Bansal Wire Industries is the largest stainless-steel wire manufacturer and the second largest steel wire manufacturer by volume in India. Arun Gupta, Anita Gupta, Pranav Bansal and Arun Kumar Gupta HUF are the promoters of the company.

Manufacturing steel wires since the last 38 years, the company caters to various sectors, with a diversified portfolio spread across high carbon steel wire, mild steel wire (low carbon steel wire) and stainless-steel wire. It is adding a new segment of specialty wires. These will be manufactured at Dadri.

Bansal manufactures 220,010 tonnes of steel wire per annum, comprising 58,427 tonnes of mild steel wire (low carbon steel wire), 84,580 tonnes of high carbon steel wire, and 77,003 tonnes of stainless-steel wire. Products include sizes as thin as 0.04 mm to as thick as 15.65 mm comprising high carbon steel wires for springs, wire for ropes, mild steel wires (low carbon steel wires), stainless-steel wires, cold heading quality wires, cable armouring wires and strips, galvanized steel wires in high and mild steel wire (low carbon steel wire) in a wide range of zinc coating, profile, and shaped in various steel grades in different cross-sections. High carbon steel wires formed 22.14%,mild steel wires (low carbon steel wires) 8.21% and stainless-steel wires 51.92% of total revenue.

High carbon steel wires refer to wires made from high carbon steel with 0.30% to 1.00% carbon. These are known for their exceptional strength, hardness, and durability. They are used in applications where these properties are crucial, such as in the manufacturing of springs, cutting tools, and various industrial components requiring resilience and resistance to wear and fatigue. Mild steel wire is made of low-carbon steel with a carbon content ranging from 0.05% to 0.25% and is known for its ductility, malleability, weldability, and versatile nature. These are commonly used in power & transmission, agriculture, poultry, fencing, and construction. Stainless-steel wire is made from a corrosion-resistant alloy, a combination of iron, chromium, nickel and other elements, and is used in consumer durables, hardware, automotive, agriculture and other general engineering products.

Of the four manufacturing facilities in the National Capital Region, India, one manufacturing facility is in Bahadurgarh (Haryana) with three other manufacturing facilities is in Ghaziabad (U.P.). Its existing units have an installed capacity of 259,000 tonnes per annum (tpa) of mild steel, high carbon and stainless-steel wires.

Bansal is setting up India’s largest single location steel wire manufacturing facility at Dadri. This is among the largest in Asia. The Dadri facility will have an installed capacity of 346,000 tpa in total and will commence operations in phases. The estimated project cost is Rs 448.816 crore, with Rs 358.463 crore being incurred till March 2024. The balance amount will be incurred in the current fiscal. The entire capacity of the facility will be installed by mid of FY2026. The initial production, with a capacity of 1,000 tonnes of high carbon wires, commenced at the Dadri facility end of January 2024. The capacity has been increased to 3,000 tonnes of high carbon wires, with 78.50% of the capacity utilisation till 31 March 2024. Production of mild steel wire will commence from H1 of FY2025 at the Dadri facility, providing economies of scale.

Bansal, with 14 global representatives, exports its products to countries like Bangladesh, Brazil, France, Germany, Israel, Italy, Netherland, South Korea, South Africa, Sri Lanka, Turkey, United Kingdom, United States of America, and Vietnam. The export turnover was Rs 283.941 crore, with Europe and US markets accounting to more than 70% of the total exports in FY2024.

Bansal markets and sells its products under the brand name Bansal. The brand has a reputation as a trusted brand since incorporation. It undertakes various initiatives to promote its brands and products to maintain sales momentum and retain customers.

Raw materials are sourced from a diversified base of suppliers. Its top 10 key raw material suppliers for mild steel wires (low carbon steel wires) and stainless-steel wires include Steel Authority of India, RashtriyaIspat Nigam, Mukand, Rathi Steel and Power, and JSW Steel.

Some key domestic and international customers include S.S. White Technologies India Private Limited, Connecton Fasteners S.A., NHK Automotive Components India Private Limited, Hettich, Hi-Lex India Private Limited, KEI Industries, Lapp India Private Limited, Suprajit Engineering, Helical Springs, Haver Standard India Private Limited, RR Kabel, Remsons Industries, and Ask Automotive.

Pursuant to a share purchase agreement of 14 November 2023, the company acquired 2,093,637 equity shares, i.e., 26% of the shareholding of Bansal Steel & Power (BSPL) producing high carbon wires for automotives, galvanized mild steel wire for cables, and stainless-steel wires for exports, with an installed capacity of 130,000 tpa. Further, pursuant to the right issuance of equity shares, it was allotted 18,842,733 equity shares. As a result, BSPL became a subsidiary of Bansal Wire Industries with effect from 07 December 2023. Bansal Wire Industries currently, holds 20,936,370 equity shares, i.e., 76.15% of the shareholding, of BSPL. Further, it entered industrial lease agreements on 08 January 2024 with Bansal High Carbons Private Limited and Balaji Wires Private Limited, respectively, to use their premises and equipment installed at their manufacturing facilities.

Bansal along with subsidiary BSPL offers one of India’s most extensive steel wire product portfolios, encompassing over 3000 stock keeping units (SKUs). Further, there are approximately 500 SKUs common to both. The diverse portfolio of products has been backed by the global certifications and accreditations

The Offer and the Objects

The offer comprises fresh issue of up to 29101563 equity shares at the upper price band of Rs 256 and 30658436 equity shares at the lower price band of Rs 243, aggregating Rs 745 crore.

The net proceeds will be used from the fresh issue towards repayment or prepayment of all or a portion of certain outstanding borrowings amounting Rs 452.68 crore, investment in subsidiary for repayment or prepayment of all or a portion of certain outstanding borrowings amounting Rs 93.708 crore, funding the working capital requirements amounting Rs 60 crore, and balance towards general corporate purposes.

The total outstanding borrowings were Rs 676.275 crore as on 31 May 2024. The total outstanding borrowings of subsidiary were Rs 103.915 crore.

Strengths

Stainless-steel and stainless-steel wire representing 20% and approximately 4% market share as of 31 March 2023, respectively.

The steel wire industry witnessed a significant CAGR of 6.9% over FY2019-23, growing to 5.6 mt, driven by an uptick in infrastructure development activities across the country and growing production in the automobile industry. Demand is expected be 8-10% CAGR between FY2023 and 2028, growing to eight-nine mt, due to increasing budget allocation of central and state governments for infrastructure development and expansion of the automobile industry.

The year-on-year customer retention stood at 64.74%, 66.06% and 68.49% in FYs2022, 2023 and 2024, respectively.

Most of the production is after the receipt of the order at a pre-agreed price. Hence, it can maintain the margins and work on a cost-plus model, remaining largely immune to commodity price fluctuations. As a result, the EBITDA margins ranged between 4.73% to 6.04% consistently over last three fiscals.

The network built is to ensure pan-India presence across all the regions of India to cater to more than 5,000 customers spread across various sectors. There is presence in 22 states and six union territories by way of dealer distribution network.

The Indian steel wire industry is well-positioned to benefit from the global shift from China-based manufacturing to China plus one strategy, resulting in new opportunities for Indian manufacturers in the global market.

No single customer accounts for more than 5% of sales. No individual sector or segment constitutes more than 25% of total sales, ensuring a balanced and resilient business model.

The product mix and plant capabilities allow switching or adding production lines from one sector to another, based on industry demands

Weaknesses

The steel wire industry is highly fragmented, with the top 10 manufacturers contributing around 22% to the overall production. Bansal Wire Industries contributes 2% to the overall production. Other unbranded larger and medium and small manufacturers contribute 75% to the overall production.

Operations are subject to risks inherent to manufacturing operations, including defects, liability for product and/or property damage, malfunctions and failures of manufacturing equipment, fire, riots, strikes, explosions, loss in-transit for products, accidents, personal injury or death, environmental pollution, and natural disasters.

The Top 10 suppliers of the raw materials formed 77.26% of total raw material required in the manufacturing processes. Any shortages, delay or disruption in the supply of the raw materials used in the manufacturing process may have a material adverse effect on the business, financial condition, results of operations, and cash flows.

The operating margin and realizations are susceptible to volatility in steel prices and freight cost.

Substantial working capital is required. Additional financing may be required to meet those requirements and could have a material adverse effect on results of operations, cash flows, and financial condition.

Negative cash flow from operations was reported in FY2024 and FY2022.

Compliance with various laws and extensive government regulations is required. Failure to these norms could result to enforcement actions and penalties.

Hazardous materials and operating activities pose a danger to people and property.

Valuation

Consolidated sales were up by 2% to Rs 2466.03 crore in FY 2024. The OPM rose 150 bps to 5.9%. OP increased 37% to Rs 144.46 crore. OIfell to Rs 4.86 crore from Rs 9.56crore in FY 2023. Interest cost increased 20% to Rs 28.81 crore. Depreciation jumped 48% to Rs 13.45 crore. PBT went up31% to Rs 107.05 crore. Tax expenses were 45% higher at Rs 31.41 crore. Net profit spurted31% to Rs 78.8 crore.

The FY2024 EPS on the post-issue equity works out to Rs 4.9. At the upper price band of Rs 256, the P/E works out to be 52.4

As of 1 July 2024, listed peers such as Rajratan Gobal Wire traded at TTM P/E of 53.6, DP Wires at TTM P/E of 19.0,and Bedmutha Industries at TTM P/E of 35.5.

For FY2024, Banal Wire Industries’ Ebitda margin and ROE stood at 6.0% and 21.2% as compared to 14.7% and 15.4% for Rajratan Gobal Wire, 5.5% and 17.4% for DP Wires, and 9.6% and 19% for Bedmutha Industries, respectively.