| Price | Lot Size | Issue Date | Issue Size |
|---|---|---|---|
| ₹ 243 to ₹ 256 | 58 | 03rd July, 2024 – 05th July, 2024 | ₹ 745.00 Cr |
Company Overview
Bansal Wire Industries Ltd. is a steel wire manufacturer whose wires have multiple application across sectors including power and cable, automotive, fencing, infrastructure, agriculture, consumer durables and general engineering. The company manufactures high and low carbon steel wires, galvanized wires, cable armoring wires, strips, stainless steel wires, profile, shaped wires, speciality wires and so on which have multiple applications. Bansal Wires offers approximately 2,000 SKUs and its subsidiary BSPL offers 1,500 SKUs. The company operates from its four established manufacturing facilities, with three manufacturing facilities in Ghaziabad (U.P.) and one manufacturing facility in Bahadurgarh (Haryana). The company has developed its network in order to ensure pan India presence, with its presence in 22 states and six union territories. Around 86% of its production is sold in the domestic market, and the rest is exported. The company has a market share of approximately 4% as of March 31, 2023. It has an installed capacity of 259,000 MTPA of mild steel, high carbon and stainless steel wires at its existing four manufacturing facilities. The company has a customer base exceeding 5,000 customers, spread across various industrial sectors with no individual sector or segment constituting more than 25.0% of its sales in FY24, FY23 and FY22.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- Repayment or prepayment of all or a portion of certain outstanding borrowings availed by the company;
- Investment in its subsidiary for repayment or prepayment of all or a portion of certain of its outstanding borrowings;
- Funding the working capital requirements of the company; and
- General corporate purposes.
Investment Rationale:
Diversified customer base with presence across various sectors
Bansal Wire Industries has a customer base exceeding 5,000 customers, spread across various industrial sectors. Except Bansal High Carbons Private Limited, one of its Group companies, which contributed 7.3% and S. S. Pranav Steels Private Limited, one of its distributor/dealer companies, which contributed 6.1% of the total sales of the company for FY24, none of its customer contributed to more than 5.0% of the sales and no individual sector or segment constituted more than 25.0% of the sales in FY24, FY23 and FY22. Some of the major sectors that it serves include automotive, cables, fencing, infrastructure and agriculture, out of which automotive and consumer durables sectors give it the highest EBITDA margins. Some of the 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 Limited, Lapp India Private Limited, Suprajit Engineering Limited, Helical Springs, Haver Standard India Private Limited, RR Kabel Limited, Remsons Industries Limited, ASK Automotive Limited, etc. The company maintains an average customer retention ratio of 89.6% of its top 300 customers, contributing 78.2%, 78.2% and 77.8% of its sales for Fiscals 2022, 2023 and 2024, respectively.
Well integrated manufacturing ecosystem and upcoming capital expansion bodes well for growth
Over the last 38 years, Bansal Wires has established a well-integrated ecosystem for manufacturing products, storage and transportation of raw materials and finished goods. It has an installed capacity of 259,000 MTPA of mild steel, high carbon and stainless steel wires at its existing four manufacturing facilities located in National Capital Region, India which includes the manufacturing facility of BSPL, located at Bahadurgarh, Haryana. All the existing manufacturing facilities are operating at their optimum capacity utilization. Additionally, its Dadri facility has started its initial production towards end of January 2024, and as of March 31, 2024, it is operating at a capacity of 3,000 metric tonnes of high carbon wires with 78.5% of capacity utilisation. The company has also entered into industrial lease agreements dated January 8, 2024, with two of its Group companies, Bansal High Carbons Private Limited and Balaji Wires Private Limited, respectively, to use the premises and equipment installed in their manufacturing facilities. The company is also in process of setting up a manufacturing facility spread approximately across 32 acres at Dadri. This facility will be one of the largest in Asia and largest steel wire plant in India. The above mentioned facility will be set up with an installed capacity of 346,000 MTPA in total and will have an independent 132 KVA feeder of electricity which will ensure uninterrupted and low-cost power supply from the grid. This project will commence its operations in phases, part of which has commenced in the current fiscal. The estimated project cost for the manufacturing facility at Dadri is Rs. 4,488.16 million and a total of Rs. 3,584.63 million has been incurred till March 2024. The balance amount will be incurred in the current fiscal and the entire capacity of the facility will be installed by mid of fiscal 2026.
Valuation
Bansal Wires along with its subsidiary, Bansal Steel & Power Limited (BSPL), offers products primarily in three segments, i.e., high carbon steel wire, mild steel wire and stainless steel wires. The company boasts strong customer diversification to de-risk impact on revenue along with diversified product portfolio serving different sectors with their different needs effectively. The demand for wires is mainly driven by its major end-user industries such as automotive, construction, power, and agriculture, with infrastructure holding the highest demand for wires. The increase in consumption of steel across infrastructure, automobile and housing sectors can be seen with the positive economic trends domestically. Owing to such growth, steel manufacturers are expected to be the direct beneficiary of this growth. To follow up with the growing trends, the company is planning set up a new manufacturing unit which will be the largest steel wire manufacturing plant in India. The company is also aiming to expand its reach to other regions, i.e. south and east to garner additional market share. On the financial front, Revenue/EBITDA/PAT grew at a CAGR of 5.9%/16.5%/17.3% between FY22 and FY24. On the upper price band, the issue is valued at a P/E of 41.4 x based on FY24 earnings, which we feel is fairly valued. We, therefore, recommend a SUBSCRIBE rating for the issue.
