Geojit Financial has come out with its report on Polycab India. The research firm has recommended to "Subscribe" the IPO in its research report as on April 04, 2019
Purpose of IPO: At the upper price band, total issue size stands at Rs 1,346cr comprising fresh issue of Rs 400cr and an offer for sale of Rs 946cr. From the fresh issue of Rs 400cr, Rs80cr will be used for reducing debt and Rs240cr will be utilised to fund the incremental working capital requirements of the company
Valuation and Outlook
Polycab India Ltd (Polycab) is one of the leading manufacturers of Cables & Wires, having ~18% market share of the organised industry. Polycab has a diverse range of wires and cables (contributes ~87% of revenue as of 9MFY19) and their key products are power and control cables, instrumentation cables, solar cables, building wires and flexible cables. Additionally, company manufactures and sells FMEG (Fast moving electrical goods-LED, Fans, Switch gears & solar products contributing ~8% of overall revenues. Further, Polycab undertakes EPC (Engineering, Procurement and Construction) business which contributes 4% to total revenues. From a pure B2B (Business to Business) player, the company started catering to B2C (Business to consumer) to tap emerging opportunities in this segment. During FY15-18, revenue and EBITDA grew at robust CAGR of 13% & 19% respectively while PAT grew at a CAGR of 31%. The strong financial performance showcased its growing strength in the industry. Strong balance sheet with debt/equity ratio of 0.4x and its focus to reduce debt by using IPO proceeds will strengthen its balance sheet further. With its quality and diversified products and rising demand in each of its business verticals provides ample scope for further scale-up in operations. At upper price band of Rs 538, Polycab is available at an attractive P/E of 21.5x on FY18 EPS (Post IPO dilution) compared to its industry peers. With better prospects in hand, we recommend “Subscribe” to the issue with a medium to long term perspective.
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