Shree Marutinandan Tubes
- Shree Marutinandan Tubes is coming out with an initial public offering (IPO) of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 143 per equity share.
- The issue will open for subscription on January 12, 2024 and will close on January 16, 2024.
- The shares will be listed on SME Platform of BSE.
- The share is priced 14.30 times higher to its face value of Rs 10.
- Book running lead managers to the issue is Swastika Investmart.
- Compliance Officer for the issue is Pooja Mangal.
Profile of the company
Shree Marutinandan Tubes is engaged in the business of trading of Galvanized Pipe, Electric Resistance Welding Mild Steel (ERW MS) Pipes (round pipes, square and rectangular hollow sections) in various specifications, sizes ranging from 15NB to 1000 NB and also in trading of Black Pipes and Solar Structural Pipes. Its products have wide application in varied industries like Agriculture, Oil, Public Health, Housing, Irrigation, Engineering, Infrastructural, Industrial etc.
The company has independent sales and distribution networks for its products. A substantial majority of its steel pipes are sold to wholesalers & Distributors in the domestic markets. It procures Steel Pipes from the best manufacturers in steel pipes at domestic level and it has good business association with suppliers. It has a procurement policy and generally purchase in large volumes in order to stock and facilitate on time delivery of products to its end customers. By purchasing in large volumes, the company is able to purchase inventory at lower prices than its competitors, which enables it to sell its products at competitive prices.
It is a well-established company that has made a significant mark in the trading of steel tubes and pipes. However, from FY 2023, it has taken a strategic step of forward integration to expand its business horizons and diversify its offerings. To achieve this, it has decided to accord with its group company, Shree Kamdhenu Machinery Private Limited, for the contract manufacturing of agricultural equipment. This move enables it to provide a broader range of products to its clients, catering to the growing demand for agricultural machinery and equipment in the market.
Proceed is being used for:
- Meeting incremental working capital requirements.
- General corporate purpose.
- Meeting public issue expenses.
Industry Overview
India is the second largest steel producer in the world with an installed capacity of 154.1 MT in FY22. It is also the second-largest consumer of finished steel with a consumption of 120 MT in FY23. The Indian steel sector has been able to grow over the years due to domestic availability of raw materials such as iron ore and cost-effective labour. The industry has been driven by domestic steel demand from sectors such as construction, real estate, and automobiles, while the vast coastline has enabled exports and imports, making India one of the leading countries in the global steel industry. In the last 10 years, finished steel production has grown at a CAGR of 2.8% to 122 MT in FY23 from 96 MT in FY14. The growth in production has been backed by a rise in domestic steel consumption on account of growing economic activities in the country supported by an increase in infrastructure and construction spending by the government, a rise in automobile and consumer durable demand, among others.
Domestic finished steel consumption in India has increased at a CAGR of 5.5% to 120 MT in FY23 from 74 MT in FY14. After witnessing an uptrend in steel production, India observed a de-growth of 20.2% y-o-y in FY19 due to lower exports. Further, the outbreak of covid-19 pandemic resulted in a decrease in steel production in FY21, a de-growth of 6.3%. Steel exports from India have contributed to the total off take of steel, in addition to the domestic demand, supported by an increase in the country’s overall capacity and production. Exports increased at a CAGR of 10.7% over the period of 9 years from 6 MT in FY14 to 13.5 MT in FY22. Of these 9 years mentioned, India was a net steel exporter for six years - FY14, FY17, FY18, FY20-FY22. In 2021, India’s exports accounted for 4.4% of the global exports. Exports witnessed a reversal in trend during FY23 after an upward trend of exports in 3 consecutive years i.e, FY20, FY21 & FY22 and declined to 6.7 MT compared to 13.5 MT in FY22, a sharp fall of 50.2% y-o-y. The Indian Government imposed an export duty of 15% on a range of finished steel products in May 2022 which made exports from India less competitive in global markets.
Indian Steel Industry contributes to all the facets of economy, including GDP, industrial and infrastructural development. The steel industry contributes approx. 2.5% to national GDP, employing 2.5 million people, directly & indirectly. The output effect of steel on Indian economy is approx.1.4 times, with an employment multiplier of 6.8 times. The future of the steel industry has to also be responsible and sustainable growth focused on reducing carbon emissions and moving towards de-carbonization. The industry is already implementing measures such as increasing the usage of renewable energy in the production process, use of pulverized coal injection (PCI) in the blast furnaces, improving efficiency by waste heat recovery, suitable use of by-products, usage of steel scrap etc. Future technologies which will significantly reduce the carbon emissions such as green steel and carbon capture utilization and storage have been identified and R&D efforts are being undertaken across the world to achieve viably scalable technologies. The steel industry is evolving its overall Environmental, Social and Governance (ESG) practices to adopt the global best practices which will enable the steel industry to tap larger markets and grow a climate-conscious investor base.
Pros and strengths
Diversified product range: The company has a varied product range to cater to the requirements of its customers. Its product portfolio includes diversified variety of pipes in various specifications, sizes, ranging from 15NB to 1000NB having wide applications in varied industries like Architectural, Infrastructural, Industrial, Engineering & Agriculture Industry. Its range of products allows its existing customers to source most of their product requirements from it and also enables it to expand its business from existing customers, as well as address a larger base of potential new customers.
Quality products: The company has earned a commendable reputation for reliability and quantity due to its adherence to uncompromising standard of quality. The objective is to delight customers at reasonable prices. It is a quality conscious organization, having consignment agent/ distributor of many reputed manufacturer of MS/GI ERW Pipes like Jindal Industries Limited and Ahmedabad Strips Private Limited. Its management team is focused on delivering quality products for any kind of requirement regarding Steel Pipes / Tubes, diameter ranging between 15 mm to 500 mm in various ISS standards. IS: 1239, IS: 3589, IS 1161, IS 9295 and pipes on of varioussizes from range of 25mm x 25mm to 250mm x 250mm in various ISS standards. IS: 4923:1997.
Established sales and distribution network in all over India: The company’s extensive sales and distribution network allows it to reach a wide range of consumers and ensures effective penetration of its products and marketing campaigns. The company’s sales and distribution network is strategically spread across different states in India. As of March 31, 2023, its strong customer network in India catering to more than 730 clients supplying products as per their specific needs, its extensive sales network enables it to serve its customers and markets in an efficient and timely manner.
Risks and concerns
Maximum revenue comes from Black pipe/MS Pipe and Structural Pipe: The company’s revenue from Black Pipes/MS Pipe and Structural Pipe, contributes 93.23%, 92.56%, 90.82% and 91.24% of its Total Revenue from operation for the stub period ended 30th September, 2023 and for the financial year ended March 31, 2023, 2022 and 2021, respectively. Any decline in its quality standards, growing competition and any change in the demand for the product may adversely affect its ability to retain clients from these sectors. The company cannot assure that it shall generate the same quantum of business, or any business at all, from this segment, and loss of business from any one or both sectors may adversely affect its revenues and profitability.
Geographical constrain: The company is working in more than 6 States among which, its Revenue are majorly dependent on the one State i.e. Gujarat. The state generates almost 97.86%, 96.69%, 97.19% and 98.30% of the Total Revenue for the stub period ended 30th September, 2023 and for the financial year ended 31st March, 2023, 2022 and 2021 respectively. Such geographical concentration of its business in the Gujarat region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in the region, which may adversely affect its business prospects, financial conditions and results of operations.
Dependent upon few suppliers for material requirements: The company procures its products i.e. ERW MS/ GI/Black Pipes on a purchase order basis and have not entered into long term contracts with its suppliers. Accordingly, it may encounter situations where it might be unable to deliver its products due to, its inability to predict the increased demand for its products. The company’s top 4 suppliers contribute 91.67%, 84.87%, 91.56% and 91.69% of the Total Purchase for the stub period ended 30th September, 2023 and for the financial year ended March 31, 2023, 2022 and 2021. Any problems faced by its supplier resulting in delays or non-adherence to quality requirements could adversely impact its ability to meet its customer’s requirements in time and its operations would be affected to the extent it is unable to line up supplies from alternate suppliers.
Outlook
Shree Marutinandan Tubes deals in Galvanized Tubes, Electrical Resistance Welded Mild Steel Tubes (ERW MS) in various specifications and sizes ranging from 15NB to 1000 NB, and Black Tubes and Solar Structural Tubes for sectors like Agriculture, Oil, Solar Energy, Healthcare, Housing, Irrigation, Engineering etc. The company's product range also includes potato harvesters, grading machines, hoppers, peanut destoners, tube winders, and rotavators. On the concern side, the company generate a substantial portion of revenue from Gujarat Region. Any adverse developments affecting its operations in the Gujarat Region could have an adverse impact on its revenue and results of operations. The demand and pricing in the steel industry is volatile and are sensitive to the cyclical nature of the industries it serves. A decrease in steel prices may have adverse effect on its business, results of operations, margins and financial condition.
The company is coming out with an IPO of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 143 per equity share. On performance front, the company's revenue from operations and other income remained consistent at Rs 4,722.58 lakh in FY23, similar to the amount of Rs 4,718.49 lakh recorded in FY22. Due to the lack of additional working capital, the company was not able to expand their client base and increase revenue, hence it remained consistent in FY 2022-23. However, the Restated Profit After Tax for FY23 has been significantly increased to Rs 201.76 lakh as against Rs 6.01 Lakhs in the FY22. The company is into the business of steel pipes/tubes for more than ten years whereas its peer group industry players/competitors have the benefit of longer operating history in comparison with its, and therefore, its brand development is at a relatively nascent stage. Considering its current market presence with its customers in diversified sectors and geographies in order to further penetrate the market, it intends to make consistent efforts to strengthen its brand ‘Shree Maruti’ and enhance its brand visibility for attaining parity with its industry peers. Moreover, the company intends to further enhance its value proposition by dealing in value added products, which have better margins and wider markets. Recently, the company has also started trading and manufacturing of potato digger machines, grader machines, hopper machines, groundnut de-stoner machines, pipe winder machines, and rotavators keeping in mind global requirement in field of Agriculture.
Shree Marutinandan TubesShree Marutinandan Tubes is coming out..
29188.95 (5.00%)
