Rishabh Instruments Limited

Rishabh Instruments Limited has filed  its DRHP with market regulator SEBI on January 02, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale. The size of Fresh Issue is up to [●] Equity Shares aggregating up to 75 crore and OFS of up to 9,417,500 Equity Shares aggregating up to [●] crore. As part of OFS the selling shareholders are Asha Narendra Goliya, Rishabh Narendra Goliya, Narendra Rishabh Goliya and SACEF Holdings II. 

Business Model of the Company

Rishabh Instruments Limited is a global energy efficiency solution company focused on electrical automation, metering and measurement, precision engineered products with diverse applications across industries including power, automotive and industrial sectors. The Company supplies a wide range of electrical measurement and process optimization equipment, and is engaged in designing, developing and manufacturing, and sale of devices significantly under its own brand across several sectors.

The Company provides comprehensive solutions to the customers looking for cost-effective ways to measure, control, record, analyze and optimize energy and processes through the array of products. The Company also provides complete aluminium high pressure die casting solutions for customers requiring close tolerance fabrication (such as automotive compressor manufacturers and automation high precision flow meters manufacturers), machining and finishing of precision components.

The Company is a global leader in manufacturing and supply of analog panel meters, and it is among the leading global companies in terms of manufacturing and supply of low voltage current transformers (Source: F&S Report). Lumel is the most popular brand in Poland for meters, controllers, and recorders and Lumel Alucast is one of the leading non-ferrous pressure casting players in Europe (Source: F&S Report).

The Company is a vertically integrated player involved in designing, developing, manufacturing and supplying (a) electrical

automation devices; (b) metering, control and protection devices; (c) portable test and measuring instruments; and (d) solar string inverters. In addition, the Company manufactures and supplies aluminium high pressure die casting through its Subsidiary, Lumel Alucast. For six years (Fiscals 2005, 2006, 2008, 2009, 2011 and 2012), the Engineering Export Promotion Council, India, recognised the Company as a ‘Star Performer’ in the product group of miscellaneous instruments and appliances (large enterprise). The Company also provides certain manufacturing services which include mould design and manufacturing, EMI/EMC testing services, Electronic Manufacturing Services, and software solutions (e.g., MARC).

Management of the Company

(i) Narendra Joharimal Goliya is the Chairman and Managing Director of the Company. He is the founder and Promoter of the Company. He has been associated with the Company since its incorporation and accordingly has over four decades of experience in the manufacturing and electrical industry. He holds a bachelor’s degree in technology (electrical engineering) from the Indian Institute of Technology, Bombay and a master’s degree in science from the Leland Stanford Junior University. He is also on the board of Nashik Engineering Cluster, Nashik Exhibition and Business Centre and Nashik Manav Sewa Foundation.

(ii) Parappath Kottekode Ramakrishnan is a Non-Executive Director of the. Company. He holds a bachelor’s degree in science (mechanical engineering) from the University of Kerala. He was previously associated with VIP Industries Limited and Madras Rubber Factory Limited.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. 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.

Fresh Offer

The Company proposes to utilize the Net Proceeds from the Issue towards:

1. Financing the cost towards expansion of Nashik Manufacturing Facility I (“Expansion Project”)

2. General corporate purposes 

In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges and enhancement of the Company’s brand name amongst its existing and potential customers and creation of a public market for the Equity Shares in India.

Risks in the IPO

Subject to certain risks in the manufacturing process

The business of the Company is dependent and will continue to depend on its manufacturing facilities, and it is subject to certain risks in the manufacturing process. Any slowdown or shutdown in the manufacturing operations could have an adverse effect on business, financial condition and results of operations of the Company. 

Delay in production plana 

The Company requires to maintain and enhance its production capabilities by adjusting and streamlining the production resources and processes, and acquiring, expanding and upgrading the testing equipment and production facilities. The Company may not be able to maintain and enhance its production capabilities in time or implement the production plans effectively. If it is unable to maintain or enhance the production capabilities to satisfy customer demand, or the production operations suffer unanticipated or prolonged interruption, the business and results of operations would be adversely affected.

The lack of long term relationship with customers 

The Company does not have long term agreements with its customers and rely on purchase orders for delivery of the products. Loss of one or more of the customers or a reduction in their demand for the products could adversely affect the business, results of operations and financial condition.

Subject to strict quality requirements 

If the products the Company manufactures experience quality defects or if the manufacturing services the Company provide are found to be deficient, the Company may lose its customers and may be subject to product liability claims or claims alleging deficiency in service, which may also cause damage to the reputation and/or adversely affect the results of operations and financial condition.

Failure to manage component and material purchasing

Failure to manage component and material purchasing and shortages in the supply of the major production inputs could adversely affect the ability to deliver contracted volumes of manufactured products, increase the inventory carrying costs, increase the risk of exposure to inventory obsolescence and may have a material adverse effect on the results of operations and financial condition.

Financial Performance 

As per the financial statements of the Company, here are Financial Highlights for FY22 compared to FY21:

Total Income

The Company’s total income increased by 19% to Rs. 479 crore in FY22, compared to Rs. 402 crore in FY21.

Total Expenses

Total expenses of the Company increased by 18% to Rs. 420 crore in FY22, compared to Rs. 356 crore in FY21.

Profit Before Tax

The Company’s profit before tax increased by 31% to Rs. 59 crore in FY22, compared to Rs. 45 crore in FY21.

Profit After Tax

Profit after tax of the Company increased by 40% to Rs. 49 crore in FY22, compared to Rs. 35 crore in FY21.

Total Assets

The Company’s total assets amounted to Rs. 563 crore in FY22, compared to Rs. 511 crore in FY21.

Total Equity and Liabilities

The Company’s total equity and liabilities were Rs. 563 crore in FY22, compared to Rs. 511 crore in FY21.

Net Cash from Operating Activities

The net cash generated from operating activities was Rs. 13 crore in FY22, compared to Rs. 52 crore in FY21.

Cash Used in Investing Activities

The total cash used in investing activities was Rs. (10) crore in FY22, compared to Rs. (20) crore in FY21.

Cash Used in Financial Activities

The total cash used in financial activities was Rs. (7) crore in FY22, compared to Rs. (23) crore in FY21.

Net Cash and Cash Equivalents

The net cash and cash equivalents at the end of FY22 were Rs. 46 crore, compared to Rs. 54 crore in FY21.