IPO Analysis

Date Heading Details
22-Feb-2021   13:46 Hrs IST Pavna Industries coming with an IPO to raise up to Rs 30 crore <P align=justify><STRONG>Pavna Industries</STRONG><UL><LI><DIV align=justify>Pavna Industries is coming out with an initial public offering (IPO) of 18,00,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 165 per equity share. </DIV></LI><LI><DIV align=justify>The issue will open on February 24, 2021 and will close on March 01, 2021.</DIV></LI><LI><DIV align=justify>The shares will be listed on the Emerge platform of NSE. </DIV></LI><LI><DIV align=justify>The share is priced 16.50 times higher to its face value of Rs 10.</DIV></LI><LI><DIV align=justify>Book running lead manager to the issue is Aryaman Financial Services.</DIV></LI><LI><DIV align=justify>Compliance Officer for the issue is Divyani Koshta.</DIV></LI></UL><P align=justify><STRONG>Profile of the company</STRONG><P align=justify>The company along with its subsidiaries is engaged in the business of manufacturing of automotive parts, providing solutions for automobile applications and serving automobile &amp; other applications worldwide. Its focus is manufacturing quality &amp; customer-oriented components, catering to Original Equipment Manufacturers (OEM) &amp; providing automotive after-market solutions. It is engaged in manufacturing of wide range of automotive components for reputed Original Equipment Manufacturers (OEMs) as per their requirements primarily catering to various vehicle segments, including, passenger vehicles, two-wheelers, three-wheelers, heavy and light commercial vehicles and off-road vehicles. The company has a varied client base and it is committed to continuing to diversify its product offerings, customer base and geographical footprint, thereby minimizing its exposure to individual geographies and industry sectors.<P align=justify>The company along with its subsidiaries has a diversified product portfolio, which consists of high-quality reliable parts such as Ignition Switches, Fuel Tank Caps, Latches, Auto Locks, Handles, Switches, Oil Pump, Carburetor, Throttle Body, Fuel Cocks, Injection System, Casting Components etc. It also provide aftermarket sales and services. Its aftermarket products include products manufactured by it such as filters, clutch plates, bearings, wiper blades and brake shoes. The company has ultra-modern manufacturing plants in India, located in Aligarh (Uttar Pradesh), Aurangabad (Maharashtra), &amp; Pantnagar (Uttarakhand). Its facilities are located in key auto-clusters and some of the facilities are in close proximity to the plants of its OEM customers. The proximity of its facilities to the plants of its OEM customers also facilitates greater interaction with its customers, thereby enabling it to respond to their requirements in a timely manner.<P align=justify><STRONG>Proceed is being used for:</STRONG><UL><LI><DIV align=justify>Part repayment of loans</DIV></LI><LI><DIV align=justify>General corporate purpose</DIV></LI></UL><P align=justify><STRONG>Industry overview</STRONG><P align=justify>The automobile industry in India is the world‘s fourth largest. India was the world's fourth largest manufacturer of cars and seventh largest manufacturer of commercial vehicles in 2019. Indian automotive industry (including component manufacturing) is expected to reach Rs 16.16-18.18 trillion ($251.4-282.8 billion) by 2026. The industry attracted Foreign Direct Investment (FDI) worth $ 24.21 billion during April 2000 to March 2020 according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT). Domestic automobile production increased at 2.36 per cent CAGR between FY16-FY20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at 1.29 percent CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20.<P align=justify>Two wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted for 80.8 percent and 12.9 percent market share, respectively, accounting for a combined sale of over 20.1 million vehicles in FY20. Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94 percent during FY16-FY20. Two wheelers made up 73.9 percent of the vehicles exported, followed by passenger vehicles at 14.2 percent, three wheelers at 10.5 percent and commercial vehicles at 1.3 percent. Domestic automobiles production increased at 2.36 per cent CAGR between FY16-20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at 1.29 per cent CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20.<P align=justify>The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry expanded 10.6 per cent to reach $56.52 billion in FY19. Auto-components industry account for 2.3 percent of India‘s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.<P align=justify><STRONG>Pros and strengths</STRONG><P align=justify><STRONG>Diversified product portfolio</STRONG>: The company is automotive component manufacturing company having varied product segments. Its diversified product portfolio caters to different automotive segments including passenger vehicles, two-wheelers, three-wheelers, heavy and light commercial vehicles and off-road vehicles. It has been able to become an integral part of its customers‘ manufacturing supply chains by offering multiple products, increasing its range of products and increasing its share of business with them. A diverse product portfolio also enables the company to achieve significant scale to overcome entry barriers in new markets.<P align=justify><STRONG>Well established manufacturing facility</STRONG>: The company's manufacturing units are located in Aligarh (Uttar Pradesh), Aurangabad (Maharashtra), &amp; Pantnagar (Uttarakhand). Its facilities are located in key auto-clusters and some of the facilities are in close proximity to the plants of its OEM customers. Apart from allowing the company to optimise delivery to its customers, the proximity of its facilities to the plants of its OEM customers also facilitates greater interaction with its customers, thereby enabling it to respond to their requirements in a timely manner. The facilities have been laid out to match best plant engineering standards housing various machineries and suitable infrastructure and quality control setup to handle the product portfolio as its plants are busy producing automotive products in large quantities as per exacting standards. Its units are ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 and IATF 16949:2016 certified. It has five units located in Aligarh close to each other thereby increasing the flexibility and reducing the overheads and costs.<P align=justify><STRONG>In-house design capability, product development and technical collaborations</STRONG>: The company has a dedicated team consisting of design engineers, tooling &amp; process engineers. They engineer the product i.e. design, develop, fabricate, and test vehicle components from the concept stage to production stage and the team is equipped with high-end software like CAD-CAM, Auto Cad, CREO etc. for creating the prototypes before actual production. It implements and create access to modern and advanced technology through in-house research and development activities, joint ventures and technical collaborations. Its joint ventures and technical collaborations provide it a competitive advantage by enabling the company to exploit technologies and expertise developed by its partners.<P align=justify><STRONG>Risks and concerns</STRONG><P align=justify><STRONG>Significant employee benefit expenses:</STRONG> The company incur various employee benefit expenses, including workers' compensation, staff welfare expenses and contribution to provident and other funds. Workers' compensation costs may increase in the future if states raise benefit levels and liberalize allowable claims. Its employees benefit expenses for the period/ year ended September 30, 2020 and March 31, 2020, March 31, 2019 and March 31, 2018 amounted to Rs 596.12 lakh, Rs 1,637.85 lakh, Rs 928.47 lakh and Rs 543.64 lakh respectively, which represents 11.63%, 12.71%, 7.14% and 5.34% of the total expenses for the respective year and such increase in labour cost may have an adverse impact on its profit margins. Further, its employees are not currently unionized, there can be no assurance that they will not unionize in the future. <P align=justify><STRONG>Reliance on third parties for certain aspects of business</STRONG>: The company rely on third parties for job work/ contract labour and manpower required for the manufacture of its products, as well as for performance of certain functions and services carried out at its manufacturing and office premises including waste management and facility management functions. Job work charges constituted 2.58 %, 3.12 %, 4.13% and 3.91 % of its total expenses for the period ended September 30, 2020 and year ended March 31, 2020, 2019 and 2018 respectively. It also relies on transporters for transport and logistics support. Its reliance on third parties for certain critical outsourced job works and on transporters for transport and logistics may affect its timelines for making delivery to its customers.<P align=justify><STRONG>Dependent on continuing operation of manufacturing facilities</STRONG>: Any significant interruption in manufacturing at company's facilities could have a material adverse effect on its business, results of operations and financial condition. The company manufactures substantially all of the products at its manufacturing facilities located at Aligarh and Aurangabad, which are subject to the normal risks of industrial production, including equipment breakdowns, labour stoppages, natural disasters, industrial accidents, power interruptions etc. In case of any disruption at such facilities, it may adversely affect the manufacturing cycle, and may lead to time over-run in the execution of the project. All of these manufacturing facilities require a significant amount and continuous supply of electricity and any shortage or non-availability of electricity may adversely affect its operations. The manufacturing process of its products requires significant electricity.<P align=justify><STRONG>Outlook</STRONG><P align=justify>Incorporated in 1994, Pavna Industries is engaged in the manufacturing of automotive parts and automobile applications solutions. The company manufactures a wide range of automotive components for Original Equipment Manufacturers (OEM) to cater to the requirements of passenger vehicles, 2-wheelers, 3-wheelers, heavy and light commercial vehicles, and off-road vehicles. The company has a well-diversified portfolio including ignition switches, Latches, Fuel Tank Caps, Auto Locks, Handles, Switches, Carburetor, Oil Pump, Throttle Body, Casting Components, etc and aftermarket products i.e. filters, bearings, wiper blades, clutch plates, and brake shoes. It has three manufacturing plants located in Aligarh (UP), Aurangabad (Maharashtra), and Pantnagar (Uttarakhand). It also has an experienced and professional management team with strong execution capabilities and considerable experience in this industry. The team comprises of personnel having technical, operational and business development experience. It has over the years maintained a consistent track record of financial performance. On the concern side, the company compete with various competitors to retain its existing business as well as winning new business for the new and redesigned existing components of its automotive. Its failure to obtain new business or to retain or increase its existing business could adversely affect its financial results. Besides, the company's business could suffer damage from fire, natural calamities, misappropriation or other causes, resulting in losses, which may not be fully compensated by insurance. <P align=justify>The company is coming out with a maiden IPO of 18,00,000 equity shares of Rs 10 each at a fixed price of Rs 165 per equity share to mobilize Rs 29.70 crore. On the performance front, the company's total income for the year ending March 31, 2020 was Rs 17,982.84 lakh. In the current period, the revenue earned from operations is Rs 17,696.47 lakh or 99.93% of the total income. Profit after Tax for the year ended March 31, 2020 was Rs 633.74 lakh, of which Rs 428.88 lakh was attributable to the shareholders of the company and the remaining of Rs 204.86 lakh was attributable to the non-controlling interests. The company seeks to grow its marketing reach domestically and internationally to explore hitherto untapped markets and segments as part of its strategy in order to widen growth prospects. It intends to continue its focus on the current product mix and aim to expand and diversify its product portfolio by adding new products like wire harness, blinkers, control cable, brake shoe, mirrors, horns, headlights etc, which will provide further growth opportunities through the retention of existing clients and acquisition of new clients. Profit after Tax for the year ended March 31, 2020 was Rs 633.74 lakh, of which Rs 428.88 lakh was attributable to the shareholders of the company and the remaining of Rs 204.86 lakh was attributable to the non-controlling interests.
20-Feb-2021   12:25 Hrs IST Party Cruisers coming with an IPO to raise up to Rs 8 crore <P align=justify><STRONG>Party Cruisers</STRONG><UL><LI><DIV align=justify>Party Cruisers is coming out with an initial public offering (IPO) of 15,20,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.&nbsp; </DIV></LI><LI><DIV align=justify>The issue will open on February 22, 2021 and will close on February 25, 2021.</DIV></LI><LI><DIV align=justify>The shares will be listed on the Emerge platform of NSE.</DIV></LI><LI><DIV align=justify>The share is priced 5.10 times higher to its face value of Rs 10.</DIV></LI><LI><DIV align=justify>Book running lead manager to the issue is First Overseas Capital.</DIV></LI><LI><DIV align=justify>Compliance Officer for the issue is Namrata Subhashsingh Negi. </DIV></LI></UL><P align=justify><STRONG>Profile of the company</STRONG><P align=justify>Party Cruisers came (PCL) into existence in 1994. Since incorporation, the company specializes in Wedding Management and Events Management Business wherein it offers all of its clients a complete variety of wedding and event facilities. Its Wedding Management Services range from pre-wedding, during wedding and post wedding events like in-house designing, designation wedding event decor etc. Its Event Services range from planning &amp; marketing to production and decor etc.<P align=justify>As a Wedding and Events Management, the company work on the initial conception (pre-event publicity, venue research &amp; booking, transport), to turnkey production (set-up, on-site management, staffing, stage designing, entertainment), to post-event support (final material distribution, delegate attendance assessment, post-event report) - it takes care of everything. The company has a fully talented, capable, self-sufficient, dedicated team for creating dream weddings. It offers customized holistic solutions to the prospective couples and their families. Its weddings reflect its client‘s unique lifestyle and personalities creating unforgettable moments and lifelong memories. It assists its clients with all the planning, facilitating, negotiating, and handling of various aspects of wedding planning ensuring best services.<P align=justify>The company offers its professional wedding services through its 2 registered brands-‘Vivaah' and ‘Vows-Away and Beyond' and through its Franchisee. The company through its ‘Vivaah' offers Traditional Wedding Services to its clients in their local cities only. Traditional Wedding is mostly preferred by residing Indians plan their Customary Indian Wedding. The company through its - 'Vows-Away and Beyond' offers Destination Wedding Services to its clients. Destination Wedding are mostly preferred by NRI's and residing Indians plan their grand Indian wedding.<P align=justify><STRONG>Proceed is being used for:</STRONG><UL><LI><DIV align=justify>Expansion of business through strategic investment.</DIV></LI><LI><DIV align=justify>Additional working capital.</DIV></LI><LI><DIV align=justify>General corporate expenses.</DIV></LI><LI><DIV align=justify>Meeting&nbsp;expenses of the issue.</DIV></LI></UL><P align=justify><STRONG>Industry overview</STRONG><P align=justify>The services sector is not only the dominant sector in India‘s GDP, but has also attracted significant foreign investment flows, contributed significantly to exports as well as provided large-scale employment. India‘s services sector covers a wide variety of activities such as trade, hotel and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction. The services sector is the key driver of India‘s economic growth. The sector has contributed 57.12 percent of India‘s Gross Value Added at current price in H1 2018-19. Net service exports stood at $ 38.95 billion in H1 2018-19 (P). The Government of India recognizes the importance of promoting growth in services sectors and provides several incentives in wide variety of sectors such as health care, tourism, education, engineering, communications, transportation, information technology, banking, finance, management, among others. Services sector growth is governed by both domestic and global factors. The Indian facilities management market is expected to grow at 17 per cent CAGR between 2015 and 2020 and surpass the $19 billion mark supported by booming real estate, retail, and hospitality sectors.<P align=justify>Event management is the application of project management to the creation and development of large-scale events such as festivals, conferences, ceremonies, weddings, formal parties, concerts, or conventions. It involves studying the brand, identifying its target audience, devising the event concept, and coordinating the technical aspects before actually launching the event. The process of planning and coordinating the event is usually referred to as event planning and which can include budgeting, scheduling, site selection, acquiring necessary permits, coordinating transportation and parking, arranging for speakers or entertainers, arranging decor, event security, catering, coordinating with third party vendors, and emergency plans. Each event is different in its nature so process of planning &amp; execution of each event differs on basis of type of event. The events industry now includes events of all sizes from the Olympics down to business breakfast meetings. Many industries, charitable organizations, and interest groups hold events in order to market themselves, build business relationships, raise money, or celebrate achievement.<P align=justify><STRONG>Pros and strengths</STRONG><P align=justify><STRONG>Established brand name:</STRONG> The company is well known through its brand named -Vivaah-and-Vows-Away &amp; Beyond - in the Wedding Management/ Planner Industry. These brands and the company‘s experience has helped by the company earn the trust and goodwill of its customer which further has an influence on the prospective client‘s decision. Its well established and recognizable brand and the reputation built by it since the last 26 years has and will enable it to increase its clientele list in the future.<P align=justify><STRONG>Well established relationship with supplier:</STRONG> Being in Wedding and Event Management Industry since last 26 years, the company has established a strong and long terms business relationships with its key suppliers from whom the company regularly purchase materials such as fabric, acrylic, ply patti, flowers, par stock decorative items, t-lights, votive candles, electric candles etc. This long-standing relationship has ensured the company timely delivery of its materials, supply of quality and superior finished materials and specialized services. This has been beneficial for the company as it is able to successfully execute the delivery on time and develop further strong relationships with its customers.<P align=justify><STRONG>Strong in-house designing capabilities</STRONG>:&nbsp; Revolutionary ideas, an experienced yet talented team defines the company's in house design team. It leaves no stone unturned when it comes wedding decor. Its class designers are able to plan using textiles for an array of events from corporate brand awareness campaigns, galas, and product launches to social celebrations including weddings, mitzvahs, retirements and birthdays. Its innovative design team makes sure that the event is one of a kind and that its clients go home with happy memories. Events, both intimate in scale and grand in scope, have specific needs to deliver a seamless production. The company offers complete design to see your event from concept through to execution. Experienced and highly professional designer staff allows its clients to be a guest while it ensures that their event runs flawlessly. Its designers make sure that the event achieves and maintains the highest standards in wedding design. The company tailor the event to the exact needs of its clients with its well-motivated and creative design team catering to all needs ensuring the outcome of the event is perfect.<P align=justify><STRONG>Risks and concerns</STRONG><P align=justify><STRONG>Wedding planning and management and event business seasonal or cyclic in nature:</STRONG> A seasonal business is one that is only open during certain times of the year i.e. business that produces a high concentration of its revenue in a single season. The company's Wedding Management Business is produces revenue only 4- 5 months in a year, whereas the Event business is also cyclic in nature which exposes the company to financial risk. It has to make a year‘s worth of money in that short period of time. It is also exposed to Human Resource risk as at the time of season it needs to hire the employees and labour for every season.<P align=justify><STRONG>Dependent upon key suppliers for supplying the products:</STRONG>&nbsp; For financial year ending September 30, 2020, the company's top 10 suppliers have accounted approximately 18.50% of its total purchases/ cost of goods, respectively. The company purchases its products from various suppliers on either pre-agreed rates or flexible rates linked to the prevailing market benchmark. However, the company does not enter into any long-term agreements with its suppliers and its arrangements with them are on short-term and spot basis. Hence, there is no assurance that in future also the company will be able to source its products on timely basis and execute its orders on time or find alternative resources to source its products. Further, if the company is unable to source its products at commercially acceptable prices, or at all, it may affect its ability to fulfill its supply commitments, or to fulfill them in an economical manner, which will have an adverse effect on its business, financial condition and results of operations.<P align=justify><STRONG>Operate in highly competitive and fragmented industry:</STRONG> The Wedding and Event Management Industry is highly fragmented and competitive. The company competes in national and regional markets. It faces competition from various regional and global players. Price competition in the industry is intense. It expects that the level of competition will remain high, which could directly impact the size of its workforce and therefore potentially limit its ability to maintain or increase its market share or profitability. The company's continued success depends on its ability to compete effectively against its existing and future competitors. With the potential influx of new competitors, its ability to retain its existing clients and to attract new clients is critical to its continued success. As a result, there can be no assurance that the company will not encounter increased competition in the future. Nor can there be any assurance that the company will, in light of competitive pressures, be able to remain profitable or, if profitable, maintain its current profit margins.<P align=justify><STRONG>Outlook</STRONG><P align=justify>Incorporated in 1994, Party Cruisers is specialized in wedding management and event management activities. The company's service portfolio is broadly divided into two. Its key revenue generating service is Wedding Management Services and its other is Event Management Services. Within these two services, the company manages all the services ranging from Pre-Event, During-Event and Post Event. This may include wedding planning, wedding decor, stage show organizer, political consultation, political activation, renting of property for events like corporate seminars and weddings etc. Stall preparation for exhibition, destination weddings, resulting in to diversified area coverage due to which the company is not restricted to any single category of clients. It has two registered brands naming ‘Vivaah' and ‘Vows-Away and Beyond' to offer professional wedding services whereas event management facilities are provided under its own-brand ‘Event Factory' and through franchisee. It also has a brand ‘Live Space' that specializes in the venue and set construction, designing as well as consulting facilities for weddings. On the concern side, the company has maintained good and longstanding relationships with its major domestic and international customers; however, it does not have any long-term contract with either of them. The loss of either of significant customer(s) or a significant reduction in their orders and/ services would have a materially adverse effect on its income. Besides, the company may face risks relating to the expansion and strategic investments such as finding a suitable investment option, time frame for expansion and investments, deriving at the suitable amount for expansion and investments, quality of services, meeting the requirement of expansion plans etc.<P align=justify>The company is coming out with a maiden IPO of 15,20,000 equity shares of Rs 10 each at a fixed price of Rs 51 per equity share to mobilize Rs 7.75 crore. On the performance front, during the year 2019-20, the total revenue of the company has decreased to Rs 1509.22 lakh as against Rs 1837.82 lakh in year 2018-19. It represents decrease of 17.88% of the total revenue. This revenue earned from sales of events, venue decor and fresh/artificial flowers. With introduction of GST and rationalize the rate structure, the company‘s products and services have become cheaper and thus it has passed on the benefits to end users. The company has started giving franchises in different states during the year, which has helped increase the sales. The PAT for Financial Year 2019-20 has decreased to Rs 100.09 lakh from profit of Rs 193.47 lakh in Financial Year 2018-19. This was mainly due to decrease in turnover. The company aims to increase its reach within India directly and through its Franchisee Model. The company will do smaller venue tie-ups and farm house in and around Mumbai and look to do intimate personalized boutique weddings. It will also target one tier and two-tier cities as opportunity are better than big cities. The company intends to strengthen its services by leveraging the skills of its employees and focusing on changing trends in the wedding industry which will help to increase the network and retain customers.
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