Incorporated
in 2002, Ratnaveer Precision Engineering Limited is a stainless steel (SS)
product manufacturer focused on producing finished sheets, washers, solar
roofing hooks, pipes, and tubes.
The company
is promoted and managed by its Managing Director and Promoter, Vijay Ramanlal
Sanghavi.
The company
operates four manufacturing units, of which two (Unit-I and Unit-II) are
located at GIDC, Savli, Vadodara, Gujarat, one (Unit-III) is located at
Waghodia, Vadodara, Gujarat, and the other (Unit-IV) is located at GIDC, Vatva,
Ahmedabad, Gujarat. The manufacturing facilities located at Vadodara and
Ahmedabad, Gujarat, with an installed capacity of 26000 metric tonne per annum,
was utilized around 84% during the last three years ended March 31, 2023
The company
manufactures SS finishing sheets, SS washers and SS solar mounting hooks at
Unit I and SS pipes and tubes at Unit II. Unit III and Unit IV are dedicated
for the backward integration process. Unit III is the melting unit where it
melts steel scrap and turns it into steel ingots. Unit IV is the rolling unit
where flat ingots are further processed to turn them into SS sheets, which are
the raw material for SS washers. Its units are supported by infrastructure for
storage of raw materials, manufacturing of its products, storage of finished
goods, together with a quality control and R&D laboratory.
Domestic
revenues stood at Rs 387.539 crore in FY2023, which formed 80.79% of total revenue
(80.39% in FY2022), while export revenue was Rs 92.191 crore, which formed
19.21% of total revenue (19.61% in FY2022).
The companys
products find application across various industries including automotive, solar
power, wind energy, power plants, oil & gas, pharmaceuticals, sanitary
& plumbing, instrumentation, electro mechanics, architecture, building
& construction, electrical appliances, transportation, kitchen appliances, and
chimney liners.
The company
primarily needs stainless steel coils, sheets, and wire to manufacture its
products. In addition to SS coils, sheets, and wire, it also acquires SS scrap
to process it into SS ingots under the backward integration process. The
company sources raw materials from its suppliers based on quality
specifications and cost effectiveness. SS coil, sheet and scrap are acquired
locally as well as from foreign suppliers from Indonesia, Switzerland, Hong
Kong and Singapore. The power requirements are met through the local power
grids maintained by the state power grid. It maintains power back-ups through
DG sets to ensure unhindered production in case of power cuts by local
electricity providers.
The company
intends to expand its portfolio of SS washers by adding circlips into the
product line. It currently offers over 2500 SKUs (stock keeping units) of SS
washers to its customers including inner ring washers, spring washers, nord
lock washers, retaining rings, internal tooth washers, and external tooth
washers of different sizes and specifications. It has taken the land located at
E-78, GIDC Industrial Estate, Savli, District Vadodara, Gujarat, which is
adjoining to its Unit I, on a 99-year lease from GIDC, for this expansion. It
has undertaken R&D activity for developing circlips and has developed the
required tools and identified prospective customers.
The Offer and the Objects
The offer
comprises fresh issue of 13800000 equity shares aggregating up to Rs 135 crore
at the upper price band of Rs 98 and Rs 128 crore at the lower price band of Rs
93 by the company and an offer for sale of up to 3040000 equity shares
aggregating Rs 30 crore at the upper price band of Rs 98 and Rs 28 crore at the
lower price band of Rs 93.
Promoter
Vijay Ramanlal Sanghavi has offered sale of up to 3040000 equity shares, which
shall lead to his post-issue shareholding decrease to 53.5% from 83.6% pre-issue
shareholding.
The company
proposes to utilize the net proceeds of the fresh issue towards funding working
capital requirements amounting to Rs 85 crore and balance towards general
corporate purposes prepayment.
Strengths
SS is a
value-added product with high corrosion resistant properties. Higher levels of
chromium and additions of other alloy elements (Nickel and Molybdenum) enhance
the corrosion resistance. Compared to traditional steel, SS has higher
resistance to corrosion, superior aesthetic finish and higher life span. These
features have helped in increasing the popularity of stainless-steel across the
world.
High
recyclability, resistance to corrosion and low maintenance properties have made
SS a preferred metal for application in diverse sectors railway, metro project,
process industries, bridges, nuclear, airport, transportation, and kitchenware.
The per
capita SS consumption in India remains low. India’s per capita SS consumption
increased from 1.2 Kg in 2010 to 2.5 Kg in 2019. However, its consumption is
comparatively lower compared to the world average of 6 Kg. This low consumption
pattern is an indication of the inherent opportunities existing in the sector.
The company
is one of the few tohave a backward integration model. While its two units
(Unit I and II) are dedicated for manufacturing the products, which are offered
to customers. The other two units (Unit III and IV) are dedicated towards
processing the byproducts generated in manufacturing products and converting it
back into the raw material for its products. Raw material generated through
backward integration was 11.03% of total raw material requirement, while 88.97%
was from external resources in FY2023.
The company’s
manufacturing units are strategically located with availability of
transportation, which facilitates convenient transportation of products.
The company
started business activities by manufacturing SS washers and have since branched
out to manufacturing SS finishing sheets, SS solar roofing hooks, SS tubes and
pipes, which has enabled it to diversify its product portfolio manifold. Having
a wide range of products not only enables it to meet the trends and the ever-changing
demands of its customers but also gives the company an edge to efficiently
compete with competitors.
The company
has an in-house R&D facility at Unit I, where it develops tools and moulds
for its products.
Revenue
contribution from top 10 customers is Rs 147.199 crore, Rs 190.695 crore and Rs
238.062 crore, contributing 35.60%, 35.35%, 38.84%, and 49.62%, for fiscals
2021, 2022 and 2023, respectively. The company’s diversified customer base
signifies its non-dependence on any single customer and thereby hedges its
business operations from potential customer specific risk and sector specific
risks.
Weaknesses
The company operates in an industry which is
highly competitive and fragmented with low barriers to entry and it competes
with a range of organized and unorganized players, both at the national and
regional level.
The pricing in the steel industry is subject
to market demand, volatility, and economic conditions. Fluctuations in steel
prices may have a material adverse impact on its business, results of
operations, prospects, and financial conditions.
The business requires a significant amount of
working capital primarily as a considerable amount of time passes between
purchase of raw materials and collection of receivables post sales to
customers.
The business is a high volume-low margin
business. Due to this nature of business, sudden changes with respect to price
movements in goods being traded or sudden ad hoc anomalies in business or
operations could substantially affect its net bottom lines and hence, adversely
affect results of operations and financial conditions.
The company has experienced negative cash
flows in relation to its operating, investing, and financing activities in the
last three financial years.
The company has not received the necessary
approval from the competent authority for construction of a portion of its
factory premises at Unit-I, admeasuring about 1,300 square meters.
The company is required to obtain consent
under certain environmental laws, which are critical for operating its units.
Any failure to comply with environmental laws and the terms andconditions of
approvals issued under such environmental laws and regulations could also
impact its ability to obtain or renew the approvals with respect to its units
in a timely manner or at all and may also adversely affect its ability to
operate its units and consequently affect results of operations.
The company is required to obtain, renew, or
maintain certain statutory and regulatory permits and approvals required to
operate its business and if it fails to do so in a timely manner or at all and
its business, financial conditions, results of operations, and cash flows may
be adversely affected.
Activities involving its manufacturing process
can be dangerous and can cause injury to people or property in certain
circumstances. A significant disruption at any of its manufacturing facilities
may adversely affect its production schedules, costs, sales, and ability to
meet customer demand.
Valuation
For FY2023,
consolidated sales were up by 12% to Rs 479.75 crore. OPM rose 310 bps to 9.5%,
which led to 66% increase in operating profit to Rs 45.63 crore. Other income
decreased 9% to Rs 1.4 crore, while interest cost rose 5% to Rs 12.29 crore and
depreciation increased 2% to Rs 4.02 crore. PBT increased 128% to Rs 30.71
crore. Tax expenses were 43% higher at Rs 5.67 crore. Net profit increased 164%
to Rs 25.04 crore.
FY2023 EPS
on post-issue equity works out to Rs 5.2. At the upper price band of Rs 98, P/E
works out to 19.
There are
no listed companies that are exclusive Stainless-Steel manufacturer of finished
sheets, washers, solar roofing hooks, pipes and tubes. However, listed peers
who are in similar line of business and manufacturer of SS products in India, a
set of listed peers are Jindal Stainless, M.M. Forgings Limited, Menon Bearings
Limited, and Venus Pipes & Tubes Limited
As of 29August
2023, its listed peers such as MM Forgings trades at TTM P/E of 17.6, Menon
Bearings at TTM P/E of 26.2,Venus Pipes &Tubes at TTM P/E of 58.7,andJindal
Stainless trades at TTM P/E of 17.3.
For FY2023,
RatnaveerPrecision EngineeringOPM and ROE stood at 9.5% and 29.1%,
respectively, as compared to 19.7% and 18.2% for MM Forgings, 24.6% and 24.5%
for Menon Bearings, 12.9% and 9.8% for Venus Pipes & Tubes and 10.5% and
24.4% for Jindal Stainless, respectively.
Ratnaveer Precision Engineering:Issue Highlights
|
Fresh issue (in number of shares)
|
13800000
|
Offer for sale (in number of shares)
|
3040000
|
Offer for sale (in Rs crore)
|
|
- in Upper price band
|
30
|
- in Lower price band
|
28
|
|
|
Price Band (Rs)
|
93-98
|
For Fresh Issue Offer size (in Rs crore )
|
|
- in Upper price band
|
135
|
- in Lower price band
|
128
|
Pre issued capital (Rs crore)
|
34.70
|
Post issue capital (Rs crore)
|
48.5
|
Pre issue promoter shareholding (%)
|
86.30
|
Post issue Promoter shareholding
|
55.48
|
Bid Size (in No. of shares)
|
150
|
Issue open date
|
04-09-2023
|
Issue closed date
|
06-09-2023
|
Listing
|
BSE, NSE
|
Rating
|
38/100
|
Ratnaveer Precision Engineering: Consolidated Financials
|
Particulars
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
Total Income
|
359.66
|
426.94
|
479.75
|
OPM
|
5.5
|
6.4
|
9.5
|
Operating Profits
|
19.93
|
27.53
|
45.63
|
Other Income
|
4.39
|
1.53
|
1.40
|
PBIDT
|
24.32
|
29.06
|
47.02
|
Interest
|
12.05
|
11.67
|
12.29
|
PBDT
|
12.27
|
17.39
|
34.73
|
Depreciation
|
2.67
|
3.94
|
4.02
|
PBT
|
9.59
|
13.45
|
30.71
|
Share of Profit/loss of JV
|
0.00
|
0.00
|
0.00
|
PBT Before EO
|
9.59
|
13.45
|
30.71
|
EO
|
0.00
|
0.00
|
0.00
|
PBT after EO
|
9.59
|
13.45
|
30.71
|
Provision for Tax
|
4.13
|
3.98
|
5.67
|
Profit after Tax
|
5.46
|
9.48
|
25.04
|
PPA
|
0.00
|
0.00
|
|
Net profit after PPA
|
5.46
|
9.48
|
25.04
|
MI
|
0.00
|
0.00
|
0.00
|
Net profit after MI
|
5.46
|
9.48
|
25.04
|
EPS (Rs)*
|
1.1
|
2.0
|
5.2
|
*EPS annualized on post issue equity capital of Rs 48.5 crore of face
value of Rs 10 .each
|
# Not annualised due to seasonality of business
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|