Vruddhi Engineering Works
- Vruddhi Engineering Works is coming out with initial public offering (IPO) of 7,20,000 shares of Rs 10 each in a price band Rs 66-70 per equity share.
- The issue will open for subscription on March 26, 2024 and will close on March 28, 2024.
- The shares will be listed on BSE SME Platform.
- The face value of the share is Rs 10 and is priced 6.60 times of its face value on the lower side and 7.00 times on the higher side.
- Book running lead manager to the issue is Fedex Securities.
- Compliance Officer for the issue is Kishori Jaysingh Sodha.
Profile of the company
The company is mainly engaged in offering mechanical splicing solutions to the real estate, construction and infrastructure industry by designing, engineering and supplying of rebar couplers. The company’s offering under this vertical includes (a) supply of rebar couplers as per its customer needs; (b) on-site threading services of the couplers; and (c) trading in threading machines and spares. The company offers an end-to-end mechanical splicing solutions ranging from design, manufacturing, testing, logistics and rebar threading. The company supply and provide its mechanical splicing solutions to construction contractors, real estate developers and infrastructure companies.
The company supplies its rebar couplersin the domestic market. As the company primarily caters to the construction industry, the company with an objective to expand its product offerings acquired the running business of the proprietorship concern of its Promoter namely, ‘M/s. Kosmo Ventures’, along with the assets and liabilities of the proprietorship concern as going concern. Kosmo Ventures was engaged in the business of trading of reinforcement bars (TMT bars) and machinery. The acquisition was completed on January 31, 2023 and since then, the company has expanded into the business of trading of reinforcement bars (TMT bars) and machinery as a trader and service provider.
The products supplied by the company i.e. rebar couplers and Steel Products finds its application with construction contractors, real estate developers and infrastructure companies and are used in the construction of residential and commercial buildings, steel structures, roads, etc. The company design and engineer the rebar couplers as per the customers requirement and is manufactured by a third-party manufacturer. The company is an ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified Company issued by Quality Control Certification accredited by ‘UASL, England, UK’ in compliance with quality management system, Environmental Management System and Occupational Health and Safety Management Systems respectively.
Proceed is being used for:
- Meeting working capital requirements
- General corporate purpose
Industry overview
The real estate sector is one of the most globally recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. India’s high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress. Infrastructure is a key enabler in helping India become a $26 trillion economy.
Real estate sector in India is expected to reach $1 trillion in market size by 2030, up from $200 billion in 2021 and contribute 13 % to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs. India’s real estate sector saw over 1,700 acres of land deals in top eight cities in the first nine months of FY22. Foreign investments in the commercial real estate sector were at $10.3 billion from 2017-2021. As of February 2022, developers expect demand for office spaces in Special Economic Zones (SEZs) to shoot up after the replacement of the existing SEZs act. As per ICRA estimates, Indian firms are expected to raise more than Rs 3.5 trillion ($48 billion) through infrastructure and real estate investment trusts in 2022, as compared with raised funds worth US$ 29 billion to date.
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind of investors to invest in the Indian real estate market. It would create an opportunity worth Rs 1.25 trillion in the Indian market in the coming years. Responding to an increasingly well-informed consumer base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family-owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.
Pros and strengths
Diversified customer base: It has a well-diversified domestic customer base, wherein it supplies standard as well as custom based products. This reduces the intensity of any significant single customer’s contribution in its revenues. Its top ten customers contribute 95.28%, 75.75%, 85.22% and 100% of its revenue from operations for the period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. It has relationships with some of its customer since inception. Its continuous focus on providing quality products and services consistently to its customers has helped it nurtures long-term relationships with them. It has a history of high customer retention and derives a significant proportion of its revenue from repeated business.
Diversified and established product: The company design, engineer and supply rebar couplers that finds its application in real estate, construction and infrastructure industry and is used in the construction of residential and commercial buildings, steel structures, roads, etc. With a wide variety of product categories, its product finds in application across real estate, construction and infrastructure industry as one of the key products.
Quality assurance: It manufactures its product using the best raw material, i.e. carbon steel meeting the strict technical specification and governing standards of an ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified Company issued by Quality Control Certification accredited by “UASL, England, UKâ€. It conducts quality tests at every stage of manufacturing process of its third party manufacturer and the desired chemical compositions are maintained right through the process. After manufacturing, the products are also carefully inspected and evaluated on various parameters. For every batch of raw materials (unique Heat number), testing is conducted in third party NABL accredited Lab and one sample is tested for physical properties (UTS and Elongation) and one sample is tested for chemical composition in each batch.
Risks and concerns
Highly dependent on suppliers: Its top 10 suppliers 65.03%, 84.03%, 89.47% and 100.00% for the period ended September 30, 2023, for the Financial Year ended March 31, 2023, Financial Year ended March 31, 2022 and Financial Year ended March 31, 2021, respectively for procurement and sale of its traded goods such as couplers, reinforcement bars (TMT bars) and machinery. It has not entered into any long-term supply agreement for procurement of such traded goods. In case of any disruption in supply of traded goods from these 30 suppliers/vendors or its procurement of traded goods on terms that are not favorable to the company; will adversely affect its operations and financial cost.
Defaults in client payment: It may be subject to working capital risks due to delays or defaults in payment by clients, which may restrict its ability to procure raw materials and make payments when due. In addition, any delay or failure on its part to supply the required quantity or quality of products, within the time, to its customers may in turn cause delay in payment or refusal of payment by the customer. Such defaults/delays by its customers in meeting their payment obligations to it may have a material effect on its business, financial condition and results of operations.
Steel industry is highly cyclical: The steel industry is cyclical in nature. Steel prices fluctuate based on a number of factors, such as the availability and cost of raw material inputs, climatic changes, fluctuations in domestic and international demand and supply of steel and steel products, worldwide production and capacity, fluctuation in the volume of steel imports, transportation costs and protective trade measures, in the economies in which the steel producers sell their products and are sensitive to the trends of particular industries, such as the construction, infrastructure development and transportation, which are among the biggest consumers of steel products. It also faces low demand during the monsoon season due to decreased construction activities. In addition, the volatility, length and nature of business cycles affecting the steel industry have become increasingly unpredictable, and the recurrence of another major downturn in the industry may have a material adverse impact on its business, results of operations, financial condition and prospects.
Outlook
Vruddhi Engineering Works is mainly engaged in offering mechanical splicing solutions to the real estate, construction and infrastructure industry by designing, engineering and supplying of rebar couplers. The company’s offering under this vertical includes (a) supply of rebar couplers as per its customer needs; (b) on-site threading services of the couplers; and (c) trading in threading machines and spares. On the concern side, it faces competition from domestic manufacturers. Competition emerges from small as well as big players in the mechanical splicing industry and from traders and dealers in the Steel Products industry. Further, it also faces competition from manufacturers of steel products who have direct access to its customers.
The company is coming out with an IPO of 7,20,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 66-70 per equity share. The aggregate size of the offer is around Rs 4.75 crore to Rs 5.04 crore based on lower and upper price band respectively. On performance front, its total revenue increased by 493.53% from Rs 220.65 lakh for the Financial Year ended March 31, 2022 to Rs 1,309.62 lakh for the Financial Year ended March 31, 2023. This increase was primarily due to an increase in revenue from operations and other income. It recorded a profit after tax of Rs 75.33 lakh for the Financial Year ended March 31, 2023 from a profit of Rs 9.44 lakh for the Financial Year ended March 31, 2022, a 697.99% increase. Meanwhile, the company intends to focus on adhering to the quality standards of the products and services. This is necessary so as to make sure that it gets repeat orders from its customers. Quality of the product and services is very important for the company from both customer and regulatory point of view. Providing the desired and quality products help it in enhancing its reputation and maintaining long term relationships with customers.
Vruddhi Engineering WorksVruddhi Engineering Works is coming ou..
535.50 (5.00%)
