Sharp Chucks And Machines Limited IPO

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i. Sharp Chucks And Machines started its manufacturing operations in the year 1994 with their first manufacturing plant set up in Jalandhar.

ii. The company is one of the few integrated companies to have the capability to manufacture forging products, casting products and machined components, that finds its application in a diverse industry, such as tractor, automobiles, material handling & earth moving equipment, railways, defense, machine tools, DIY industry, etc. Our range of products under our manufacturing capabilities is summarized as under:

iii. They manufacture these products from our Manufacturing Units (as defined below) ensuring conformity with the international standards. Their manufacturing facilities have advanced technologies to develop and manufacture the products that meet the stringent quality control requirements of our customer.

iv. The Company is engaged in the manufacturing of forging and graded casting machined components of tractors and other automobiles, and are also engaged in power chucks, lathe chucks, drill chucks, and other machine tools accessories They supply to automobile industries in India and OEMs industries.

v. The Company has necessary instruments for checking the quality of our raw materials and finished goods for measuring the sizes and shapes in order to match the standards based on the standardized dimensions as well as customer specifications. If the raw materials purchased through the purchase orders fail to confirm to the required standards for manufacturing their products, the same are liable to be rejected and are returned to the suppliers/vendors. The finished products are also tested in-house to ensure that the same is of relevant standards and design as specified by the customer; the products are then packed and dispatched to the end users or customers.

Competitive Strengths

i. In-house manufacturing facilities and machining centre
ii. Wide product range and customized product offering
iii. Vast Experience of Promoters

Objects of the Sharp Chucks And Machines Limited IPO:

The company intends to utilize the net proceeds from the issue towards the funding of the following objects: i. Funding of working capital requirements; and ii. General corporate purposes. The total number shares issues: - a) Fresh Issue is 975,484 shares. b) Offer for Sale is 1,928,516 shares.
DRHP of Sharp Chucks And Machines Limited IPO
RHP of Sharp Chucks And Machines Limited IPO

Sharp Chucks And Machines Limited IPO Details:

Open Date: Sep 29 2023
Close Date: Oct 05 2023
Total Shares: 2,904,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Price Issue IPO
Issue Size: 16.84 Cr.
Lot Size: 2000 Shares
Issue Price: ₹ 58 Per Equity Share
Listing At: NSE Emerge
Listing Date: Oct 13 2023

Promoters And Management:

Ajay Sikka is the Chairman and Managing Director of the Board of the Company. He has been a Director of the Company since February 01, 2004. He holds a bachelor of degree in arts from Guru Nanak Dev University. He has an over 20 years of experience in the automobile components industry Gopika Sikka is the Whole Time Director and Chief Financial Officer of the Board of the Company. She has been a Director of the Company since May 17, 2013. She holds a bachelor of degree in commerce from Delhi University. She has an over 7 years of experience in handling human resources, training and development and administration. She looks over the human resource and responsible to implement welfare activities. Avinash Joshi is a Non-Executive Director of the Board of the Company. He has been on the Board of the Company since November 17, 2022. He holds a advanced diploma in foundry technology and a diploma in business management. He has an over 30 years of experience in foundry technology.

Financials of Sharp Chucks And Machines Limited IPO:

Particulars ( In Lakhs )
2021
2022
2023
Revenue from Operations 13,546 15,191 17,645
Other Income 37 61 286
Total Revenue 13,583 15,252 17,931
Direct Cost 10,878 12,133 14,864
Changes in Inventories -71 -201 -1,198
Employee benefits expenses 660 933 1,306
Other Expenses 606 615 820
EBITDA 1,509 1,772 2,139
Depreciation & Amortisation 397 472 569
Finance Cost 641 659 853
EBIT 1,112 1,300 1,570
OPM (%) 11.11% 11.62% 11.93%
PBT 471 641 717
Tax 140 188 210
PAT 331 453 507
NPM (%) 2.44% 2.97% 2.82%
No.of Shares 107.59 107.59 107.59
EPS 3.07 4.20 4.70
 

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Sharp Chucks And Machines Limited 176 5 4.70 12.3 58 62
Pritika Engineering Components Limited 82 4 3.25 20.7 67.4 73
Nelcast Limited 1,264 30 3.42 49.2 165 1,432
Bhagwati Autocast Limited 154 8 26.80 22.5 585 168
*  All the data is as per FY23.

Recommendation on Sharp Chucks And Machines Limited IPO:

Review And Recommendation of Sharp Chucks and Machine SME IPO by IZ team is 3/10

Overview of Sharp Chucks And Machines Limited

1. Founded in 1994, the Jalandhar-based company specializes in manufacturing lathe chucks, power chucks, drill chucks, machine tool accessories, and auto parts. 2. The company serves a broad range of industries including automotive, material handling, earth-moving equipment, sugar plants, and cement plants.

Revenue and Financial Metrics

1. The company's revenue grew from INR 105 crore in 2019 to INR 176 crore in 2023. 2. Despite the revenue growth, the Profit After Tax (PAT) margins are relatively low, under 3%. 3. The Return on Equity (ROE) and Return on Capital Employed (ROCE) stand at 10-11%.

Risk Factors

1. The company is heavily reliant on the tractor segment and commercial vehicles in India, making it vulnerable to sectoral downturns. 2. The company's ROCE is less than the Weighted Average Cost of Capital (WACC), which is generally around 13-14% in India. This indicates that the business may not be generating a sufficient return on capital.

Debt Profile

1. As of March 31, 2023, the total debt stands at INR 82 crore. 2. The net worth of the company is INR 52 crore, making the Debt-to-Equity ratio (D/E) around 1.57x, which is on the higher side.

IPO Details

1. The total IPO size is INR 16 crore. 2. INR 11 crore will facilitate the complete exit of SIDBI India Opportunity Fund, which had invested in the company in 2014. 3. INR 5 crore will be used for the company's working capital needs.

Use of Proceeds

Had the entire INR 16 crore been allocated to the company, it would have helped in reducing the debt and consequently, the finance cost. This could have improved PAT margins, benefiting investors.

SIDBI's Exit

1. SIDBI had invested INR 7.5 crore in 2014 and is exiting at INR 11 crore. 2. Over the past 9 years, this investment has yielded an annual return of only 5%, which may be the reason for SIDBI's complete exit.

Valuation and Final Thoughts

1. The valuation seems reasonable, but the business is not highly lucrative and faces stiff competition. 2. Given these factors, investors should conduct thorough due diligence before investing in this IPO.

Lead Manager of Sharp Chucks And Machines Limited IPO:

  1. Fedex Securities Limited

Registrar of Sharp Chucks And Machines Limited IPO:

  1. Skyline Financial Services Private Ltd

Company Address:

Sharp Chucks And Machines Limited A-12 Industrial Development Colony Jalandhar - 144012 Phone: +0181 -2610341 Email: cs@sharpchucks.com Website: https://sharpchucks.com/index.html

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