be funded out of the Net Proceeds, whereas the balance working capital requirements would be arranged from its internal accruals and borrowings from banks and financial institutions. However, it may not be able to obtain financing on better and favourable terms from bankers or financial institutions, if and when it decides to avail institutional funding. Further, it cannot assure that its bankers or financial institutions may implement new credit policies, adopt new pre-qualification criteria or procedures, raise interest rates or add restrictive covenants in loan agreements, some or all of which may significantly increase its financing costs, or prevent it from obtaining financings totally. All of these factors may increase in working capital requirements and if it experience insufficient cash flows to meet required payments on its working capital requirements, there may have an adverse effect on its financial condition, cash flows and results of operations.

Derive significant portion of revenues from Rice Bran Oil: The company derive a significant portion of its revenue from the sale of Rice Bran Oil. It manufactures, market and sell Rice Bran Oil under its own brands “Tulsi” and “Sehat” through thirty-eight (38) distributors who in turn sell to various retailers across Maharashtra. It also manufacture and sell Rice Bran Oil to FMCG companies like Mother Dairy Fruit & Vegetable, Marico and Empire Spices and Foods. For the nine months ended December 31, 2023 and Fiscals 2023, 2022 and 2021, its revenue from its Rice Bran Oil under its own brands and to other brands of leading FMCG companies on a contractual basis amounted to Rs 19,396.87 lakh, Rs 29,698.16 lakh, Rs 29,030.38 lakh and Rs 18,555.68 lakh contributing 41.84%, 42.57%, 49.81% and 43.77% during nine months period ended December 31, 2023 and Fiscals 2023, 2022 and 2021 of its revenue from operations, respectively. Consequently, any reduction in demand from the consumers of Rice Bran Oil or lack of preference for Rice Bran Oil could have an adverse effect on its business, results of operations and financial condition.

Outlook

Founded in 2008, Ramdevbaba Solvent stands as a beacon of innovation and sustainability in the agro-industrial sector. With three state-of-the-art Solvent Extraction Plants in Maharashtra, it specializes in producing high-quality Rice Bran Oil, De-Oiled Rice Bran cake, and various by-products, reflecting its commitment to quality and environmental stewardship. The company’s Manufacturing Facilities are situated near Nagpur, Maharashtra giving it the strategic advantage to supply and distribute Rice Bran Oil in Maharashtra and DORB across various states in India. It is the preferred partner for its FMCG clients for manufacturing Rice Bran Oil as it can be easily distributed to central and southern India from Nagpur.  On the concern side, the company’s earnings are to an extent dependent on the prices of the commodities that it sells mainly physically refined rice bran oil. These fluctuate due to factors beyond its control, including, amongst others, world supply and demand, supply of raw materials, weather, crop yields, trade disputes between governments of key producing and consuming countries and governmental regulation.

The company is coming out with an IPO of 59,13,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 80-85 per equity share. The aggregate size of the offer is around Rs 47.31 crore to Rs 50.27 crore based on lower and upper price band respectively. On performance front, the company’s total income has increased by 20.35% to Rs 70,433.41 lakh in Financial Year ended March 31, 2023 from Rs 58,525.46 lakh in Financial Year ended March 31, 2022 primarily due to overall increase in the revenue from operations. The company recorded an increase of 97.25% in profit after tax from Rs 659.15 lakh in Financial Year ended March 31, 2022 to Rs 1300.15 lakh in Financial Year ended March 31, 2023. Meanwhile, the company intends to set up corn de-oiling manufacturing facility, adjoining its exisiting manufacturing unit at Brahmapuri, which involves crushing and processing of grains like corn using a process called dry-milling. The company will enhance its marketing efforts to reach out to other districts in and around the Vidharbha region of Maharashtra and also expand into other neighbouring states like Madhya Pradesh and Chhattisgarh. 

Grill Splendour Services 

• Grill Splendour Services is coming out with an initial public offering (IPO) of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share. 
• The issue will open for subscription on April 15, 2024 and will close on April 18, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 12.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Nikita Jawa.

Profile of the company

The company is engaged in the business of selling Bakery and patisserie food items through chain of Birdy’s store. The company is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. The company was incorporated in November 2019 as a hospitality company to acquire the bakery and confectionary business along with brand Birdy’s Bakery and Patisserie from WAH Restaurants. The acquisition was done via a Business Transfer and Intellectual Property Assignment Agreement dated December 27, 2019 (Acquisition Agreement). After that the company proceeded to invest in the business and grow the brand and spread presence. The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company vide above referred Acquisition Agreement. The primary focus of the Company was to bring back the quality and sheen of the brand. 

Its production facility is largely based on a manual production format. The food items are handmade by its chefs and they are of various varieties / sizes and types accordingly, there is no possibility to work out capacity. Hence capacity and capacity utilization does not apply to its business. It requires many ingredients viz. Chocolate, Premixes, Grocery, Whipping & Cooking Cream, Butter as raw material for which it supplies chain have a panel of listed negotiated vendors. These vendors supply all products like grocery, chocolate, dairy etc. Its major requirements are met through local vendors. 

The Promoters of the company, Srinidhi V Rao and Vandana Srinidhi Rao, individually have more than 30 years of experience in Hospitality industry. Its vision is to make available affordable experiential stores to meet every aspirational needs of individuals. Its Promoters inspirational leadership has led Grill Splendour Services (GSSL) to be recognised as one of the trusted food chains in its region. Further, the Company is managed by a team of experienced personnel. The team comprises of personnel having customer relationship, operational, marketing and business development experience.

Proceed is being used for:

• Funding additional working capital requirements
• Pre-payment/Repayment, in full or part, of certain outstanding borrowings availed by the company
• General corporate purposes

Industry overview

India’s food service sector is one of the vibrantly growing segment, which has witnessed noticeable growth in past few years. The sector, including both organised and unorganized segments, stands at Rs 4,23,865 crore in 2018-19. The sector is expected to reach to $79.65 billion by 2028, with a CAGR of 11.19%. Factors accelerating the progress of the food services sector include changing demographics, increase in disposable income, growing urbanization, increasing internet penetration and proliferation of online services. Also, young affluent couples with penchant for eating out are adding to the growth further.

According to a report, the market for food services in India is predicted to increase from $41.1 billion in 2022 to $79.65 billion by 2028, with a CAGR of 11.19%. According to the Food Service and Restaurant Business Report 2022-23 by Francorp and restaurantindia.in, the industry is predicted to employ 1 crore people by 2025, despite losing over 20 lakh jobs at the height of the COVID-19 pandemic. The country's restaurant and food service market is split into two segments, with the unorganised segment holding the lion's share of the market, according to the report, which also noted that the organised sector expanded rapidly between 2014 and 2020. The market for quick service restaurants (QSRs) in the country is predicted to be worth $690.21 million in 2022 and $1069.3 million in 2027, rising at a CAGR of 9.15%, according to the report's additional findings. The QSR chain market is anticipated to increase at a CAGR of 23% over the course of FY20–25, making it the fastest growing sub-segment overall in the food service industry.

Pros and strengths

Strong Brand recognition: The brand Birdy’s was originally set up as ‘Birdy’s by Taj’. Over a period, it was sold to WAH Restaurants and from them the same was acquired by the company. The primary focus of the company was to bring back the quality and recognition of the brand. It did that over a period of last few years by a series of initiatives.

Chain of stores spread across Mumbai region: It is a chain of gourmet Bakery and Patisserie spread across Mumbai and Thane through 17 retail stores, a centralized production facility and multiple corporate clients. This presence helps it serves customer in major part of city and create satisfactory base of customers. The company after acquisition of Birdy’s brand has renovated more than half the shops. These shops now boast of seating, music ambience, table service, free library and freshly made food and beverages. These cafes attract a new category of customers called dine- in which was absent earlier.

Strong B2B customer relationships: Its quality of products and client relationships help the company to get repeat business from its B2B customers. Its client relationships also help it to cross sell its other products and services to them. Further it has been mutually value creating and stable association with its customers through products & services offered by the company. This has helped it creates a long-term relationship with its customers and improve its customer retention strategy. Through these efforts, it aims to become the ‘first choice service provider’ for all its customers for the products / services it offers.

Risks and concerns

B2B operations are subject to high working capital requirements: it started pursuing B2B business aggressively from end of last fiscal. Its B2B business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. It expects this to grow further in the coming years as it increases its focus on B2B business. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations.

Do not have long-term contracts with customers: It generates retail sales generally by its continuing relationships with its customers as well as walk-in customers. It does not enter in any long- term contract with any of its customers. It offers wide range of food products which are being sold under its stores operating under registered brand name ‘Birdy’s’. It has entered into agreements with most of its B2B customers and loss of any significant customers would have a material effect on its financial results. it cannot assure that the customers would renew their agreements or pay it in a timely manner or it would be able maintains the historical levels of business from these customers or that it will be able to replace these customers in case it losses any of them.

Operate in a highly competitive industry: The segments of the industry in which it operates are subject to intense competition. Its principal competitors are other established brands of the similar products it sells, including other major retail chains with well-established and recognized brands. If it is unable to compete successfully, its revenues or profits may decline or its ability to maintain or increase its market share may be diminished. It competes primarily on brand name recognition and reputation, customer satisfaction, quality of service etc. Some of its competitors are larger than it is in terms of size of operations and its competitors may also have greater financial and marketing resources than it does, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect its ability to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.

Outlook

Grill Splendour Services is a chain of gourmet Bakery and Patisserie spread across Mumbai through retail stores, a centralized production facility and multiple corporate clients. It offers fresh food products from traditional to ‘made to order’ as required by the Customers. On the concern side, it operates in a competitive market and competition is based primarily on quality of products and pricing of such products & services. To remain competitive in the market it strives to improve its sales & marketing efforts, reduce cost and improve operating efficiencies. If it fails to maintain its strengths, its competitors will gain an advantage over it, which would adversely affect its market share and results of operation. It faces competition from those who may be better capitalized, have longer operating history, have greater brand presence, and better management than it. If it is unable to manage its business, it might impede its competitive position and profitability.

The company is coming out with an IPO of 13,72,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 120 per equity share to mobilize Rs 16.47 crore. On performance front, the revenue from operations for the FY 2023 is Rs 1,529.35 lakh as compared to Rs 1,150.49 lakh during the FY 2022 showing an increase of 32.93%. This overall increase in sales was mainly due to increase in B2B business during FY 2023. Profit after tax (PAT) increased from Rs 3.46 lakh for the FY 2022 to Rs 199.10 lakh in FY 2023. Meanwhile, the company will look to acquire brands of different styles that are scalable. These brands would offer popular cuisines in a casual dining format. This would enable them to have a lower real estate footprint. These brands would have processes where bulk of the production is done in the central kitchen and the restaurant kitchens are more final assembly/finishing areas. This would mean lower skill requirements and hence lower staff costs. It would also lead to consistency and ease of roll out.

Greenhitech Ventures 

• Greenhitech Ventures is coming out with an initial public offering (IPO) of 12,60,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share. 
• The issue will open for subscription on April 12, 2024 and will close on April 16, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 5.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Sneha Jain.

Profile of the company

The company is engaged in trading of various petroleum-based products for the different categories of industries based on their requirement. This includes supply of biofuels, bitumen, light density oils, furnace oils etc. The company is also engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. It understands the market needs and upgrades its team constantly with growing technology and market trends. It provides business solutions and services to consumers of Fuels and other alternative materials across India.

The company is engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. Company is not having its owned manufacturing unit. The Company bids for tender of Government owned distillery for Operation & Maintenance as Job worker for Ethanol manufacturing. After receipt of tender, the company runs the ethanol plant in government owned distillery and manufacture ethanol and transfer all ethanol manufactured to the respective distillery. Hence there is no procurement and selling of Product for ethanol manufacturing as the Company manufacturer ethanol in government owned distillery for transferring to them only.

Driven by experience in agriculture, innovation and investment in Research & Development, as bio fuel is substitute for the traditional fossil fuels and with the indiscriminate exploitation of all fossil fuels. It started with an aim ‘Effective, Efficient and Economical’ the 3 E's form the base of its commitment be it any segment of services or supply that it provides. The company has compiled an extensive list of customers/potential customers and vendors. The Company is a well-known itself in Purvanchal belt of Uttar Pradesh, India for supply of bio-diesel. In Addition, the Ministry of Petroleum and Natural Gas vide its notification dated August 10, 2015 permit the sale of bio-diesel (B-100) for blending with high speed diesel to bulk consumers, in accordance with the standards specified by Bureau of Indian Standards. With the experience of its Promoter, technological drive, continuous research, supplier tie-ups, customer relationships, government support and industry demand for bio-fuel the company is one of key player for supplying of biofuels. 

Proceed is being used for:

• Meet working capital requirement 
• General corporate purpose

Industry overview

The oil and gas sector is among the eight core industries in India and plays a major role in influencing the decision-making for all the other important sections of the economy. India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. India retained its spot as the third-largest consumer of oil in the world as of 2022. India ethanol market size was estimated at $2.27 billion in 2022. During the forecast period between 2023 and 2029, India ethanol market size is projected to grow at a CAGR of 9.16% reaching a value of $4.15 billion by 2029. The rising demand for biofuels is expected to lead to growth in the India ethanol market.

India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. India’s consumption of petrol products stood at 222.3 MMT in FY23. High-Speed Diesel was the most consumed oil product in India and accounted for 38.6% of petroleum product consumption in FY23. India’s consumption of petroleum products stood at almost 4.44 million barrels per day (BPD) in FY23, up from 4.05 million BPD in FY22. India’s LNG import stood at 20.1 million metric tonnes (MMT) in FY23. Gross production of LNG was 2,883 MMSCM in January, 2023. According to the International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 BCM, registering an average annual growth of 9% until 2024.

Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% 90 of India’s oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.

Pros and strengths

Timely fulfilment of orders: Timely fulfilment of the orders is a prerequisite in its industry. The company has taken various steps in order to ensure adherence to timely fulfilment and also to achieve greater cost efficiency at its existing unit. The Company constantly endeavors to implement an efficient business process so as to ensure cost efficiency in procurement. 

Eco-friendly products: Unlike fossil fuel, bio-fuel and ethanol does not contribute to greenhouse gases and are renewable source of energy. The company is serving towards renewable green energy and sustainable development of renewable natural resources (Biofuels) through the adoption of environmental-friendly technologies that favour the net reduction of greenhouse gas emission.

Quality assurance and standards: The Company is providing its customers the best possible quality. Quality standards followed right from the beginning were very stringent, and are adhered during the process of manufacturing. It is very particular from usage of right quality of material to following the right procedure for manufacturing. Its dedicated efforts towards the quality of products, processes and inputs have helped it gains a competitive advantage over others. There are quality checks in place that prevent any defective material from reaching the customer.

Risks and concerns

Depend on top ten customers: Its top ten customers contribute around 100%, 100%, 99.96%, 99.97% of its revenues for the period ended July 31, 2023, March 31, 2023, March 31, 2022 and March 31, 2021. Any decline in its Quality standards, growing competition and any change in the demand for its products by these customers may adversely affect its ability to retain them. It cannot assure that it shall generates the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its revenues and profitability. However, the composition and revenue generated from these clients might change as it continues to add new clients in normal course of business. This helps the company in providing better value to each customer thereby increasing its engagement with its new and existing customer base that presents a substantial opportunity for growth.

Failure to adapt to technological developments: As its operations grow in scope and size, whether through expansion into new markets, it must continuously improve, upgrade, adapt and expand its systems and infrastructure to offer its customers enhanced products, features and functionality ahead of rapidly evolving customer demands, while maintaining the reliability and integrity of its systems and infrastructure in a cost-efficient and competitive manner. The systems, infrastructure and technologies it currently employs may become obsolete or be unable to support its increased size and scale. Even if it is able to maintain, upgrade or replace its existing systems or innovate or customize and develop new technologies and systems, it may not be as quick or efficient as its competitors in upgrading or replacing its systems. It may be unable to devote adequate financial resources or obtain sufficient financing on commercially acceptable terms in time, or at all, which may have a material adverse effect on its business, prospects, results of operation and financial condition.

Ethanol manufacturing business is slightly seasonal: The ethanol manufacturing business is slightly seasonal in country. This is due to the fact that distillery is shut down for period of rainy season, the timing and seasonality of weather impacts the business of the company. The company is engaged in two business i.e., ethanol manufacturing business as Job worker and trading of biofuels. The company undertakes trading in biofuels as a regular business during the year. Thus, it is subject to seasonal factors for ethanol manufacturing business, which make its operating results unpredictable. 

Outlook

Greenhitech Ventures is engaged in trading of various petroleum-based products for the different categories of industries based on their requirement. This includes supply of biodiesel and light density oils. The company is also engaged in Operation & Maintenance as Job worker for Ethanol manufacturing in Government owned distilleries. It understands the market needs and upgrades its team constantly with growing technology and market trends. It provides business solutions and services to consumers of Fuels and other alternative materials across India. On the concern side, its industry faces moderate competition from scattered unorganized players in the domestic market. It has a number of competitors who manufacture and trade products, which are similar to the company. Besides, the ethanol manufacturing business is slightly seasonal in country. This is due to the fact that distillery is shut down for period of rainy season, the timing and seasonality of weather impacts the business of the company.

The company is coming out with an IPO of 12,60,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share to mobilize Rs 6.30 crore. On performance front, the revenue from operations had decreased by 62.12% from Rs 6611.58 lakh in Fiscal 2022 to Rs 2504.35 lakh in Fiscal 2023. The change was primarily due to decrease in sales of products. The company reported a net profit of Rs 57.23 lakh in Fiscal 2023 as compared to a net profit of Rs 135.14 lakh in Fiscal 2022. Meanwhile, the company constantly endeavors to improve its business process, and will increase service activities to optimize the utilization of resources. It has invested significant resources, and intends to further invest in its activities to develop customized systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for providing its products which enables it to identify the areas of bottlenecks and correct the same.

DCG Wires & Cables 

• DCG Wires & Cables is coming out with an initial public offering (IPO) of 49,99,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share. 
• The issue will open for subscription on April 8, 2024 and will close on April 10, 2024.
• The shares will be listed on NSE SME Platform.
• The share is priced at 10.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Shwetal Maliwal.

Profile of the company

The company is manufacturers of copper cables and wires. Its primarily focus is on manufacturing of different types of copper cables which finds application in Transformers. Its product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica) Bare Copper Wires and Strips, Copper Tapes and Fiber Glass Copper. At DCG, it takes pride in offering a wide range of copper products. Its products include bare copper strips, conductors, and wires, ensuring optimal conductivity for various applications. It also provides paper-covered copper conductors in both rectangular and round shapes, as well as multi-paper-covered copper conductors and connection cables designed specifically for transformers. For added durability, it offers fiber glass-covered copper strips and wires.

Additionally, its copper submersible wires and strips are perfect for submersible applications. It also supplies twin and triple bunched paper-covered copper strips and bunch conductors. It majorly supplies its products to the transformer manufacturing companies in India and its main marketing strategy is to develop and maintain good relationships with its customers. Its promoter has been in this industry since 2008 and his relationships with the customers / clients have been very helpful for the growth of its business.

The company has three manufacturing units. Its manufacturing facilities are equipped with the latest required machineries that enable the company to offer products as per the specific requirements of clients along with low production cost. It is currently in process of setting up a new manufacturing plant at Bhayala, Bavla, Gujarat, in order to increase its manufacturing capabilities. The land on which the said plant is being constructed comprises of over 8308 sq. mtrs. area and is obtained by the company on lease from its Promoter Director, Mr. Devang Patel for a period of 7 years from November 20, 2023. As and when needed, it is gradually planning to consolidate and shift all three existing manufacturing facilities to this new manufacturing facility for better administration, efficiency and cost optimization.

Proceed is being used for:

• Capital expenditure for building construction
• Working capital requirement
• General corporate purpose
• Meeting public issue expenses

Industry overview

India has the capacity to export goods worth $1 trillion by 2030 and is on the road to becoming a major global manufacturing hub. With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025. India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.

India has potential to become a global manufacturing hub and by 2030, it can add more than $500 billion annually to the global economy. As per the economic survey reports, estimated employment in manufacturing sector in India was Rs 5.7 crore in 2017-18, Rs 6.12 crore in 2018-19 which was further increased to Rs 6.24 crore in 2019-20. India's display panel market is estimated to grow from around $7 billion in 2021 to $15 billion in 2025. As per the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), capacity utilisation in India’s manufacturing sector stood at 72.0% in the second quarter of FY22, indicating significant recovery in the sector.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of $3.4 trillion along with a population of 1.48 billion people, which will be a big draw for investors. The Indian Cellular and Electronics Association (ICEA) predict that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to $100 billion by 2025 through policy interventions.

Pros and strengths

Exceptional product quality: It focuses on quality of its product and for that reason its cables and wires are known for their excellent conductivity, durability and reliability, making them a preferred choice for industries where performance is critical. In the process of manufacturing of its product, it ensures that every product meets or exceeds industry standards. The company invests in cutting-edge testing equipment to guarantee the consistency and reliability of its products.

Customization expertise: The Company boasts an engineering team that possesses proficiency in the art of cable and wire customization. This team's capabilities are a cornerstone of the company's success, enabling the company to offer clients tailor-made cable solutions that precisely align with their specific project requirements. This level of customization is a distinguishing feature of the company and a testament to its commitment to meeting clients' unique needs. Whether clients require cables of a specific length for structured cabling installations, varying lengths for intricate network setups, or precise measurements for any other purpose, the Company can accommodate these demands with unparalleled precision.

Competitive pricing: The Company has cultivated strong, long-term relationships with their suppliers. These relationships are built on trust, reliability, and mutually beneficial terms. By negotiating favorable terms and maintaining a good rapport with suppliers, the company can secure raw materials and components at competitive prices, further contributing to their ability to offer attractive pricing to clients. Further, for clients who anticipate ongoing cable needs, it offers the option to enter into long-term contracts. These contracts provide clients with a consistent and reliable supply of copper cables at stable prices over an extended period. As on date due to volatility of the price of the raw material, no client has entered into long term contracts with the Company to get the benefit of price fluctuations.

Risks and concerns

Operations are limited to the state of Gujarat: It is supplying its products to the customers spread over with the state of Gujarat. The revenue from Gujarat is 100%, 99.98%, 95.00% and 95.23% in the FY 2020-21 FY 2021-22, FY 2022-23 and for the stub period ended on February 29, 2024 respectively. Looking to the good quality of its products, it is able to sale its entire production within Gujarat. It is supplying its products to the few customers only. Yet it has not developed market for its product other than Gujarat state. It is in the process of developing online market that provides the 24X7 business opportunity to all the clients spread over across the country. This will also provide the opportunity for direct sale to the end users of its products and this will provide opportunity for the sales against payment, which will help the company to smoothening of its liquidity requirement.

Any failure in quality control and procurement process: It is a practice of the Company to purchase the standard quality required raw materials for its manufacturing process, since it has a direct impact on the quality of finished products. It has implemented quality checks for raw material that it procures, on the basis of internal and international quality standards. In case of poor quality, its customers may lose faith in the quality of its products and could in turn refuse to further deal in its products, which could have a severe impact on its revenue and business operations. It may faces the risk of legal proceedings and product liability claims being brought against the company by its customers for low quality products sold. 

Operate in competitive business environment: It faces significant competition in its business from other manufacturers and suppliers of cables and wires products. It operates in a highly competitive business environment. Growing competition in the domestic market from domestic organized and unorganized players and/or the international players, it is subject to pricing pressures and requires the company to reduce the prices of its products in order to retain the existing customers and/or attract new customers, which may have a material adverse effect on its revenues and margins. Some of its competitors may be increasing their capacities and targeting the same products in which it is dealing at a lower price. There can be no assurance that it can continues to compete effectively with its competitors in the future, any failure to compete effectively may have an adverse effect on its business, financial condition and results of operations.

Outlook

DCG Wires & Cables is engaged in the business of Manufacturing of copper strips, Wires, Cables products. Its primarily focus is on manufacturing of different types of copper cables which finds application in Transformers. Its product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica) Bare Copper Wires and Strips, Copper Tapes and Fiber Glass Copper. On the concern side, the Cables and Wires Industry is extremely competitive where the key factors of competition primarily comprise of product quality, cost, delivery, development and management. In this highly competitive industry, it competes with other manufacturers and suppliers in the world and in India. Some of its competitors have better penetration in some of the geographical locations that it operates in. 

The company is coming out with an IPO of 49,99,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share to mobilize Rs 50 crore. On performance front, the Company’s total revenue was Rs 5452.47 lakh which is increased by 96.90% in compare to total Income from operations of Rs 2769.16 lakh in F.Y. 2021-22. Profit after Tax (PAT) is Rs 172.11 lakh for the F.Y. 2022-23 in compared to Rs 37.13 lakh in F.Y. 2021-22. The PAT was 3.15% of total revenue in F.Y. 2022-23 compared to 1.34% of total revenue in F.Y. 2021-22. Meanwhile, the company intends to focus on adhering to the quality standards of the products. Quality of the product is very important for the company for getting its selves registered as approved vender with clients. Continuous quality review of products and timely corrective measures in case of quality diversion are keys for maintaining quality standards of the products. Providing the desired and good quality products help it in enhancing its clients’’ trust and maintaining long term relationships with them.

Teerth Gopicon

• Teerth Gopicon is coming out with an initial public offering (IPO) of 39,99,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 111 per equity share. 
• The issue will open for subscription on April 8, 2024 and will close on April 10, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 11.10 times higher to its face value of Rs 10. 
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Diksha Joshi.

Profile of the company

The company is an engineering construction and development company engaged primarily in the construction of roads, sewerage work and water distribution work in the Madhya Pradesh. It has also worked as sub-contractor and constructed residential tower in the city of Indore. The company as corporate have the track record of not more than 5 years. However, the promoter of the Company Maheshbhai Khumbhani has started the Proprietorship in the name of Gopi Construction in the year 2009.

The company has taken up various work as a registered Civil contractor of various Central/State Government like ISCDL, IMC, USCL, UMC, MPJNM etc. and also executed building works for private sector. The company has executed wide range of civil engineering projects like building construction work, water supply, pipeline, sewerage network, sewerage treatment plant, nalla tapping work, Re-use network, Over Head Tanks, GSR, Road work, Rejuvenation of Lake etc. As an EPC contractor, the scope of its services includes detailed engineering of the project, procurement of construction materials, plant and machinery, construction and execution of the project and its operation and maintenance in accordance with the contractual provisions. Its manpower, resources and fleet of machinery and equipment, together with its engineering capabilities, enables it to execute a large number of projects simultaneously. Its resource, quality of work and project execution skills have enabled it to enhance its relationships with existing clients and helps it to further secure projects from new clients.

Proceed is being used for:

• Funding the working capital requirements of the company.
• General Corporate Purpose.

Industry overview

Infrastructure is a key enabler in helping India become a $26 trillion economy. Investments in building and upgrading physical infrastructure, especially in synergy with the ease of doing business initiatives, remain pivotal to increase efficiency and costs. Prime Minister Mr. Narendra Modi also recently reiterated that infrastructure is a crucial pillar to ensure good governance across sectors. The government’s focus on building infrastructure of the future has been evident given the slew of initiatives launched recently. The $ 1.3 trillion national master plan for infrastructure, Gati Shakti, has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway. Infrastructure support to nation’s manufacturers also remains one of the top agendas as it will significantly transform goods and exports movement making freight delivery effective and economical. The ‘Smart Cities Mission’ and ‘Housing for All’ programmes have benefited from these initiatives. Saudi Arabia seeks to spend up to $ 100 billion in India in energy, petrochemicals, refinery, infrastructure, agriculture, minerals, and mining. Infrastructure sector is a key driver for the Indian economy. 

The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. In other words, the infrastructure sector acts as a catalyst for India’s economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects. To meet India’s aim of reaching a $ 5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of infrastructure sector. Historically, more than 80% of the country's infrastructure spending has gone toward funding for transportation, electricity, and water& irrigation. While these sectors still remain the key focus, the government has also started to focus on other sectors as India's environment and demographics are evolving.

Pros and strengths

Strong Presence in Madhya Pradesh: The smart cities mission was launched by the Prime Minister in 2015. The mission's main aim is to promote and develop cities that provide a sustainable environment, core infrastructure, and a good quality of life to the citizens. Work will be done on economic, physical, and social fronts to transform the city into a smart city with all amenities. Indore holds the second position in the list of smart cities in Madhya Pradesh. The company has completed 4 Project in Indore; that is 1: Improvement of Water Supply and Sewerage Systems in ABD Area of Indore Smart City. 2: Under the tapping work of the major nallas of the city, the remaining work of sewar taping in Piliyakhal nala from Sirpur to Khatipura Puliya and laying drainage line at other directed places (Piliyakhal Nala) by Indore Municipal Corporation, 3: Under the tapping work of the major nallas of the city, the remaining work of sewer tapping from Pipliahana to Niranjanpura Village and laying drainage line at other directed places. (Palasiya Nalla) by Indore Municipal Corporation and 4: Repair of existing primary sewerage networking system of CENTRAL ZONE and make it function in all respect by Indore Municipal Corporation.  

Extensive experience in managing and completing projects on time and within budget: The company’s management team has experience in the infrastructure sector. Led by the Promoter and Managing Director Maheshbhai Khumbhani (who has extensive experience in the infrastructure construction business), it considers the strength of its management team to be fundamental to its success. The stability of its management team and the industry experience brought on by its employees will enable it to continue to take advantage of future market opportunities and expand into new markets. It has qualified in-house teams who are responsible for different aspects of its projects starting from identifying prospective projects to the completion of the projects. It is able to undertake a significant number of activities related to the project in-house, thereby ensuring timely completion of its projects, reducing its reliance on third parties and decreasing its costs. Its integrated structure also allows it to control its budget and maximize returns for the project, including developer returns and operation and maintenance margins. 

Visible growth through robust order book: The order book position of the company is an indicator for the future performance since it represents the future revenue generation. It is not focused on adding the order book only but evaluate the tender looking to the complexity of the project, its strength and the profit margin before bidding. Its revenue from the incorporation indicates that it gets the order for road construction, sewerage work and water supply system. It is able to pursue a broader range of project tenders and thereby increase business volume and profit margin. 

Risks and concerns

Geographical constrain: The company’s business is primarily dependent on projects undertaken or awarded in the state of Madhya Pradesh. It relies 100% on the State government, Local Authority and it’s undertaking for its revenue. It currently derives majority of its revenue from contracts with a limited number of government authorities and other entities. Such concentration of its business on a few projects or clients may have an adverse effect on its results of operations and result in a significant reduction in the award of contracts which could also adversely affect its business if it does not achieve its expected margins. Its revenue generation activities are confined to the state of Madhya Pradesh. Every time it has to bid for the tender work and compete with the other contractors/bidders. The concentration of its business in Madhya Pradesh heightens its exposure to adverse developments which may be beyond its control such as economic, political, demographic, regulatory and other changes, which may adversely affect its business prospects, financial conditions and result of operations.

Revenues derived primarily from contracts awarded on project-by-project basis: The company’s prime business is to bid and undertake Infrastructure projects of the State government of Madhya Pradesh (M.P. Government). Its major revenue is derived from the infrastructure project of M. P. Government. In the event that it is not able to continually and consistently secure new projects of similar or higher value as the ones that it has executed in the past or are currently executing, and on terms and conditions that are favourable to it, its financial performance, its results of operations and cash flows may be adversely affected or fluctuate materially from time to time depending on the timing and nature of such contracts. Accordingly, it is difficult to predict whether and when it will be awarded a new project. If it is unable to identify or acquire new projects matching its expertise or profit expectations or obtain the requisite consents from regulatory authorities or other relevant parties when required or at all, it may be subject to uncertainties in its business.

Operate in highly competitive environment: The company operates in a highly competitive environment. Generally, in the open Bid/Tender, the process of awarding contracts / projects, its clients generally specify pre-qualification criteria based on certain factors such as project execution experience, technical strength, performance capabilities, etc. While it strives to increase its portfolio of direct government contracts, it expects to face competition from large domestic infrastructure development companies, which are well placed to fulfil the pre-qualification criteria. There have been instances in the past, wherein bids made by it for infrastructure projects were not accepted on account of a favourable position held by its competitors. There can be no assurance that it would be able to meet such criteria in the future. The company constantly compete for obtaining projects from government authorities. If it is unable to meet the eligibility criteria and industry expectations in comparison with its competitors, it may not be successful in qualifying to bid for various future projects. 

Outlook

Teerth Gopicon is engaged in the business of road construction, sewerage and water supply in Madhya Pradesh. The company has also provided services as a subcontractor and built a residential tower in the city of Indore. The company has undertaken various works as a registered contractor of various central and state governments like ISCDL, IMC, USCL, UMC, MPJNM etc. and has also undertaken construction works for the private sector. The company has undertaken a wide range of civil engineering projects such as building construction, water supply, pipelines, sewage network, sewage treatment plant, nalla taps, reuse network, overhead tanks, GSR, road construction, lake rehabilitation, etc. On the concern side, the timely and successful completion of its projects in most of the cases depends upon its relations with the sub-contractors, their efficiency and cooperation, and any failure or delay in successful completion could adversely affect the quality of its developments and adversely affect its profitability, business and reputation. It relies on third parties for the implementation of projects where it has entered into arrangements with them for the supply of labour, equipment and raw material. 

The company is coming out with an IPO of 39,99,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 111 per equity share to mobilize Rs 44.40 crore. On performance front, in the FY23, the company’s total revenue was Rs 3907.66 lakh, which is increased by 25.37% in compare to total Income from operations of 3116.84 lakh in FY22. The company’s Profit after Tax (PAT) is Rs 179.21 lakh for the FY23 in compared to Rs 15.27 lakh in FY22. The PAT was 4.58 % of total revenue in FY23 compared to 0.49% of total revenue in FY22. Meanwhile, at present the company has concentrated and established in the state of Madhya Pradesh, and concurrently, it is planning to expand into multiple states. Through an increasingly diversified portfolio, it hopes to hedge against risks in specific areas or projects and protect it from fluctuations resulting from business concentration in limited geographical areas. The company intends to focus on water supply projects looking to the asset base, Man power resource and financial capabilities with an eye to diversify in other states. 

Bharti Hexacom

• Bharti Hexacom is coming out with a 100% book building; initial public offering (IPO) of 7,50,00,000 shares of Rs 5 each in a price band Rs 542-570 per equity share.  
• At least 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
• The issue will open for subscription on April 3, 2024 and will close on April 5, 2024.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 5 and is priced 108.40 times of its face value on the lower side and 114.00 times on the higher side.
• Book running lead managers to the issue are SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities and IIFL Securities.
• Compliance Officer for the issue is Richa Gupta Rohatgi. 

Profile of the company

The company is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. It offers its services under the brand ‘Airtel’. It has a distinct strategy to premiumise its portfolio by acquiring and retaining quality customers and deliver an experience to them through its omnichannel approach and use of data science. It has a gamut of digital offerings to enhance customer engagement and differentiated customised offerings through family and converged plans under Airtel Black proposition, which has resulted in the continuous improvement of its revenue market share during the last three Fiscals. It undertakes prudent cost optimisation measures to improve its profitability and maintain an efficient capital structure with a comfortable leverage position. It continuously invests in network expansion, technology advancement and judicious spectrum investments. It also derive significant synergies from its relationship with its Promoter, Airtel, through the expansive digital infrastructure, digital experience and the digital services it provides to its customers.

The company was originally incorporated in 1995 as ‘Hexacom India Limited’. In 2004, the name of the company was changed to ‘Bharti Hexacom Limited’ when Airtel acquired a majority equity interest in the company. Airtel owns 70% of its outstanding equity share capital. Airtel is a global communications solutions provider with over 500 million customers in 17 countries across South Asia and Africa. It is among the top global mobile operators in terms of number of customers and is India’s largest integrated communications solutions provider in terms of consolidated operating revenue as of Fiscal 2023. Airtel’s retail portfolio includes mobile services, fixed-line telephone, broadband services and Digital TV services. Airtel Xstream Fiber is a one-stop solution for all the high-speed internet and content needs of customers with convergence across linear and on-demand entertainment, streaming services spanning music and video. For enterprise customers, Airtel also offers a gamut of solutions that include secure connectivity, cloud and data center services, cyber security, IoT, Ad Tech and CPaaS (Airtel IQ). Its flywheel of digital services includes the Airtel Payments Bank, Wynk Music, Airtel Ads, Airtel IQ and Nxtra by Airtel.

The Government of India through Telecommunications Consultants India (TCIL) owns 30% of the company’s outstanding equity share capital. TCIL is an engineering and consultancy company and was set up in 1978 for providing Indian telecom expertise in all fields of telecom and information technology to developing countries around the world. Its core competence is in the fields of switching, transmission systems, cellular services, rural telecommunication, optical fibre-based backbone transmission systems, information technology and networking solutions, application software, e-Governance, 4G/5G, FTTH, VOIP, Wi-Fi surveillance, cyber security and civil construction and project management consultancy services. 

Proceed is being used for:

• Carrying out the Offer for Sale of up to 75,000,000 Equity Shares by the Selling Shareholder.
• Achieving the benefits of listing the Equity Shares on the Stock Exchanges.

Industry overview

Telecommunication has been playing a pivotal role in country’s economic growth. It is the backbone of many industries, including e-commerce, media and entertainment, finance, information and technology (IT), healthcare, transportation, and logistics. The sector facilitates seamless movement of data worldwide through wired or wireless channels and significantly influences economic progress. The telecom market is constantly evolving with integration of cutting-edge technologies over the years. This has widened the coverage of telecom services globally and made them an indispensable part of the daily lives of consumers. Telecom proved to be an essential service, especially during the Covid-19 pandemic, by enabling people to remain connected amid worldwide lockdowns. The telecom industry mainly comprises wireless services, or mobile services, and wireline services, or fixed-line services. In India, wireless services accounted for 97.3% of total telecom customers and wireline services for the remaining 2.7% as of the nine months of Fiscal 2024.

In India, spectrum auctions are held for 22 telecom circles and a telecom company needs to acquire spectrum in each circle to provide comprehensive coverage to its consumers. Operators also need to acquire a unified license with authorisations for access services in each circle before they participate in auctions. So, if a new telecom company plans to launch services in a particular region, it will have to buy both spectrum and a licence for the entire circle. Further, it would have to either wait for spectrum auction or acquire a telecom company with a spectrum portfolio. Currently, acquisition costs are prohibitive given significant consolidation in the domestic industry. Telecom players require substantial capital to purchase spectrum through government auctions and establish and maintain their network infrastructure. Further, the telecom industry remains susceptible to rapid technological changes, necessitating fresh investments or significant overhaul of existing networks.

Growing need for telecom services, network expansion by telecom operators, and availability of services at affordable prices have been driving customer addition and, in turn, contributing to an improvement in teledensity to 84.5% as of Fiscal 2023 from 75.2% as of Fiscal 2014. Rural teledensity improved to 57.7% as of Fiscal 2023 from 44.0% as of Fiscal 2014, which was led by higher penetration of wireless services, whereas urban teledensity declined to 134.2% from 145.5%, during the same period led by SIM consolidation. Rural customers grew faster than urban counterparts, due to low teledensity. Notably, rural customers logged a CAGR of approximately 3.6% between Fiscals 2014 and 2023. In contrast, urban customers exhibited a lower CAGR of approximately 1.8%. The difference in growth rates can be attributed to affordability of smartphones and telecom services and continued network expansion by telecom operators. Telcos’ concentrated and aggressive expansion strategies in rural areas supported rapid customer-base augmentation in these regions. Telecom revenue growth will be supported by a rise in the customer base, supported by an increase in rural teledensity.

Pros and strengths

Established leadership and large customer base in area of operations: The company provides consumer mobile services, fixed-line telephone and broadband services to customers in Rajasthan and in the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. It has been able to grow its market share by its simple and cogent strategy on acquiring and retaining high value customers by offering them superior experience at competitive prices. Its digital infrastructure investments, digital experience and the digital services it provides along with Airtel and its affiliates have facilitated its growth in market share and catered to the needs of its customers. Customised offerings through family plans and converged plans under the Airtel Black proposition have contributed in improving its market share in post-paid segment. As a result of its strategy, it has been able to consistently increase its ARPU and market share in its circles. It has the highest number of VLR customers of 6.4 million and a VLR market share of 52.3% in the North East circle and the second highest VLR customers in the Rajasthan circle with 23.2 million customers and a VLR market share of 38.7%, as of December 31, 2023. 

Presence in markets with high growth potential: The company operates in the Rajasthan and North East telecommunication circles in India. Rajasthan had 67.0 million telecom customers contributing 5.6% to overall India telecom customers, while the North East had 12.7 million customers, contributing 1.1% to overall India telecom customers in the nine months of Fiscal 2024. Rajasthan had a teledensity of 79.5% as of Fiscal 2023, which lags the national average of 84.5% due to its lower rural teledensity of 57.2%. Rajasthan’s customer base is expected to grow at 1.4% to 1.5% between Fiscals 2023 and 2028 reaching 69.0 million to 69.5 million with a teledensity of 82% to 83% following pan-India trends with rising rural teledensity. Wireless customers are expected to account for approximately 98.5% of the customers by Fiscal 2028. Rajasthan’s focus on resolving regional imbalances and supporting growth in rural areas will create demand for telecom services in rural areas of the state, driving customer growth. The gross revenue of the Rajasthan circle was approximately Rs 127.6 billion in Fiscal 2023 growing at CAGR of 4.4% between Fiscals 2014 and 2023. However, its revenue grew robustly at 17% in Fiscal 2023 in line with the national trend and the industry is expected to grow at 7% to 8% between Fiscals 2023 and 2028 to reach Rs 183 to 185 billion, supported by a rise in teledensity in the region, especially in rural regions, higher tariffs and an increase in internet penetration in the state. 

Building future ready network: The company relies on a robust network infrastructure through owned and leased assets. It benefits from the telecommunication infrastructure and other digital assets of its Promoter, Airtel and its investment in Indus Towers. Over the years, it has increased use of digital tools, data science and technology to enhance the network efficiency, optimise costs and make its networks more environment friendly. As of December 31, 2023, it was present in 486 census towns in the two circles in which it operates with 5,092 owned and 19,782 leased network towers. During the nine months ended December 31, 2023, its customers spent 260,674 million minutes and consumed 3,719 million gigabytes on its network. It has a spectrum portfolio with varied pool of mid band spectrum (1800/2100/2300 MHz bands) along with spectrum holding in 900 Mhz, 3500 MHz and 26 Ghz bands. Over the years, it has followed prudent capital allocation and spectrum acquisition and it chose not to acquire the expensive 700 Mhz band for its 5G network. None of its existing spectrum expires before the year 2030, the validity of its spectrum pool ranges between the years 2030 and 2042 and it does not expect to incur any significant capital expenditure towards spectrum acquisition until the specific spectrum band expires. 

Extensive distribution and service network: The company has an extensive sales and distribution network across the rural and urban areas of the Rajasthan and North East circles serviced by 616 distributors and 75 stores operated by it, as of December 31, 2023. Its distribution partners are digitally empowered to sell Airtel services through the ‘Mitra’ app, which has been licensed to it by one of Airtel’s affiliates, and which facilitates mobile recharge transactions between distributors and retailers and supports onboarding of new customers. Its exclusive retail footprint comprising 89,454 retail touchpoints, as of December 31, 2023, is one of the key differentiators, including for supporting high value customers and providing them superior experience. Its exclusive retail footprint is an integral part of its customer acquisition and engagement strategy, designed to bring the Airtel brand closer to its customers. As of December 31, 2023, it had setup 24 small format low-cost stores, in addition to the 51 retail stores in its two circles to deepen its retail presence and primarily drive the sale of its post-paid, homes broadband and international roaming services. 

Risks and concerns

Rely on sophisticated billing, credit control and customer verification systems: The company is dependent on several sophisticated processes, IT systems and software packages for mobile services usage, billing and credit control. It has also outsourced certain aspects of these systems to specialist service providers, such as its Business Support Systems stack. Any failure of critical IT systems, including those provided by third parties, could have an adverse effect on its business and results of operations, and lead to a loss of revenues and customers. It is dependent on several complex software packages that record minutes used, calculate the appropriate charge and then deduct the amount due from the account of the pre-paid customer or record the amount payable by the relevant post-paid customer. Any failure to properly capture the services provided or to charge the appropriate fees could have an adverse effect on its revenue. No system or process can ensure total capture and some loss of income is common. However, if income leakages increase, or are greater than that of its competitors, then its business, financial condition and results of operations could be adversely affected. Similarly, it is also dependent on several sophisticated systems and processes for customer verification and activation services, which ensures that all necessary documents are procured from pre-paid customers at the time of subscription in compliance with regulatory requirements in relation to verification of the identity of its customers.

Depends on limited number of vendors to supply critical network: The company’s principal vendors and suppliers provide network equipment and related services and site infrastructure for its operations. While it has supply and services agreements with key suppliers and vendors, it cannot assure that it will be able to obtain satisfactory equipment and services as per its expectations. For instance, it works with several entities including Ericsson India Private Limited, Nokia Solutions and Networks India Private Limited and Ceragon Networks Ltd for critical network services. Its top five network and equipment related services suppliers contribute to a significant portion of its network and equipment related service requirements. If its contractual arrangements with such vendors expire or terminate, or if it fails to receive the quality of equipment and maintenance services that it requires, or if its key suppliers discontinue the supply of such equipment and services due to withdrawal from the Indian mobile telecommunications market or otherwise, it may find it difficult to replace a vendor on a timely basis.

Rely significantly on information technology systems: The company may be subject to disruptions, failures or infiltrations of its information technology systems arising from events that are wholly or partially beyond its control (including damage or incapacitation by human error, insider attacks, electrical or telecommunication outages, sabotage, computer viruses, cyberattacks or similar events, or loss of support services from third-parties, such as internet backbone providers), which could result in breaches of applicable data security laws and resultant imposition of monetary penalties, in addition to reputational harm. It may also be subject to claims by customers of interception of their mobile devices, and consequent breach of their privacy. In addition, it uses third party software, platforms, services and data storage services, on-cloud and on-premises data centres, including payment gateway services, cash collection services, electronic sign services, as well as for automated calls and messages. Infiltration of its or such third parties’ information technology systems may result in data losses or theft of its or customers’ proprietary business or personally identifiable information, resulting in exposure to litigation, liabilities, remediation costs, disruption of internal operations, increased cybersecurity protection costs and loss of customer confidence. 

Churn rate in mobile telecommunications industry in India is high: Churn rate in the Indian telecom market is high and weighted average monthly churn rate is approximately 2.7% as of Fiscal 2023. Factors such as SIM consolidation, closure of inactive SIMs, and ease of number portability among others, contribute to a high churn rate for the industry. This makes it necessary for the telecom players to offer competitive tariffs, introduce promotional offerings and maintain service quality to retain customers. A high rate of churn increases its aggregate customer acquisition costs as it need to add new customers in order to maintain or grow its market share. Such customer acquisition costs include payments to be made as commission to agents, costs in relation to SIM cards, welcome kits and documentation and customer verification costs. The need to add customers also requires additional marketing expenditure which cannot be fully passed on to customers. Similarly, a high rate of churn also increases its customer retention costs as it may need to incur expenditure to dissuade its customers from shifting to its competitors by offering deals and services. Further, while it has interconnection and international roaming agreements in place with other telecommunications operators through its Promoter, it has no direct control over the quality of their networks and the interconnections and international roaming services they provide.

Outlook

Incorporated in 1995, Bharti Hexacom provides consumer mobile services, fixed-line telephone and broadband services to customers in Rajasthan and in the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. It has an extensive sales and distribution network across the rural and urban areas of the Rajasthan and North East circles serviced by 616 distributors and 75 stores operated by it, as of December 31, 2023. Its distribution partners are digitally empowered to sell Airtel services through the ‘Mitra’ app, which has been licensed to it by one of Airtel’s affiliates, and which facilitates mobile recharge transactions between distributors and retailers and supports onboarding of new customers. Its operations are conducted by an experienced management team that has significant experience in all aspects of its business operations. On the concern side, the company’s tower infrastructure and telecom business are subject to various national, state-level and municipal environmental laws and regulations in India concerning issues such as damage caused by electromagnetic radiation. It may face negative publicity owing to factors such as network connectivity, customer satisfaction and the efficacy of its complaints and grievance redressal process.  

The company is coming out with an IPO of 7,50,00,000 equity shares of face value of Rs 5 each. The issue has been offered in a price band of Rs 542-570 per equity share. The aggregate size of the offer is around Rs 4065.00 crore to Rs 4275.00 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 21.72% from Rs 54,052 million in Fiscal 2022 to Rs 65,790 million in Fiscal 2023. The company’s profit for the period was Rs 5,492 million in Fiscal 2023 compared to Rs 16,746 million in Fiscal 2022. Meanwhile, the company’s strategy is to premiumise its portfolio with continuous upgrades from 2G to 4G/5G customers, upgrading customers within its 4G plans for higher data packs, pre-paid to post-paid upgrade, contextual data monetisation, and through converged offerings. Its simple and clear strategy helps it drive its ARPU growth agenda in absence of tariff hike, which is reflected in its performance. Besides, the company continues to expand its network coverage across the regions in which it operates with a focus on key revenue generating cities and high value catchment areas to increase its customer base and enhance customer experience.

K2 Infragen 

• K2 Infragen is coming out with initial public offering (IPO) of 34,06,800 shares of Rs 10 each in a price band Rs 111-119 per equity share.  
• The issue will open for subscription on March 28, 2024 and will close on April 3, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 11.10 times of its face value on the lower side and 11.90 times on the higher side.
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Jyoti Lakra.

Profile of the company

The company is an integrated engineering, procurement and construction (EPC) with a focus on Power Engineering and Project Engineering having experience in design and construction of various projects across 8 States in India viz. Uttar Pradesh, Rajasthan, Madhya Pradesh, Karnataka, Haryana, Gujarat, Punjab & Delhi. It provides its services across the value chain, ranging from design, procurement, construction supervision, subcontract management and work order management to post-construction activities to its clients. 

The scope of the company’s services includes detailed design & engineering of the project, procurement of key materials, and project execution at the sites with overall project management up to the commissioning of the projects. It has design and engineering, procurement, project management and quality management teams along with fleet of 13 construction equipment and 25 vehicles. Majorly its in-house teams deliver its projects from design to completion. This reduces its dependency on third parties for key materials such as stone aggregates, bitumen and services such as design and engineering, transportation and logistics required in the development and construction of its projects. 

The company is specializing in the procurement of materials such as non-ferrous waste from the open market and, at times, through auction processes. These materials are carefully selected and segregated based on the specific quality requirements outlined by customers. This meticulous process ensures that the materials supplied to customers meet their exact specifications, contributing to the evolving relationship with customers. By serving as an intermediary that bridges the gap between material sourcing and supply through mark-up model, its trading business plays a pivotal role in optimizing the supply chain and supporting various stakeholders in the value chain. Its promoters and senior management team have played a significant role in the development of its business including this trading business, and it benefits from their technical expertise, industry knowledge and relationships with various stakeholders.

Proceed is being used for:

• Working capital requirement.
• Capital Expenditure.
• General corporate purposes.

Industry overview

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. In other words, the infrastructure sector acts as a catalyst for India’s economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects. To meet India’s aim of reaching a $5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of infrastructure sector. Historically, more than 80% of the country's infrastructure spending has gone toward funding for transportation, electricity, and water & irrigation. While these sectors still remain the key focus, the government has also started to focus on other sectors as India's environment and demographics are evolving. There is a compelling need for enhanced and improved delivery across the whole infrastructure spectrum, from housing provision to water and sanitation services to digital and transportation demands, which will assure economic growth, increase quality of life, and boost sectoral competitiveness.

In Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to Rs.10 lakh crore ($ 122 billion), which would be 3.3 per cent of GDP. As per the Union Budget 2023-24, a capital outlay of Rs. 2.40 lakh crore ($ 29 billion) has been provided for the Railways, which is the highest ever outlay and about 9 times the outlay made in 2013-14. Started with 6,835 projects, the NIP project count now stands at 9,142 covering 34 sub-sectors, as per news reports. Under the initiative, 2476 projects are under development phase with an estimated investment of $ 1.9 trillion. Nearly half of the under-development projects are in the transportation sector, and 3,906 in the roads and bridges sub-sector. The Indian Railways expects to complete total revenue from traffic of Rs. 2,64,600 crore ($ 32.17 billion) for FY24. India’s logistics market is estimated to reach $ 410.75 billion in 2022 and is expected to reach $ 556.97 billion by 2027, growing at a CAGR of 6.28%. India intends to raise its ranking in the Logistics Performance Index to 25 and bring down the logistics cost from 14% to 8% of GDP, leading to a reduction of approximately 40%, within the next five years.

Pros and strengths

Focused EPC player: The company has over 8 years of experience in executing EPC projects which have been in the building, roads, structure work, civil construction, railway work and turnkey water supply projects. Since 2015, it has executed 38 projects. It has historically had a focus on the executing EPC projects and accordingly has established its credentials as an EPC player capable of executing a range of these infra projects while working with renowned infrastructure companies and PWDs. Its focused approach shall enable it to benefit from future market opportunities and expand into newer markets.

Established track record of timely execution: With over Eight years of collective experience of the company’s Promoters and Senior Management, it has successfully executed various types of infrastructure projects since 2015. This track record highlights its capability in project management and execution, utilizing trained manpower, efficient equipment deployment and an integrated in-house model. These factors have enabled it to compete on projects within or ahead of scheduled timelines. Its in-house supply chain management ensures timely delivery of construction materials to its facilities and sites, enhancing process management and optimizing inventory. Its project management team, in collaboration with the engineering team, oversees project execution processes to maintain operational efficiencies.

In-house integrated model: The company embarks on its business in an included manner as it has developed competencies and resources in-house to deliver a project from conceptualization until completion. Its model includes a design and engineering team, facility for processing of bitumen which it uses for its projects, located in Kota, Rajasthan. Its facilities help reduce its dependence on third party suppliers for its key materials i.e., bitumen emulsion. It ensures timely transportation of key materials such as bitumen and diesel to project sites by tankers owned by it and through third party vendors, which reduces pilferage and adulteration. 

Risks and concerns

Derive significant portion of revenues from limited number of clients: The company’s business heavily relies on its customer base, and the potential loss of any of its customers could have a negative impact on its sales and, consequently, its overall business and financial performance. If it was to lose one or more of its significant or key customers or experience a reduction in the volume of business they provide, it could result in adverse consequences for its business, financial health, and cash flow. It cannot guarantee that it will be able to maintain the same levels of business as it has historically or secure long-term contracts with its major customers on mutually beneficial terms. Additionally, reducing its dependence on a few key customers may pose challenges in the future. Furthermore, factors such as a decline in its product or service quality, increased competition, or shifts in market demand could jeopardize its ability to retain these valuable customers.

Dependent on few suppliers: The company’s top ten suppliers contribute 63.67% of its total purchase for the period ended September 30, 2023, and 100% of its total purchase for Fiscal 2023, Fiscal 2022, Fiscal 2021. It cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. However, the composition and amount of purchase from these suppliers might change as it continues seek new suppliers for product for better quality and price in the normal course of business. Though it will not face substantial challenges in maintaining its business relationship with them or finding new suppliers, there can be no assurance that it will be able to maintain long term relationships with such suppliers or find new suppliers in time. 

Business is working capital intensive: The company’s infrastructure projects typically demand significant working capital and entail extended implementation timelines, necessitating diverse financing sources. As of September 30, 2023, its short-term borrowings amounted to Rs 1,870.27 lakh. It may need to secure further debt in the future. The acquisition of additional debt financing may lead to heightened interest expenses and impose additional constraints through restrictive covenants within its financing agreements. Conversely, seeking additional equity financing may dilute its earnings per Equity Share and ownership stake in the Company, potentially exerting adverse pressure on the company's Equity Share price. Its working capital requirements may be affected due to factors beyond its control including force majeure conditions, delay or default of payment by its clients, non-availability of funding from banks or financial institutions. Accordingly, such working capital requirements may not be indicative of the actual requirements of the company in the future and investors are advised to not place undue reliance on such estimates of future working capital requirements. 

Outlook

K2 Infragen is emerging Project Engineering, Power Engineering and EPC organization of India. It is founded by group of professionals having vast exposure in Project & Power Management with rich financial backup to meet the desire objective. The company is certified for ISO 14001:2015 (Environment Management System), 45001:2018 (Occupational Health & Safety Management System), and 9001:2015 (Quality Management System) by Globus Certifications Private Limited. It has been accredited with various registrations as a contractor with various departments and agencies viz. Public Works Department, Rajasthan (Class AA), Public Works Department, Madhya Pradesh, Bhopal (Class AA), pursuant to which it is also eligible to participate and undertake projects awarded by various other departments and agencies. It has in-house capabilities to deliver a project from conceptualization to completion with faster turnaround time and focus on derisking wherever possible. Its core competence lies in professionally managing the value chain and attracting and retaining talent to maximize value creation. On the concern side, the cost of construction materials, fuel, labour and equipment maintenance constitutes a significant part of its operating expenses. It is vulnerable to the risk of rising and fluctuating steel and cement prices, which are determined by demand and supply conditions in the global and Indian markets as well as government policies. 

The company is coming out with an IPO of 34,06,800 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 111-119 per equity share. The aggregate size of the offer is around Rs 37.82 crore to Rs 40.54 crore based on lower and upper price band respectively. On performance front, the company’s total revenue has increased by 103% from Rs 3,685.20 lakh in the fiscal year ended March 31, 2022 to Rs 7,490.08 lakh in the fiscal year ended March 31, 2023. Profit After Tax was at Rs 1,132.32 lakh in FY23 as against loss of Rs 311.26 lakh in FY22. Meanwhile, the company continues to maintain and strengthen its market position of its EPC business in. It intends to consolidate its experience, market position and ability to execute and manage multiple projects, to further grow its portfolio of road and other EPC projects. Further, to fuel its growth strategy, it intends to invest in latest equipment and technology to support its expanding operations. It also seeks to purchase equipment and continue its strategy of minimal reliance on hired or leased equipment.