IPO Analysis

Date Heading Details
27-Jan-2020   10:37 Hrs IST Madhav Copper coming with FPO to raise up to Rs 25.50 crore <p align="justify"><strong>Madhav Copper </strong><ul><li><div align="justify">Madhav Copper is coming out with a 100% book building Follow On Public Offering (FPO) of 24,99,600 equity shares of face value of Rs 5 each in a price band Rs 100-102 per equity share.</div></li><li><div align="justify">The issue will open on January 27, 2020 and will close on January 30, 2020.</div></li><li><div align="justify">The shares will be listed on SME Platform of NSE.</div></li><li><div align="justify">The face value of the share is Rs 5 and is priced 20 times of its face value on the lower side and 20.4 times on the higher side.</div></li><li><div align="justify">Book running lead manager to the issue is Pantomath Capital Advisors.</div></li><li><div align="justify">Compliance Officer for the issue is Pratik Patel.</div></li></ul><p align="justify"><strong>Profile of the Company</strong><p align="justify">Madhav Copper was originally incorporated as ‘Madhav Copper Private Limited' at Bhavnagar, Gujarat as a Private Limited Company under the provisions of the Companies Act, 1956 vide Certificate of Incorporation dated November 19, 2012 issued by the Registrar of Companies, Gujarat, Dadra and Nagar Havelli. Subsequently, the Company was converted into a Public Limited Company pursuant to shareholders resolution passed at the Extra-Ordinary General Meeting of the Company held on August 02, 2016 and the name of the Company was changed to ‘Madhav Copper Limited' and a fresh Certificate of Incorporation consequent upon conversion from Private Limited Company to Public Limited Company dated August 17, 2016 issued by the Registrar of Companies, Ahmedabad, Gujarat. Further, shares of the company listed and traded pursuant to Initial Public Offering on SME Platform of National Stock Exchange of India Limited (‘NSE EMERGE') with effect from February 06, 2017.<p align="justify">Madhav Copper is engaged in the manufacturing and supply of copper bus bars, copper rods, strips, anodes, sections, enamelled copper wire, and poly wrap submersible winding wire. The copper material produced by the company is used in mechanical and electrical fields for power distribution, generation, transmission and electronic industries. The company also offers services to assist electrical winding designers in overcoming electrical equipment short-circuit problems and winding making. Madhav Copper follows the National and International standards such as IES, BS, JIS, NEMA, and ASTM. The manufacturing unit of MCL is situated at Bhavnagar, Gujarat.<p align="justify"><strong>Proceed is being used for:</strong><ul><li><div align="justify">Purchasing of Plant &amp; Machinery;</div></li><li><div align="justify">Prepayment/ Repayment of certain secured borrowings of the company;</div></li><li><div align="justify">Funding the working capital requirements; and</div></li><li><div align="justify">Meeting General Corporate Purposes.</div></li></ul><p align="justify"><strong>Industry Overview</strong><p align="justify">Copper is the second largest non-ferrous metal in India in terms of production. The country has come a long way since being a net importer of refined copper, with exports of refined copper markedly increasing over the years. However, India continues to import significant volumes of copper ores and concentrates from Chile, Australia and Indonesia. The demand for copper in India will remain strong, driven by rapidly increasing electricity generation and consumption. India ranks seventh in global refined copper production and fifth in copper smelter production globally. In addition, the country is a net exporter of refined copper. Major applications of copper are in electrical sectors viz, transformers, motors, generators, switchgears, house wiring etc. The metal finds usage across numerous applications including but not limited to defence, spacecraft, railways, power cables, electronics &amp; communications, auto ancillaries, and consumer durables such as air conditioning, refrigeration.<p align="justify">Copper demand in India is expected to grow at 6-7% due to increased thrust of Government of India towards ‘make in India' and ‘Smart City' programmes and increased investment in railways, power, defence and infrastructure sectors which will drive the demand of copper in the country. Demand is expected to show significant growth considering the initiatives such as development of industrial corridors, smart city project, housing for all Indians by 2022, National Highway development project, Rail project, defence production policy to encourage indigenous manufacture, India energy plan 2022 100GW solar, 32GW wind, 260GW thermal &amp; nuclear, 62 GW hydro. In addition to this, there is plan for green energy corridor for transmission of renewable energy. The per capita copper consumption in India is expected to increase from the current level of 0.6 kg to 1 kg by 2025. The per capita copper consumption of China is 6 kg and world average is 2.7 kg. <p align="justify"><strong>Pros and strengths</strong><p align="justify"><strong>Experienced Management:</strong> The Company is promoted by Nilesh Patel, Rohit Chauhan and Divya Monpara who are first generation entrepreneurs and having a decade of experience in the copper industry. Prior to promoting the company, Nilesh Patel had experience of copper trading and Rohit Chauhan has worked with various leading wire giants like Precision Wires India as Head&nbsp;- Operations / Assistant Production Manager, Salzer Magnet Wires as Head&nbsp;- Operations Copper Wire Businesses and ASTA India (A Metrod Group Company) prior to promoting the company. Its promoters are backed with sound management team which is instrumental in driving its growth and implementing its strategies. Its management is prudent mix of young and experienced persons leading continuous expansion of its business. <p align="justify"><strong>Quality Assurance:</strong> Its products are ISO 9001:2015 and 14001:2015 certified. From the procurement of raw material till the dispatch of final products, it ensures quality inspection thus assuring the customers with quality products. Output of each stage is sent to in-house laboratory for inspection, if the same is not upto the standards, the same are subject to rejection. It procures raw materials after conducting audit on suppliers. The copper material, which it produces, achieves an electrical conductivity of 101% IACS (International Annealed Copper Standard) and has good electrical and mechanical properties suitable for applications in power generation, transmission, distribution and electronic industries.<p align="justify"><strong>Strong relationship with clients:</strong> The company's highest level of customer satisfaction ensures long term relationship with the clients. It offers a wide range of copper based products catering needs of various industries like power generation, transmission, distribution and electronic industries to name a few. It always thrives to assess changing consumer preferences and redesign the products accordingly by continuous exploring new types of winding wire solutions.<p align="justify"><strong>Risks and concerns</strong><p align="justify"><strong>Intense competition:</strong> The market for its products is competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes such as technical competence, quality of products, various products line, customer base, pricing and timely delivery. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by the company and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.<p align="justify"><strong>Significant amount of working capital:</strong> The company requires significant amounts of working capital for a continued growth. Its inability to meet its working capital requirements may have an adverse effect on its results of operations.<p align="justify"><strong>Changes in technology:</strong> Modernization and technology upgradation is essential to provide better services to customers. Although, it strives to keep its technology in line with the latest standards, it may be required to implement new technology or upgrade the existing technology employed by it. Further, the costs in up grading its technology could be significant as compared to the one that its competitors might have in place in terms of costs, efficiency and timely delivery of the final products.<br><p align="justify"><p align="justify"><strong>Outlook</strong><p align="justify">Madhav Copper is engaged in the manufacturing and supply of copper bus bars, copper rods, strips, anodes, sections, enamelled copper wire, and poly wrap submersible winding wire. The copper material produced by the company is used in mechanical and electrical fields for power distribution, generation, transmission and electronic industries. The company also offers services to assist electrical winding designers in overcoming electrical equipment short-circuit problems and winding making. It offers a wide range of copper based products catering needs of various industries like power generation, transmission, distribution and electronic industries to name a few. It always thrives to assess changing consumer preferences and redesign the products accordingly by continuous exploring new types of winding wire solutions. On the concern side, the company has negative cash flows from its operating activities in the past 3 years (in FY 2016-17). If the company is not able to generate sufficient cash flows in future, it may adversely affect its business and financial operations.<p align="justify">The company is coming out with FPO of 24,99,600 equity shares of Rs 5 each via book building route with a price band of Rs 100-102 to mobilize Rs 25 crore to Rs 25.50 crore (based on lower and upper price bands). On the performance front, the company's revenue from operations increased by 26.16% to Rs 21,298.55 lakh for the financial year 2018-19 from Rs 16,881.94 lakh for the financial year 2017-18 mainly due to increase in net revenue from sale of manufactured goods by 22.24% to Rs 18,876.21 lakh in financial year 2018-19 from Rs 15,441.33 lakh in financial year 2017-18. Increase in its revenue from manufacturing operations was primarily due to business expansion and introduction of new products in addition to its existing product. Its sale of traded goods also increased by 68.15% to Rs 2,422.34 lakh in financial year 2018-19 from Rs 1,440.61 lakh in financial year 2017-18. Due to reasons mentioned above, its profit after tax increased by 114.76% to Rs 421.42 lakh for the financial year 2018-19 from Rs 196.23 lakh for the financial year 2017-18.<p align="justify">The company intends to increase its product base by entering into the manufacturing of newer products like Paper insulated copper conductor, Mica tape insulated copper conductor, Nomax insulated copper conductor, Polyamide wrapping copper conductor and fiber glass film copper conductor. Thus increased product portfolio will make it one stop copper wire and allied products solution provider.</p>
24-Jan-2020   17:33 Hrs IST Tranway Technologies coming with an IPO to raise up to Rs 4.24 crore <p align="justify"><strong>Tranway Technologies</strong><ul><li><div align="justify">Tranway Technologies is coming out with an initial public offering (IPO) of 4,240,000 equity shares of face value of Rs 10 each at a fixed price of Rs 10 per equity share.</div></li><li><div align="justify">The issue will open on January 27, 2020 and will close on January 29, 2020.</div></li><li><div align="justify">The shares will be listed on SME Platform of BSE.</div></li><li><div align="justify">The share is priced at par to its face value of Rs 10.</div></li><li><div align="justify">Book running lead manager to the issue is Finshore Management Services.</div></li><li><div align="justify">Compliance Officer for the issue is Anitha R.</div></li></ul><p align="justify"><strong>Profile of the company</strong><p align="justify">The Company was originally incorporated as ‘Tranway Technologies Private Limited' on March 25, 2015 under the provisions of the Companies Act, 2013 bearing Corporate Identification Number U74900KA2015PTC079480 issued by the Registrar of Companies, Karnataka, Bangalore. Subsequently the company was converted into Public Limited Company and the name of the Company was changed to ‘Tranway Technologies Limited' vide a fresh Certificate of Incorporation dated January 03, 2020 bearing Corporate Identification Number U74900KA2015PLC079480 issued by the Registrar of Companies, Karnataka, Bangalore.<p align="justify">Tranway Technologies is engaged in the business of Software product development, Software services, Software Testing and Development, Staffing Services, Human Resource Consulting, Contract Staffing, Manpower Supply Services, Recruitment Process Organization (RPO), Training For Employability, and related services. The company also works as Technical Advisors, Purveyors, and Consultants for processed &amp; applied technology, research &amp; development and technical Know-how.&nbsp; The core business of Tranway Technologies is offering Staffing solutions and Payroll processing. The company outsources Tranway Payroll to the clients for managing their clients' on-roll employees.<p align="justify"><strong>Proceed is being used for:</strong><ul><li><div align="justify">Meeting working capital requirement;</div></li><li><div align="justify">Public issue expenses; and </div></li><li><div align="justify">General corporate purpose.</div></li></ul><p align="justify"><strong>Industry Overview</strong><p align="justify">India is the world's largest sourcing destination, accounting for approximately 55 percent of the $185-190 billion market in 2017-18. India's highly qualified talent pool of technical graduates is one of the largest in the world and the country has a low-cost advantage by being 5-6 times inexpensive than the US. India is the second-fastest digitising economy amongst 17 leading economies of the world. The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. Indian IT &amp; ITeS companies have set up over 1,000 global delivery centres in about 80 countries across the world. India has become the digital capabilities hub of the world with around 75 percent of global digital talent present in the country.<p align="justify">The IT industry employs nearly 3.97 million people in India of which 105,000 were added in FY18. The industry added around 105,000 jobs in FY18 and is expected to add over 250,000 new jobs in 2019. Hardware exports from India are expected to grow at 7-8 percent in FY19. The export sector crossed Rs 957,493 crore ($137 billion) of revenues and marginally grew at the rate of 7-9 percent in FY19. India's IT &amp; ITeS industry grew to $181 billion in 2018-19. Exports from the industry increased to $137 billion in FY19 while domestic revenues (including hardware) advanced to $44 billion. Spending on Information Technology in India is expected to grow over 9 percent to reach $87.1 billion in 2018 (as per Gartner). Revenue from the digital segment is expected to comprise 38 percent of the forecasted $350 billion industry revenue by 2025. Indian IT's core competencies and strengths have attracted significant investments from major countries. The computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflows worth Rs 2,60,200 crore ($37.23 billion) between April 2000 and March 2019 and ranks second in the inflow of FDI, as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT). Leading Indian IT firms like Infosys, Wipro, TCS and Tech Mahindra, are diversifying their offerings and showcasing leading ideas in blockchain, artificial intelligence to clients using innovation hubs, research and development centres, in order to create differentiated offerings.<p align="justify">India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. Export revenue of the industry is expected to grow 7-9 percent year-on-year to $135-137 billion in FY19. The industry is expected to grow to $350 billion by 2025 and BPM is expected to account for $50-55 billion out of the total revenue.<p align="justify"><strong>Pros and strengths</strong><p align="justify"><strong>Experienced &amp; qualified management team:</strong> The company is promoted by Bharat and Kalavathy Bylappa. Bharat is having more than 20 years of experience in IT industries, HR and Talent Supply Management and Kalavathy Bylappa is having more than 20 years of experience in IT industries. Further, the company is managed by a team of competent personnel having knowledge of core aspects of its Business. Its Promoters, Bharat and Kalavathy Bylappa guide the company and are well assisted by its Key Managerial Persons. The company has an experienced management team having vast experience in the Industry. Its personnel policies are aimed towards recruiting talented employees and facilitating their integration into the organization and encouraging the development of their skills and expertise. <p align="justify"><strong>End-to-end Software solutions and support:</strong> The company offers end-to-end technology services and solutions to its clients. Since incorporation, it has continuously developed its offerings to include new-age technologies along with data science and artificial intelligence capabilities, query optimization and rapid iteration services. Its focus has been to become a technology partner to its clients by constantly updating its service offerings to meet the evolving needs of its clients. Its range of products, services and solutions enables the company to broaden its offerings for potential clients, deepen its relationships with existing clients and diversify its revenue base.<p align="justify"><strong>Existing client base:</strong> The company has maintained long-standing relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help the company to get repeat business from its customers. This has helped the company to maintain a long-term working relationship with customers and improve its customer retention strategy. Its existing relationship with clients represents a competitive advantage in gaining new clients and increasing its business.<br><p align="justify"><p align="justify"><strong>Risks and concerns</strong><p align="justify"><strong>High working capital requirement:</strong> The company requires high working capital for its smooth day to day operations of business and any discontinuance or inability to acquire adequate working capital timely and on favourable terms may have an adverse effect on its operations, profitability and growth prospects. Its business demands substantial funds towards working capital requirements particularly for procuring and retaining skilled Manpower. In case there are insufficient cash flows to meet its working capital requirement or the company is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or the company is unable to procure funds on favourable terms, it may result into 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 align="justify"><strong>Faces competition:</strong> The industry is highly competitive, and the company may not be able to compete effectively with competitors. The industry is highly fragmented and intensely competitive. Its competitors are numerous, ranging from small private firms to multi-billion-dollar public companies. Many of its competitors have achieved greater market penetration in some of the markets in which it competes and have more personnel, technical, marketing and financial resources or financial flexibility than it does. If its competitors develop and implement methodologies that yield greater efficiency and productivity, they may be able to offer services similar to its at lower prices without adversely affecting their profit margins. Even if its offerings address industry and client needs, its competitors may be more successful at selling their services. If it is unable to provide its clients with superior services and solutions at competitive prices or successfully market those services to current and prospective clients, its business, results of operations and financial condition may suffer. These competitive forces could force the company to make price concessions or otherwise reduce prices for its services. If it is unable to maintain its competitiveness, its market share, revenue, and profits could decline.<p align="justify"><strong>Expensive product development:</strong> Product development is a long, expensive and uncertain process and its current expenditure in product development may not provide a sufficient or timely return. The company has made, and will continue to make, significant investments in product development and related product opportunities. The company must continue to dedicate a significant amount of resources to its research and development efforts in order to maintain its competitive position. However, significant revenues from new software product and service investments may not be achieved for a number of years, or at all. Moreover, new software products and services may not be profitable, and even if they are profitable, operating margins for new software products and services may not be in line with the margins the company has experienced for its existing or historical software products and services. Moreover, the company may determine that certain products or services do not have sufficient potential to warrant the continued allocation of resources and accordingly, it may elect to terminate the development of such products. If it terminates a product in development in which it has invested significant resources, its prospects may suffer, as it will have expended resources on a project that will not provide any return on its investment and also may have missed the opportunity to have allocated those resources to potentially more productive uses. In turn, this may adversely impact its business, operating results and financial condition.<br><p align="justify"><p align="justify"><strong>Outlook</strong><p align="justify">Tranway Technologies is engaged in the business of Software product development, Software services, Software Testing and Development, Staffing Services, Human Resource Consulting, Contract Staffing, Manpower Supply Services, Recruitment Process Organization (RPO), Training For Employability, and related services.The core business of Tranway Technologies is offering Staffing solutions and Payroll processing.&nbsp;It mulls other offerings like quality engineering and assurance; demand development projects, software developments, start up training etc. The company has up the sleeve developments of SAP solutions, software products etc. Currently TTL has limited market reach, threats from big players, dependency on suppliers, inadequate working capital and thus poses major threats. On the flip side, the company had negative cash flow in recent fiscals. Sustained negative cash flow could adversely impact its business, financial condition and results of operations. The company also faces intense competition from established as well as unorganized players. Its competition depends on several factors, which include quality, price and its pace in keeping up with the changing trends. Competition emerges from both organized as well as unorganized sector.<p align="justify">The company is coming out with a maiden IPO of 42,40,000 equity shares of Rs 10 each at a fixed price of Rs 10 per equity share to mobilize Rs 4.24 crore. On the performance front, during the FY2018-19 the revenue from operation of the company increased to Rs 513.38 lakh as against Rs 393.93 lakh in the FY 2017-18, representing an increase of 30.32% of the revenue from operation. While, the restated Profit after Tax for FY2018-19 has increased to Rs 24.02 lakh as against Rs 11.38 lakh in the FY 2017-18. The increase in profit after tax was 111.14%. As part of its growth strategy the company intends to focus on increase in volume of sales. The company wants to focus on larger volume of sales and further addition of new products in its portfolio to achieve its targeted sales. The company has the ready infrastructure as well as know how to scale this business further; and the company has a long-term strategy to increase its sales from this business vertical. Going forward the company plans to establish its presence in the other regions within India and abroad. Its emphasis is on expanding the scale of its operations as well as growing supply chain network, which will provide attractive opportunities to grow its client base and revenues.</p>
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