- November 18, 2022
- Posted by: Santosh Singh
- Category: IPO
Plaza Wires Limited has filed DRHP with market regulator SEBI on 10th, May, 2022 to launch its IPO.
The IPO entirely comprises issuance of 1,64,52,000 Fresh equity shares.
Business Model of Company
The company is engaged in the business of manufacturing and selling of wires, and selling and marketing of LT aluminium cables and fast moving electrical goods under the flagship brand “PLAZA CABLES” and home brands such as “Action Wires” and “PCG”. The Company was started with a vision to create a niche in the domestic wire and cable industry with an approach to provide quantitative and qualitative products at competitive prices to customers for various backgrounds. In 2021, the Company launched a line of house wire under the brand “Action Wires” for products at economical price range.
According to the Resurgent India Research Report, the Company is one of the growing manufacturers in the wires and cables industry in the northern region of India, and provides an extensive range of wires and cables. The product mix comprises different types of wires and cables, and FMEG such as electric fans, water heaters, switches and switchgears, PVC insulated electrical tape and PVC conduit pipe & accessories.
In 2016 and onwards, the Company entered into arrangements with third-party manufacturers and launched FMEG products such as electric fans, and water heaters. As part of after sales service for electric fans, the Company ties up with 20+ service centers in Uttar Pradesh, Uttarakhand, Jammu and Kashmir, Punjab, Haryana And Tamil Nadu.
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) Mr. Sanjay Gupta, is the Managing Director and one of the Promoters of the Company. He has been on the Board of Directors of the Company since March 12, 2008 and was appointed as the Managing Director and Chairman of the Company from March 10, 2022. He holds a Bachelor of Commerce from the University of Delhi. He possesses approximately 25 years of experience in the electrical industry. He oversees the entire planning of the manufacturing, sales and finance departments in the Company.
(ii) Mrs. Sonia Gupta, is a Whole-time Director one of the Promoters of the Company. She has been on the Board of Director of the Company since March 21, 2008. She holds a degree in Bachelor of Arts (Honors) from University of Delhi. She has approximately 25 years of work experience in the electrical industry. She has been instrumental in planning and formulating the overall business and commercial strategy and managing the financial planning of the Company.
Why is the company raising funds via IPO?
The Company proposes to utilize the Net Proceeds towards funding of the following objects:
1. Funding the capital expenditure towards setting up of a new manufacturing unit for house wires, fire-resistant wires & cables, aluminum cables and solar cables to expand the product portfolio.
2. Funding the working capital requirements of the Company.
3. General corporate purposes.
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 Plaza Wires Limited includes Fresh Issue only. There is no OFS in the IPO of Plaza Wires Limited. The IPO entirely comprises issuance of 1,64,52,000 Fresh equity shares.
Financials of the company?
As per the financial statements, in FY22, the total revenue of the Company increased 21% to Rs. 177 crore as against Rs. 146 crore in the previous financial year. The total expenses of the Company have increased 20% to 168 crore as against Rs. 140 crore in the previous financial year. The Profit Before Tax of the Company was Rs. 9 crore compared to Rs. 6 crore in the previous financial year. The Profit After Tax of the Company also increased 50% to Rs. 6 crore compared to 4 crore in the previous financial year.
In FY22, the total assets of the Company increased 5% to Rs. 104 crore as against Rs. 99 crore in the previous financial year.
The total equity and liabilities of the Company also increased 5% to Rs. 104 crore as against Rs. 99 crore in the previous financial year.
In FY22, the cash generated from operating activities of the Company was Rs. 12 crore as against Rs. 8 crore cash used in the previous financial year. The cash used in investing activities of the Company was Rs. 4 crore as against Rs. 8 crore in the previous financial year. The net cash used in financial activities of the Company was Rs. 7 crore as against Rs. 3 crore in the previous financial year.
Risk in The IPO
Inadequate or Interrupted Supply and Price Fluctuation of the Raw Materials
Manufacturing quantity and cost of the products are dependent on the ability to source raw materials and packaging materials at acceptable prices and maintain a stable and sufficient supply of the major raw materials. The principal raw materials used in the manufacturing process are copper and insulation materials such as PVC compounds. The raw materials the Company uses are subject to price volatility and unavailability caused by external conditions, such as commodity price fluctuations within India and globally. Inadequate or interrupted supply and price fluctuation of raw materials could adversely affect the business, results of operations, cash flows, profitability and financial condition.
The Company is Dependent on Significant Amounts of Working Capital
The Company requires significant working capital, such as to finance the purchase of raw materials, consumables, stores & spares and payments for operating expenses before the Company receives payment from the customers. The Company requires significant amounts of working capital and a significant portion of the working capital is consumed in trade receivables and inventories. The inability to meet the working capital requirements including failure to realize receivables and inventories may have an adverse effect on the results of operations and overall business of the Company.
Company Doesn’t Have Any Long Term Agreement with Dealers or Customers
The Company has not entered into any long term or definitive agreements with its dealers or customers. If the dealers or customers choose not to source their requirements from the Company, the business, financial condition and results of operations may be adversely affected. Consequently, there is no commitment on the part of the customer to continue to source their requirements from the Company, and as a result, the sales from period to period may fluctuate significantly as a result of changes in the customers’ vendor preferences.
The Company is Subject to Strict Quality Requirements
The Company is subject to strict quality requirements and any product defect issues or failure by the raw material suppliers to comply with quality standards may lead to the cancellation of existing and future orders, recalls and exposure to potential product liability claims. The Company may face an inherent business risk of exposure to product defects and subsequent liability claims if the use of any of the products results in personal injury or property damage. The products manufactured by the Company need to comply with certain standards as prescribed by the Bureau of Indian Standards (BIS).
Tight Competition from Large Players
The Company competes in the wires & cables industry on the basis of the range of the products, quality of the products, price, and dealers & distribution network. The industry in which the Company is highly competitive. According to the Resurgent India Research Report, the Indian cables and wires industry has been gradually moving from a largely unorganized sector comprising smaller regional players towards an organized sector comprising pan-India branded market players across all categories. The Company faces tight competition from large players, which may affect the business operations and financial conditions of the Company.