- November 8, 2022
- Posted by: Santosh Singh
- Category: IPO
Lohia Corp Limited has filed DRHP with SEBI on 3rd, October, 2022 to launch its IPO. The IPO comprises Offer for Sale only.
Business Model of Company
Incorporated in 1981 as a joint venture between the Lohia group, through Lohia Engineering Works, and Machinenfabrik Starlinger & Co. GmbH, Austria, the company sold its first product, circular looms, in 1983 and expanded its product portfolio thereafter by introducing a tape extrusion line under technical collaboration with Windmöller & Hölscher (Germany) in 1984. The Company manufacturers a comprehensive suite of machinery and equipment such as tape extrusion lines, winders, circular loom, coating and lamination lines, printing machine, conversion machine, multifilament yarn machine, recycling machines, twister winder and monofilament extrusion lines, amongst others. As of March 31, 2022, the company supplied its products to over 90 countries.
The Company is one of the leading manufacturers globally of machinery and equipment used in the production of technical textile, in particular for manufacturing polypropylene (“PP”) and high density polyethylene (“HDPE”) woven fabric and sacks (“Raffia”), with a global market share of 17.5% across all Raffia machinery and more than 28.7% for machines used in PP/ HDPE fabric making. The Company is the market leader in India providing end-to-end manufacturing solutions for the Raffia industry with a market share of more than 80% in terms of value and volume, in the machine segment up to the plastic woven fabric stage in Fiscal 2022.
The Company provides end-to-end solutions for the entire ecosystem of woven plastic, offering services from concept to commissioning, throughout the complete lifecycle of its machinery. The Company supplies machinery and equipment through a global sales network, and, as of March 31, 2022, in addition to its four sales offices in India and one corporate office, which also performs sales and marketing functions in India, the company has five international offices located in Brazil, Russia, Thailand, UAE and USA, as well as exclusive sales agents in 22 countries across continents, including regions such as Latin America, Europe, Middle East and Africa.
Who is the Management of the Company?
As on the date of this Draft Red Herring Prospectus, the following is the management of the company:
(i) Raj Kumar Lohia is the Chairman and Managing Director of the Company. He is one of the founding directors of the Company and has been on the Board since the incorporation of the Company. He holds a bachelor’s degree in arts from Kanpur University, Kanpur, India. In the past, he was associated with Merchants Chamber of Uttar Pradesh and Plastics Machinery Manufacturers Association of India. He has also served in the past on the board of directors of J.K. Cement Limited as an independent director.
(ii) Ujjal De is a Whole-time Director of our Company and has been on the Board since February 7, 2022. He has been associated with the Company since August 1, 2016 in the capacity of director of sales and marketing. He holds a bachelor’s degree in technology from Banaras Hindu University, Banaras, India. In the past, he was associated with ABS Plastics Limited, Blue Star Limited, Haldia Petrochemicals Limited, Jai Corp Limited, National Organic Chemical Industries Limited, Reliance Industries Limited, Torrent Exports Limited and Voltas Limited.
Why is the company raising funds via IPO?
The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon. The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder. The Company expects that listing of the Equity Shares will enhance its visibility and brand and provide liquidity to its existing Shareholders. Listing will also provide a public market for the Equity Shares in India.
Is there any OFS in the IPO?
The IPO of the Company includes Offer for Sale only. Details of Offer for Sale by Promoters:
- Raj Kumar Lohia Selling 5125000
- Neela Lohia Selling 410000
- Gaurav Lohia Selling 2000000
- Amit Kumar Lohia Selling 4247000
- Ritu Lohia Selling 1537000
Shareholders Other Than Promoters
- Ajay Lohia Selling 2700000
- Shradha Lohia Selling 3116000
- Gopal Chandra Lohia Selling 320000
- Jitendra Kumar Lohia Selling 2925000
- Alok Kumar Lohia Selling 2619000
- Anurag Lohia Selling 3,741,000
- Anuja Lohia Selling 2955000
Financials of the company?
As per the rested financial statements, in FY22, the total revenue of the company has reported an increase of 68% to Rs. 2279 crore as against Rs. 1365 crore in the previous financial year. The total expenses of the company have also increased 73% to Rs. 2073 crore as against Rs. 1197 crore in the previous financial year. The Profit Before Tax of the company increased 19% to Rs. 200 crore as against Rs. 168 crore in the previous financial year. The net profit of the company has reported an increase of 35% to Rs. 160 crore as against Rs. 119 crore in the previous financial year.
In FY22, the total assets of the company have increased 5% to Rs. 1467 crore as against Rs. 1395 crore in the previous financial year. The total equity and liabilities of the company have also increased 5% to Rs. 1467 crore as against Rs. 1395 crore in the previous financial year.
In FY22, the net cash flow generated from operating activities of the company was Rs. 124 crore as against Rs. 400 crore in the previous financial year. In FY22, the net cash used in investing activities was Rs. 74 crore as against Rs. 105 cash used crore in the previous financial year. In FY22, the net cash used in financial activities was Rs. 66 crore as against Rs. 310 crore in the previous financial year. The cash and cash equivalents for FY22 was Rs. 12 crore as against Rs. 28 crore in the previous financial year.
Risk in The IPO
Disruption in Supply Chain
The Company’s operations are dependent upon the efficient supply chain management of raw materials, parts and components made to drawings and standard parts that are required for manufacturing of machines for the technical textile industry. Significant increases or fluctuations in prices of, or shortages of, or delay or disruption in supply of primary raw materials could affect estimated costs, expenditures and timelines which may have a material adverse effect on the business , financial condition, results of operations and cash flows of the Company.
Heavily Dependent on Plastic Woven Fabric Machines
The Company is heavily dependent on the performance of the plastic woven fabric machines market. The plastic woven fabric machines market depends on the growth of end-use industries such as agro-textiles,
building-textiles, geo-textiles and packing-textiles. Any slowdown in these end-use industries or any other adverse changes in the conditions affecting the plastic woven fabric machines market can adversely impact the business, financial condition, results of operations, cash flows and prospects of the Company.
The Company faces significant competitive pressures in the industry. The inability to compete effectively would be detrimental to the business and prospects for future growth. The Company faces significant competition in the business from other manufacturers of machines for plastic woven fabric/ sacks. The global competitors include Starlinger, Windmoller & Holscher, Yongming Machinery, Tianfeng Plastic Machinery and Hengli Machinery, among others.
Inability to Handle Risk Associated with Export Sales
The inability to handle risks associated with its export sales could negatively affect sales to customers in foreign countries, as well as operations and assets in such countries. In the course of operations, the Company has exported its products to more than 90 countries. For Fiscal 2020, 2021 and 2022, 96.24%, 94.61% and 95.69%, respectively, of its total segment revenue, as per its segment reporting.
Failure to Maintain Technology Infrastructure
Failure to maintain or improve technology infrastructure could harm the business of the Company and prospects. The future success may depend in part on the ability to respond to technological advances and emerging standards and practices on a cost effective and timely basis. The development and commercialization of new products is complex, time-consuming and costly, and its outcome is inherently uncertain. Any uncertainty may adversely affect the business, financial condition, results of operations and prospects of the Company.