Archives: Ipos

Sanstar has the fifth largest capacity in the Indian maize-based speciality products and ingredient solutions industry. It is well on its way for an expansion of an additional 1,000 tons per day at the Dhule facility. After the expansion, it is estimated to be the third largest manufacturer of maize-based speciality products and ingredient solutions in India. To cater to the growing demand for products from existing customers and to meet the requirements of new customers, they intend to expand manufacturing capacities for existing products. Sanstar has established long-term relationships and serves over 525 customers, with 162 new customers during FY24. The company plans to expand its customer base by leveraging relationships with existing customers in India and globally while simultaneously pursuing opportunities to develop new relationships. The company demonstrated consistent growth in terms of revenues and profitability at a compound annual growth rate (CAGR) of 45.4% and 104.8% between FY2022-24, respectively. The company experienced sustained growth in various financial indicators, including revenue, profitability, cash flows and returns, and consistent     improvement in balance sheet position in the last three financial years. As we advance, Sanstar’s financial performance is driven by its established market position in the industry, increasing global footprint, high entry barriers, expanded manufacturing capacities to capture additional market share, and long-lasting customer relationships, which enable it to tap the significant opportunities in existing and future products. The issue is valued at a P/E of 20.0x on the upper price band based on FY24 earnings, which is deemed fair. Therefore, we recommend a SUBSCRIBE rating for the issue.

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.

Emcure Pharma Ltd. is a significant player in the pharmaceutical industry, having niche products for key therapies and a global market presence. The company is well-positioned to capitalize on its market position and expand rapidly. Emcure plans to enter the domestic market, particularly in rural areas, with its key brands in established therapies while continuing to develop unique products to meet patient needs. They have also increased their sales force over the last two years to expand their geographical presence. The company will also focus on expanding its international presence by increasing the sales force or establishing partnerships through unique products with less competition, leading to higher margins. The company’s revenue has grown at a compounded annual growth rate (CAGR) of 7% between FY2022-24. However, the topline has been increasing gradually, and there has been a dip in profitability mainly due to high finance costs. The company anticipates a substantial improvement in its bottom line as it plans to repay its borrowings with the proceeds. Emcure’s financial performance is driven by leveraging its leadership position in key therapeutic areas, established presence in international markets, proven track record in building brands, higher entry barriers, focus on R&D and strong manufacturing capabilities. The issue is valued at a P/E of 36.6x on the upper price band based on FY24 earnings, which is deemed fair. Therefore, we recommend a SUBSCRIBE rating for the issue.

The average global finished steel consumption per capita was recorded at 222 kg in CY22. In comparison, India has a consumption rate of 81.1 kg per capita in CY22 which is considerably lower than the global average. The National Steel Policy estimates that the per capita finished consumption of steel in India will increase to 158-160 kg by 2031. Further, steel output has an output multiplier of 1.4x on GDP and an employment multiplier of 6.8x domestically. Thus, the steel industry is expected to showcase significant domestic potential and play a key role in the future economic growth of India. The domestic growth prospects aligns with Vraj Iron and Steel which is a Sponge Iron, MS Billets and TMT Bars manufacturing company with a strong focus on improving operational efficiency, robust supply chain management and prudent debt management. The company is aiming to be a cost-efficient steel manufacturer and penetrate deeper into the regional market to capture a higher share of the existing market. The company is also planning to expand its existing manufacturing and power plant capacity which will further help in improving its financial performance and provides an edge over its competitors. On the financial front, the Revenue/EBITDA/PAT grew at a CAGR of 33%/67%/121% between the fiscal years 2021 and 2023. On the upper price band, the issue is valued at a P/E of 8.6x  based on FY24 earnings, which we feel is fairly valued. We, therefore, recommend a SUBSCRIBE rating for the issue.

Over the years, India has been one of the fastest-growing alcoholic beverage markets in the world, with a consumption of pure alcohol estimated to be 3.2 liters per capita in 2023. The IMFL is the largest segment of the Indian alco-beverage market both in volume and value terms. With the Indian alco-beverage market crossing more than a billion cases per annum mark in FY23, a volume-based analysis shows that the alcohol beverage market in India is almost equally divided between country liquor, IMFL and beer with a small contribution from wines in FY23. Various factors such as lower per capita consumption of alcohol and positive demographic factor which adds more than 13 million people each year to the population eligible for drinking has made the country an attractive market for alcoholic beverages. Over the years, the IMFL segment has recorded sales of 38.5 crore cases in FY23, growing at around 8% YoY, and is expected to reach 145.1 crore cases in volume by FY28. With the figures substantiating industry growth, the company is set to benefit from such industry dynamics. By leveraging their strength in popular segments by carrying out branding, the company is set to tap into the growing demand of IMFL. On the financial front, revenues grew to Rs.71,057 million in FY 23 from Rs. 63,788 million in FY21 whereas EBITDA and PAT fell to Rs.1,850 million and Rs.16 million in FY23 from Rs.1,940 million and Rs.127 million in FY21, respectively. On the valuation front, the issue looks expensive on the price-to-earnings multiple front and ahead of its peer set. However, looking at the alcohol industry dynamics and company’s strong positioning in the IMFL landscape, we would advise high-risk investors to “Subscribe” to the issue for listing gains.

The real estate boom in India has propelled significant growth in the furniture market, driven by urbanization, rising incomes, and a shift towards tier-II cities. Home renovations and upgrades are fueling demand for furniture and home goods as consumers seek to enhance their living spaces. Despite setbacks during COVID-19, the tourism and hotel industries are rebounding, contributing to increased demand for aesthetic and comfortable furniture. The luxury and super-premium furniture segment, comprising 8% of the overall market, is expanding due to the rise in dual-income households and the preferences of urban millennials and Gen Z for quality and trendy décor. Stanley, as a market leader, stands to benefit from these trends, supported by impressive CAGR in revenue/EBITDA/PAT at 46%/66%/326%, respectively. Additionally, the company has shown improvement in EBITDA margin, increasing from 15.2% in FY21 to 19.7% in FY23. The company has demonstrated consistent enhancement in its Return on Capital Employed (ROCE), progressing from 5.5% in FY21 to 16.6% in FY23. Similarly, its Return on Equity (ROE) has shown steady improvement, rising from 1.0% in FY21 to 16.3% in FY23. The company commands a high valuation at a P/E of 57.9x based on FY2023 earnings. However, considering the industry dynamics and growth prospects, we recommend a SUBSCRIBE rating for the issue.

DEE Development Engineering Ltd. has evolved as one of the key players in process piping solutions in India w.r.t. installed capacity, with a strong focus on automation and process excellence to drive operational efficiencies and offerings to its customers. The company is increasing its focus on high-margin products with additional contributions from modular skids and usage of high-grade materials, forging technology tie-ups with select global OEMs to derive consistent order flow to become a preferred partner for its clients for the next few years. On the industrial front, the Indian pipe process industry has a decent growth outlook and is expected to grow at a CAGR of 6.1% between FY23 and FY30, supported by oil and gas, chemicals/petrochemicals, ethanol, and biomass, and power sectors. The company’s revenue has grown at a CAGR of 10% between FY21-23. The company has initiated the capacity expansion plans mentioned above, which will help it to improve its financial performance in the future.  Further, the company is deleveraging its balance sheet by reducing debt. As we advance, the company’s financial performance is likely to be driven by its robust balance sheet, long-standing customer relationships, capacity expansion, higher entry barriers, and strong management team holding impressive backgrounds. The issue is valued at a P/E of 56.4x on the upper price band based on FY24 earnings, which we feel is fairly valued given the strong growth prospectus and stickiness of customer. We, therefore, recommend a SUBSCRIBE rating for the issue.

With India’s economy showing signs of resilience and GDP growing at an estimated 7.3% in FY24, the capacity utilization in the Indian manufacturing sector is recovering as industries have stepped up their production volumes. Following a 7.2% GDP growth in FY23, the industrial production index showed a growth of 5.2% in FY23. However, amidst a difficult and uncertain external environment, the government’s union budget appears to be balanced as it focuses on achieving inclusive and   sustainable growth. Also, a sustained momentum in economic activity supported by domestic drivers point towards the rising confidence of households. Such confidence is also witnessed by strong growth in NBFC credit due to a mix of favorable regulations, innovative product offerings, and high credit appetite by consumers. When analyzed, around 37% of NBFC credit is concentrated in the industrial sector, and among the sector 82% is concentrated in large industries, thereby the MSME sector remaining unpenetrated by institutions. However, with vehicle financing dominating the retail loan portfolio of the NBFC industry in FY23, the retail credit segment witnessed aggressive growth. Such dominance can be attributed to the NBFC industry’s leadership position in the two-wheeler loan segment where it has the majority market share. With the average debt situation in rural households ranging between Rs. 60,000-Rs. 88,000, the institutional credit mechanism to meet the                  non-agriculture credit demand in rural India is poorly developed. Also, the higher transaction cost, low ticket size, risk profile, and lack of collaterals have made this segment unattractive for formal credit agencies. However, the situation seems to have improved due to the introduction of microfinance services which has improved the credit flow to the rural markets. Although it has made lower progress compared to the banking and NBFC sectors in the urban market, there exists ample untapped opportunity in the rural market for a structured credit product that will directly benefit the company in the future period. On the financial performance front, the company’s Revenue/EBITDA/PAT degrew to Rs.695 million/Rs.482 million/Rs.158 million in FY 2023 from Rs.862 million/Rs.673 million/ Rs.163 million in FY 2021. On the upper price band, the issue is valued at a P/E of 20.5x based on FY2023 earnings. Though the prospect for the company’s business segments look promising, we would look for more clarity and confirmation on the financial performance trajectory. We, therefore, recommend high risk-appetite investors to “Subscribe” to the issue for listing gains.

With the GDP growth for India being quite strong post the COVID era and the forecast GDP figures being even stronger, the contribution of services sector among the core sectors is set to grow to 67% by FY30. Due to this, the contribution of hotels and transport sector to the real GDP is set to increase to 22% by FY30 mainly due to the growing population which is supported by increased income levels and discretionary spending. Such increasing consumption patterns have led to an increase in mobile and internet penetration, with the rural subscriber segment growth set to outpace urban growth. The overall rural subscribers are set to grow at a CAGR of 18% during FY2023-28 along with the mobile penetration percentage to increase from the current 89% to 95% by 2024. Due to such high rural penetration and growth prospects, the “Next Billion Internet Users” are a highly anticipated consumer class that will determine the consumption in many internet-based industries. One of the beneficiaries of such a trend is the travel and hotel industry. As of FY23, the online penetration for ticket booking stood highest for rail travel at 81% followed by air travel booking and hotel booking at 70% and 32%, respectively, thereby depicting a shift from offline booking to online booking systems. Also, the increasing air traffic among the Tier 2 and 3 cities, the introduction of new railway routes, better and upgraded experience of train travel, and the government’s increased focus on improving the road infrastructure across the country will be the major factors driving the travel industry as a whole. These macro factors coupled with an increasing spending power of the consumer are set to benefit the company’s overall growth in the near future. Considering the financial performance, the company’s Revenue/EBITDA/PAT grew at a CAGR of 92.3%/194.9%/76.2% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 163.2x based on FY2023 earnings. Though the valuations are rich, we believe that the nature of the platform business (high pass-through of revenues) and large industry opportunity size would be the key factors to drive sustained and high earnings growth in future. We, therefore, recommend a “Subscribe” rating for the issue.

The company manufactures high-purity speciality fine chemicals of various grades in particle sizes ranging from 10 mesh to 100 mesh. The company’s manufacturing infrastructure is a key growth driver for their business. Currently, they have three strategically located manufacturing facilities near several ports, which ensures they have ready access to port facilities and can conveniently import raw materials and export their products, providing them with a cost and logistical advantage. Over the years, the company has expanded its product portfolio to more than 185 products spread across diverse applications. They have consistently endeavoured to diversify their portfolio of products to cater to changing customer requirements across various segments and geographies. The company has over a decade’s track record of operations and has a robust balance sheet and cash flow position. They have experienced sustained growth in various financial indicators, including revenue and PAT, and a consistent improvement in their balance sheet position in the last three Financial Years, wherein they have seen an increase in their net worth. As we advance, the company’s financial performance, driven by its robust balance sheet, positive operating cash flows coupled with zero debt position, enables it to fund its strategic initiatives, pursue growth opportunities, create higher entry barriers and diversify into new products by setting up a new manufacturing facility. The issue is valued at a P/E of 25.5x on the upper price band based on FY24E earnings, which is fairly valued. We, therefore, recommend an SUBSCRIBE rating for the issue.