Company Profile

KP Green Engineering

• KP Green Engineering is coming out with initial public offering (IPO) of 1,31,60,000 shares of Rs 5 each in a price band Rs 137-144 per equity share. 
• The issue will open for subscription on March 15, 2024 and will close on March 19, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 5 and is priced 27.40 times of its face value on the lower side and 28.80 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Saurabh Sharma.

Profile of the company

The company manufactures fabricated and hot-dip galvanized steel products. Its diverse range of products includes Lattice Towers Structures, Substation Structures, Solar Module Mounting Structures, Cable trays, Earthing strips, Beam Crash Barriers and other infrastructure solution products aligning with its motto ‘A Company to Solve the Difficulties’. It provides in-house fabrication and Hot Dip Galvanizing facilities enabling tailormade solutions to its clients and end-to-end solutions by carrying out engineering, designing, fabrication, galvanization, and deployment. 

The company is an accredited vendor with GETCO (Gujarat Energy Transmission Corporation) and MSETCL (Maharashtra State Electricity Transmission Company) for upto 400 Kw and 220 Kw, respectively. The company operates through its manufacturing facility located at Dabhasa, Vadodara, Gujarat, fully equipped with CNC machinery and equipment. It is ISO 9001:2015 certified company, demonstrating its capabilities to delivers quality products and services to its end users, having direct relationship with reputation, customer satisfaction and long-term success. It has in-house, well equipped quality control laboratory (for pre and post-production quality checks) to meet the demanding needs of its diversified customers. It has achieved a strong and stable market position through a continued focus on evolving technologies, quality control and customer service.

The company is further planning to expand into its existing line of business along with addition of new products to its portfolio at its new manufacturing plant proposed to be set up at Matar, Bharuch. The new facility will have a capacity of more than 2,90,000 MT, a substantial increase from its current capacity of 53,000 MT at its existing plant. In addition to its product offerings, the company is planning to introduce new line of products including High Masts, Floor Gratings, Pre-Engineered Buildings and Heavy Fabrications to meet evolving market demands.

Proceed is being used for:

• Part finance the capital expenditure towards setting up of a new manufacturing unit to expand its current production capabilities as well as expanding its current product portfolio. 
• General corporate purposes.

Industry overview

One of the primary forces behind industrialization has been the use of metals. Steel has traditionally occupied a top spot among metals. Steel production and consumption are frequently seen as measures of a country's economic development because it is both a raw material and an intermediary product. Therefore, it would not be an exaggeration to argue that the steel sector has always been at the forefront of industrial progress and that it is the foundation of any economy. The Indian steel industry is classified into three categories - major producers, main producers and secondary producers. 

India is the world’s second-largest producer of crude steel, with an output of 125.32 MT of crude steel and finished steel production of 121.29 MT in FY23. India’s steel production is estimated to grow 4-7% to 123-127 MT in FY24. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India's manufacturing output. The Indian steel industry is modern, with state-of-the-art steel mills. It has always strived for continuous modernisation of older plants and up-gradation to higher energy efficiency levels. 

Production Linked Incentive (PLI) Scheme for domestic production of specialty steel has been approved with an outlay of Rs 6322 crore by the Cabinet. The scheme is set to commence from FY: 2023-24 (PLI to be released in FY: 2024-25). 57 MoUs have been finalized out of 67 applications from 30 companies which were selected under the Production Linked Incentive (PLI) Scheme for Specialty Steel. This will attract committed investment of Rs 29530 crore with a downstream capacity addition of 25 Million Tonne and employment generation potential of 70000. PM Gati Shakti Masterplan: In order to address the concerns in logistics in the Steel Sector, Ministry of Steel has onboarded itself as user of infrastructure on PM GatiShakti Masterplan by uploading the Geo locations of more than 2100 steel units functioning in the country.

Pros and strengths

Founder led company supported by a highly experienced and professional leadership team: Its Founder and Chairman, Dr. Farukbhai Gulambhai Patel founded the Company, in addition to KPI Green Energy, K.P. Energy and many other recognised KP Group companies. KP Group companies are extensively engaged in the business of renewable energy including Solar and wind renewable energy. Dr. Farukbhai Gulambhai Patel is having over fifteen years of experience in the renewable energy sector. It is also led by a Board of Directors with diverse expertise that will contribute to and participate in the organic growth of its business. In addition, many of its senior management have experience across a broad range of industries, enabling them to effectively operate the business.

Execution capabilities: Its execution capabilities are a skill set that gives the company competitive advantage over other industry players. It operates from its manufacturing facility located at Dabhasa, Vadodara having installed capacity of more than 53,000 MT per annum. As evident from ‘Capacity and Capacity Utilization’ it has increased its installed capacity in each of the last three financial years as well as current financial year to cater the need of its customers in timely manner along with growth of the company.

Consistent financial performance: It has demonstrated strong financial performance, and its total income as per Restated Standalone Financial Information has grown at a CAGR of 71.98% from Rs 3,861.32 lakh in Financial Year 2020-21 to Rs 11,420.89 lakh in Financial Year 2022-23. Driven by its strong operational capabilities, it has been able to minimize costs and achieve healthy profit margins. Its profit for the year as per Restated Standalone Financial Information has grown at a CAGR of 179.70% from Rs 158.45 Lakh in Financial Year 2020-21 to Rs 1,239.59 lakh in Financial Year 2022-23.

Risks and concerns

Dependent on few numbers of customers: Its top ten customers contribute 71.10%, 70.02%, 70.14% and 65.33% of its total revenue from operations on standalone basis for the period ended on September 30, 2023 and for financial year ended on March 31, 2023, 2022 and 2021, respectively. The company is engaged in the business of Manufacturing of fabricated and hot-dip galvanized steel products. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations.

Dependent on few suppliers: Its top ten suppliers contribute 77.75%, 69.61%, 58.78% and 65.19% of its total purchase from operations for the period ended September 30, 2023 and for the financial year ended on March 31, 2023, 2022 and 2021, respectively. 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.

Face competition: Competition in its business is based on pricing, relationships with customers, product quality, customisation and innovation. It faces pricing pressures from its customers who aim to produce their products at competitive costs and competitors who are able to source their raw materials at cheaper prices or are able to offer more favourable pricing terms to customers. It shall be able to meet the pricing pressures imposed by such customers which would adversely affect its profitability.

Outlook

KP Green Engineering is primarily engaged in Fabrication, Galvanizing, Fault Rectification Team, Patrolling of Optical Fiber Cables, Site Clearance Work, Solar Roof-top installation, Sale of solar electricity, EPC, Mobile tower Manufacturing and Turnkey Service Provider to Mobile and Renewable Energy Industry. On the concern side, the company is engaged in the business of Manufacturing of fabricated and hot-dip galvanized steel products. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations.

The company is coming out with an IPO of 1,31,60,000 equity shares of face value of Rs 5 each. The issue has been offered in a price band of Rs 137-144 per equity share. The aggregate size of the offer is around Rs 180.29 crore to Rs 189.50 crore based on lower and upper price band respectively. On performance front, revenue from operation increased by Rs 3,650.73 lakh being 46.98% to Rs 11,420.89 lakh for the FY 2022-2023 from Rs 7,770.16 lakh for the FY 2021-2022. Profit after tax increased significantly by 172.76% from Rs 454.46 lakh in FY ended March 31, 2022 to Rs 1239.60 lakh for the FY ended March 31, 2023. Going forward, it continues to focus on enhancing operational controls and cost efficiencies through optimal service quality & cost management. Its ability to provide timely completion of service and quality service is key to its reputation and further expansion of its business. It also continues to implement various measures aimed at incremental improvement in operational efficiencies, such as deploying more professional for providing services.