The Rs 1,346-crore initial public offering of Polycab India, the wires and cables manufacturer, will open for subscription on April 5. The IPO consists of fresh issue as well as offer for sale.
The public issue bidding will close on April 9. Equity shares are proposed to be listed on BSE and National Stock Exchange.
The global co-ordinators and book running lead managers to the offer are Kotak Mahindra Capital Company, Axis Capital, Citigroup Global Markets India and Edelweiss Financial Services. the book running lead managers to the offer are IIFL Holdings and YES Securities (India).
Here are 10 key things to consider before subscribing the issue:
Company Profile
Polycab India (PIL) is engaged in the business of manufacturing and selling wires and cables and fast moving electrical goods (FMEG) under the Polycab brand.
According to CRISIL Research, PIL is the largest manufacturer in the wires and cables industry in India, in terms of revenue from the wires and cables segment and provide one of the most extensive range of wires and cables in India.
In fiscal 2018, PIL had a market share of approximately 18 percent of the organised wires and cables industry and approximately 12 percent of the total wires and cables industry in India, estimated at Rs 52,500 crore based on manufacturers realisation.
Apart from wires and cables, PIL also manufactures and sells electric fans, LED Lighting and luminaires, switches and switchgears, solar products and conduits and accessories.
Its distribution network in India comprises over 2,800 authorised dealers and distributors and 30 warehouses, as on December 31, 2018.
PIL has 24 manufacturing facilities, including their two joint ventures with Techno Electromech and Trafigura Pte, located across the states of Gujarat, Maharashtra and Uttarakhand and the union territory of Daman and Diu.
Four out of these 24 manufacturing facilities are for the production of FMEG, including 50:50 joint venture with Techno, a Gujarat-based manufacturer of LED products.
About Public Issue
The public issue consists of a fresh issue of equity shares aggregating up to Rs 400 crore by the company and an offer for sale up to 1,75,82,000 equity shares by the investor as well as promoter selling shareholders.
The offer includes a reservation of up to 1,75,000 equity shares for eligible employees. A discount of Rs 53 per share is being offered to eligible employees.
The price band for issue is Rs 533-538 per share.
Bids can be made for a minimum lot of 27 equity shares and in multiples of 27 equity shares thereafter.
Fund Raising
Polycab aims to raise Rs 1,346 crore through the public issue, which includes Rs 400 crore fresh issue and offer for sale of Rs 945.91 crore at higher end of the price band.
Objectives of Issue
The net proceeds from the fresh issue are proposed to be utilised for (i) scheduled repayment of all or a portion of certain borrowings, (ii) to fund incremental working capital requirements and (iii) for general corporate purposes.
The company will not receive any proceeds from the offer for sale as the shareholders who are selling their stake will be entitled to receive proceeds.
Competitive Strengths
1) Polycab is the largest wires and cables manufacturer in India, in terms of segment revenues, with a market share of approximately 18 percent of the organised wires and cables industry and approximately 12 percent of the total wires and cables industry in Fiscal 2018.
2) The company manufactures and sells a diverse portfolio of wires and cables and FMEG, which also give it the opportunity to cross-sell products to its diverse base of customers.
3) Its distribution network across India also enables it to roll out new products more quickly, which gives a competitive advantage over competitors.
4) It has manufacturing facilities with high degree of backward integration.
5) Strong brand in the electrical industry.
6) Experienced and committed management team
Strategies
1) Enhance and strengthen leadership position in wires and cables
2) Continue to expand FMEG business
3) Expand distribution reach
4) Continue to invest in technology to improve operational efficiencies, customer satisfaction and sales
5) Strengthen brand recognition
Financials and Peer Comparison
Promoters and Shareholding
Promoters of the company are Inder T Jaisinghani, Ajay T Jaisinghanim, Ramesh T Jaisinghani and Girdhari T Jaisinghani.
Following is the list of top 10 shareholders and the number of equity shares held by them as of March 28, 2019
Management
Inder T Jaisinghani is the Chairman and Managing Director of the company while Ajay T Jaisinghani and Ramesh T Jaisinghani are Whole-Time Directors.
Shyam Lal Bajaj is the Chief Financial Officer and Whole-Time Director while Radhey Shyam Sharma, Tilokchand Punamchand Ostwal, Pradeep N Poddar and Hiroo Mirchandani are Independent Directors.
Ramakrishnan Ramamurthi, the Chief Executive since May 23, 2018, has significant work experience of 36 years in management and organisational leadership. Prior to joining Polycab, he had worked for around 12 years in Bajaj Electricals and 17 years in Asian Paints.
Manoj Verma, the Executive President and Chief Operating Officer (CE), has significant work experience in sales, marketing and operations while Gandharv Tongia is the Deputy Chief Financial Officer of the company.
Risk Factors
Brokerage houses have highlighted following risks:
1) Significant increases or fluctuations in prices of, or shortages of, or delay or disruption in supply of primary raw materials could affect company’s estimated costs, expenditures and timelines which may have a material adverse effect on its business, financial condition, results of operations and cash flows.
2) High dependence on the wire and cable market (89.3 percent of FY18 revenue),
3) Extended losses in JVs.
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