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IPO Analysis

Date Heading Details
15-Jun-2024   16:13 Hrs IST Falcon Technoprojects India coming with IPO to raise Rs 13.69 crore <p style="text-align: justify;"><span style="font-weight: bold;">Falcon Technoprojects India</span></p><p style="text-align: justify;"></p><ul><li>Falcon Technoprojects India is coming out with an initial public offering (IPO) of 14,88,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 92 per equity share.&nbsp;</li><li>The issue will open for subscription on June 19, 2024 and will close on June 21, 2024.</li><li>The shares will be listed on NSE Emerge Platform.</li><li>The share is priced at 9.20 times higher to its face value of Rs 10.</li><li>Book running lead manager to the issue is Kunvarji Finstock.</li><li>Compliance Officer for the issue is Dipti Sharma.</li></ul><p></p><p style="text-align: justify;"><span style="font-weight: bold;">Profile of the company</span></p><p style="text-align: justify;">The company is engaged in the business of providing Mechanical, Electrical and Plumbing (MEP) services to its PAN India customers which are operating in various sectors including Petroleum Refineries, Residential Townships, Atomic Energy, Civil Construction, etc. MEP services refer to installation services that provide comfortable spaces for building occupants. These services specifically deal with the design, selection, and installation of the integrated Mechanical, Electrical, and Plumbing systems. It includes installing air-conditioning systems, power and lighting systems, water supply and drainage, fire prevention and fighting systems, and telephones. By integrating these separate systems into one, the operation can be made more energy effective. The design of MEPs is important for planning, decision-making, accurate documentation, performance and cost estimation, construction, and ultimately the facility's operation and maintenance. MEP services specifically cover the in-depth design and selection of these systems, rather than simply installing the equipment.</p><p style="text-align: justify;">Mechanical systems are those systems associated majorly with Firefighting and HVAC services. Under firefighting services, the Company provides a wide range of solutions like fire hydrant and wet riser system, Sprinkler System, water spray system, gas-based suppression system like CO2 system, etc. in the area of life &amp; property safety in accordance with standards/regulations viz. NBC, TAC &amp; NFPA. The company undertakes turn-key electrical projects and is principally engaged in executing and providing electrical engineering service for power, process, industrial and commercial projects both High Tension (HT) as well as Low Tension (LT) for the public and private sector undertakings. The company provides services of sanitary fixtures &amp; fittings, internal drainage (above ground) system, external drainage (underground) system, rain water disposal system, water supply system, rainwater harvesting, plant &amp; utilities etc. Its plumbing team provides solutions in saving water and energy conforming to Leadership in Energy and Environmental Design (LEED) and Indian Green Building Council (IGBC) norms.</p><p style="text-align: justify;"><span style="font-weight: bold;">Proceed is being used for:</span></p><p style="text-align: justify;"></p><ul><li>Working capital requirements&nbsp;</li><li>General corporate purposes</li></ul><p></p><p style="text-align: justify;"><span style="font-weight: bold;">Industry overview<span style="white-space:pre"> </span></span></p><p style="text-align: justify;">Indian market for MEP services is undergoing a transition. The major factors behind this is the emergence of complex construction projects across all segments of real estate, as well as changes in building codes resulting in mandatory installation of certain products and systems. The changing regulation in electrical voltage systems for different consumer classes (residential, commercial, and industrial) is a major feature that is reshaping the MEP industry. Moreover, the focus on Green Buildings is getting stronger and more and more projects (primarily in commercial real estate space) are vying to get the coveted green certification. This entails compliance with an entirely different set of codes and regulations, which in turn is opening up new opportunities for construction services including MEP services as well as HVAC services.</p><p style="text-align: justify;">MEP services is a specialized type of service as it involves the integration of different system at different levels. An inefficient MEP system can prove to be a high-risk factor for the entire building's system. As MEP providers have the required skill sets and knowledge to handle such operations, developers prefer to outsource these services to MEP specialists who are more capable of handling these activities. Further, with increasing adoption of MEP systems, the relationship between the MEP providers and buyers is shifting from a contractual / transactional basis to a long-term relationship basis which is more collaborative in nature.</p><p style="text-align: justify;">The rapid growth of commercial infrastructure such as office buildings, retail spaces, hotels, healthcare facilities on the back of economic revival and increasing per capita income are driving the growth of the MEP segment. It is also supported by the increasing demand for energy-efficient and sustainable MEP services to meet environmental regulations and reduce operating costs. Moreover, the rising adoption of advanced technologies, such as BIM, building automation and smart systems etc., in commercial buildings is further boosting the demand for MEP services.</p><p style="text-align: justify;"><span style="font-weight: bold;">Pros and strengths</span></p><p style="text-align: justify;"><span style="font-weight: bold;">Project management and execution capability:</span>&nbsp; It has a proven track record of providing quality services that meet the diverse needs of its clients. It has completed contracts worth more than Rs 4,000 lakh in the last 3 Fiscals. It is constantly exploring and adopting latest ways to improve its processes and streamline its operations, in order to deliver greater value to its customers. Its execution team is highly skilled and operates in a professional manner, adhering to its internal quality policy to ensure that the projects are completed efficiently and within the specified timeframe. Its ongoing projects are managed by a team of engineers, technicians and other necessary professionals, along with additional support from third party contractors. It has developed and maintained a network of contractors in various states that helps it in executing work in respective areas to reduce on costs and time.</p><p style="text-align: justify;"><span style="font-weight: bold;">Managing diverse business operations amidst growing demand: </span>The company's focus and expertise in the MEP industry, is a strong blend that gives it an edge in the industry and provides it with a distinct advantage over its competitors who have MEP as one of their businesses. With a varied range of services, it is not dependent on a single revenue stream, thereby providing it with greater flexibility and adaptability during economic slowdowns for a particular industry. This advantage enables it to enjoy synergy benefits, a broader customer base, and helps it to mitigate risks in the event of industry setbacks.</p><p style="text-align: justify;"><span style="font-weight: bold;">Technology at the forefront of current and future business: </span>The company has adopted and developed appropriate technology and the required upgradations that not only help it stay updated but also drive customer satisfaction and market competitiveness. It has a group Chief Operations Officer and an in-house operating team driving many initiatives such as building cloud-based ERP &amp; digital maps and drawings in order to help optimize productivity and improve cost efficiencies as well as digital transformation.</p><p style="text-align: justify;"><span style="font-weight: bold;">Risks and concerns</span></p><p style="text-align: justify;"><span style="font-weight: bold;">Depend on few number of customers: </span>The substantial portion of its revenues has been dependent upon few customers. For instance, its top five customers for F.Y. ended March 31, 2023, March 31, 2022 &amp; March 31, 2021 accounted for 64.15%, 46.82% and 52.29% of its revenue from operations for the respective year. Its reliance on a selected group of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, failure to negotiate favorable terms or the loss of these customers, all of which would have a material and adverse effect on the business, financial position and future prospects of its Company.</p><p style="text-align: justify;"><span style="font-weight: bold;">Significant amounts of working capital requirement: </span>Its business requires significant amount of working capital primarily due to the fact that a significant amount of time passes between when it make payments to its vendors and personnel, and when it receives payments from its customers. Consequently, there could be situations where the total funds available to it may not be sufficient to fulfil its commitments, and hence it may need to incur additional indebtedness in the future, or utilize internal accruals to satisfy its working capital needs. If its cash resources are insufficient to satisfy its cash requirements, it may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. As it pursues its growth plan, it expects that it will has to raise additional funds by incurring further indebtedness or issuing additional equity to meet its capital expenditures in the future. Its future success depends on its ability to continue to secure and successfully manage sufficient amounts of working capital.</p><p style="text-align: justify;"><span style="font-weight: bold;">Unable to collect dues and receivables from customers:</span> Its business depends on its ability to successfully obtain payment from its customers of the amounts they owe it for work performed in accordance with the terms and conditions of the contract and the agreed payment schedule. Payments from customers may often be delayed for various reasons beyond its reasonable control and these irregular payment cycles may affect its working capital requirements and projections, and in turn may adversely affect its business, results of operations and financial condition.&nbsp;</p><p style="text-align: justify;"><span style="font-weight: bold;">Outlook</span></p><p style="text-align: justify;">Falcon Technoprojects India is engaged in the business of providing Mechanical, Electrical and Plumbing (MEP) services to PAN India customers. MEP services refer to installation services that provide comfortable spaces for building occupants. These services specifically deal with the design, selection, and installation of the integrated Mechanical, Electrical, and Plumbing systems. It includes installing air-conditioning systems, power and lighting systems, water supply and drainage, fire prevention and fighting systems, and telephones. On the concern side, the industry in which it operates is highly competitive, cost conscious and is characterized by regular introductions of new and improved solutions and timely execution of projects. It expects competition to persist and intensify in the future as the industry in which it operates is constantly evolving and growing with new and existing competitors devoting considerable resources to introduce and enhance services. Failure to compete successfully against current or future competitors could have a material adverse effect on its business, results of operations and financial condition</p><p style="text-align: justify;">The company is coming out with an IPO of 14,88,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 92 per equity share to mobilize Rs 13.69 crore. On performance front, its total income decreased by 27.66% from Rs 2,290.07 lakh in financial year ended March 31, 2022 to Rs 1,656.59 lakh in financial year ended March 31, 2023 primarily due to reduction in revenue from operations. Profit for the period increased to Rs 103.92 lakh for the financial year 2022-23 from Rs 102.76 lakh for the financial year 2021-22. Meanwhile, it seeks to grow its business through the acquisition of new customers across industries such as real estate, industrial construction, petroleum refineries, warehousing and public infrastructure such as airports, etc. its customer acquisitions are usually undertaken through two mechanisms being past track and technical business development. Past track is where its prospective customers check its past performance with existing customers. For example, the Department of Atomic Energy checks its past records and credibility with BPCL, L&amp;T or HPCL.</p>
14-Jun-2024   14:40 Hrs IST Durlax Top Surface coming with IPO to raise Rs 40.80 crore <p style="text-align: justify;"><span style="font-weight: bold;">Durlax Top Surface</span></p><p style="text-align: justify;"></p><ul><li>Durlax Top Surface is coming out with initial public offering (IPO) of 60,00,000 shares of Rs 10 each in a price band Rs 65-68 per equity share.&nbsp;&nbsp;</li><li>The issue will open for subscription on June 19, 2024 and will close on June 21, 2024.</li><li>The shares will be listed on NSE Emerge Platform.</li><li>The face value of the share is Rs 10 and is priced 6.50 times of its face value on the lower side and 6.80 times on the higher side.&nbsp;</li><li>Book running lead manager to the issue is Expert Global Consultants.</li><li>Compliance Officer for the issue is Komal Birla.</li></ul><p></p><p style="text-align: justify;"><span style="font-weight: bold;">Profile of the company</span></p><p style="text-align: justify;">The company is engaged in the business of manufacturing of solid surface material, which is sold across India, through an extensive distribution network of distributors and direct customers and also exported to various countries such as Dubai, Bahrain, Greece, Nepal. It operates through two brands namely LUXOR and ASPIRON, which provide a wide range of solid surfaces. Its LUXOR brand offers Acrylic UV Solid Surfaces, while ASPIRON offers Modified Solid Surfaces. Situated in Vapi, its manufacturing facility is equipped with German and South Korean technologies and advanced machinery to produce solid surface materials. It aims to meet the ever-evolving demands of its customers and create functional spaces across various sectors.&nbsp;</p><p style="text-align: justify;">Its solid surfaces find applications in residential, commercial, hospitality, healthcare, exterior, and diverse industries, providing stylish and durable solutions for countertops, vanities, offices, retail spaces, hotels, hospitals, outdoor projects, and more. The company is founded by Shravan Suthar and Lalit Suthar, both of whom are certified in interior designing. Shravan Suthar is primarily responsible for client acquisition and retention, diligently working to expand its client base and maintain strong customer relationships, fostering continuous business growth. On the other hand, Lalit Suthar oversees comprehensive business development endeavours, particularly focusing on brand marketing solutions.</p><p style="text-align: justify;"><span style="font-weight: bold;">Proceed is being used for:</span></p><p style="text-align: justify;"></p><ul><li>Part finance the working capital requirements&nbsp;</li><li>General corporate purposes</li><li>Meeting the offer expenses</li></ul><p></p><p style="text-align: justify;"><span style="font-weight: bold;">Industry overview</span></p><p style="text-align: justify;">The India home furnishings market size reached Rs 48,625 crore in 2022. Looking forward, the market to reach Rs 78,536 crore by 2028, exhibiting a growth rate (CAGR) of 8.23% during 2023-2028. Home furnishings include furniture, appliances, rugs, cooking utensils, art objects, wall-to-wall carpeting, builtin ovens, ranges, and dishwashers. They aid in providing an appeal and comfortable ambiance to different spaces of a home, including the bedroom, living room, and dining room. There is currently a rise in the availability of innovative and affordable home furnishings across India.</p><p style="text-align: justify;">The thriving e-commerce industry on account of the increasing internet penetration and reliance on smartphones, tablets and laptops represents one of the key factors propelling the growth of the market in India. Additionally, leading players operating in the country are focusing on visually attractive online product displays and aggressive 113 promotional campaigns to widen their existing consumer base. They are also offering customization to customers, which enable them to request for a specific material and colour of furniture upholstery to match their home décor. Apart from this, the Government of India is introducing campaigns like Make in India that aim at minimizing exports and encouraging domestic manufacturing of home furnishings to offer employment opportunities.</p><p style="text-align: justify;">The most recent research report on the global ‘Corian Acrylic Solid Surface Market' from 2023 to 2029 offers a comprehensive overview of the market, highlighting current trends, demand, and recent advancements that are anticipated to impact market growth in the near future. The report delves into various aspects including new business opportunities, pricing, revenue generation, gross margin, market size, market share, growth potential, and upcoming strategies employed by leading players. Additionally, it provides detailed profiles of major companies operating in the market, with a focus on market size for different product types (Casting Molding Solid Surface, Extrusion Molding Solid Surface), applications (Hospitals, Hotels), and geographical regions. The report also analyses the competitive landscape, current status, and emerging trends in the industry.</p><p style="text-align: justify;"><span style="font-weight: bold;">Pros and strengths</span></p><p style="text-align: justify;"><span style="font-weight: bold;">Focusing on multiple end-user industries: </span>It has over the last few years introduced new categories/designs which have diverse end-use applications. Initially when it started with 20 colours and 2 ranges (6mm and 12 mm). Subsequently, it has successfully producing wide range of thickness (4 mm to 20 mm) with more than 100 different shades and colour option and also established a good presence in Indian and international market in Dubai, Saudi Arabia, Qatar, Greece, USA, Sri Lanka, Bahrain, Nepal, Thailand etc. which has helped it to diversify into more end-user industries such as residential, commercial, hospitality, healthcare, exterior, and diverse industries, and much more. This expansion has facilitated a diversified product portfolio and has helped us create demand for its solid surface across various end-user industries.</p><p style="text-align: justify;"><span style="font-weight: bold;">Wide and diverse range of product offerings:</span> Over last few years, it has expanded its product brand portfolio to multiple product categories/designs. Having a wide portfolio of product categories/designs enables it to cross-sell to a large customer base (which, in its case, are majorly distributors) who in-turn reach out to large number of retail counters for serving the appliers and eventual end-customer. Having a wide product portfolio also enables the company to efficiently compete with larger solid surface players in the market who also have a wide product offering. Its constant efforts are focused towards continuously identifying market demands and introducing relevant products with high quality.</p><p style="text-align: justify;"><span style="font-weight: bold;">Diversified distribution network across India catering to customers:</span> It has established its distribution network strategically over the last several years to meet its goals. Its sales team and distribution network cater to all major cities of India to support the distributor who supply the products to retailers/sub dealer who, in turn, make the product available for end-users like Architects, Interior designer, contractors. Its sales team services the retail network through the distributors by making regular visits, which help in generating secondary sales and increase market presence which results in growing market share of its products.</p><p style="text-align: justify;"><span style="font-weight: bold;">Risks and concerns</span></p><p style="text-align: justify;"><span style="font-weight: bold;">Do not have long term agreements with suppliers:</span> Its purchases are concentrated to a few suppliers with its top 10 supplier contributing 86.18%, 84.30% and 83.50% respectively, of its purchases during the Fiscal 2024, 2023 and 2022, respectively. Production quantity and cost of its products are dependent on its ability to source raw materials and packaging materials at acceptable prices and maintain a stable and sufficient supply of its major raw materials. Its key raw materials include Acrylic Resin and Aluminium Hydroxide etc. It procures majority of raw material from import and local suppliers with whom it has no formal arrangements. There can be no assurance that it will be able to procure all of its future raw material requirements at commercially viable prices.</p><p style="text-align: justify;"><span style="font-weight: bold;">Dependent on third-party transportation providers: </span>Its success depends on the supply and transport of the various raw materials required for its Unit and of its finished products from its Unit to its customers, which are subject to various uncertainties and risks. It relies on third-party freight and transportation providers for the delivery of its products to customers with whom it has no formal arrangement, to provide rail, road and other transportation facilities. It also depends on sea borne freight in respect of import and export operations. Such transportation providers are arranged on an as-needed basis. It maintains marine cargo open insurance policy to cover any damage to its products during transit. Transportation strikes, if any, could have an adverse effect on supplies and deliveries to and from its customers and suppliers.</p><p style="text-align: justify;"><span style="font-weight: bold;">Significant working capital requirement:</span> It operates in a working capital-intensive industry therefore its business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.</p><p style="text-align: justify;"><span style="font-weight: bold;">Outlook</span></p><p style="text-align: justify;">Durlax Top Surface is engaged in the business of manufacturing of solid surface material, which is sold across India, through an extensive distribution network of distributors and direct customers and also exported to various countries such as Dubai, Qatar, Greece, Sri Lanka. It operates through two brands namely LUXOR and ASPIRON, which provide a wide range of solid surfaces known for their aesthetics and performance. Its LUXOR brand offers Acrylic UV Solid Surfaces, while ASPIRON offers Modified Solid Surfaces. On the concern side, it presently does not have any long-term or exclusive arrangements with any of its customers and it cannot assure that it will be able to sell the quantities it has historically supplied to such customers. In the event its competitors' products offer better margins to such customers, there can be no assurance that it customers will continue to place orders with the company. In the event of frequent cancellations of purchase orders, the same could have a material adverse effect on its business, financial condition, results of operations and cash flows.</p><p style="text-align: justify;">The company is coming out with an IPO of 60,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 65-68 per equity share. The aggregate size of the offer is around Rs 39.00 crore to Rs 40.80 crore based on lower and upper price band respectively. On performance front, the company's total revenue for the financial year 2023-24 is Rs 9,076.42 lakh. This represents a 36.00% increase compared to the previous financial year's total revenue of Rs 6,673.83 lakh. Profit after tax is Rs 505.07 lakh for the financial year 2023-24 in compared to Rs 209.44 lakh in financial year 2022-23. Meanwhile, the company's strategy is focused towards introducing new product designs to meet the ever-changing demands of the market as well as garnering the attention of more end-users. This helps in strengthening the relationship with the existing customer network through a wide range of products while also onboarding new customers from untapped segments and regions.</p>
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