Archives: Ipos

The company’s growth has been inconsistent in the last two years, with contracting margins mostly due to the inclusion of FMEG products in its portfolio and the retail business costs involved. The focus on FMEG is likely to increase, and that will support valuations in the coming years. The company has maintained an impressive rate of sweating assets, as is evident from the asset turnover ratio. It has consistently averaged above 2X, which is a very good sign for a low-margin business like FMEG and electrical OEM goods. R R Kabel is well-positioned to capture a significant share of growth in the wires and cables industry in India, owing to their longevity in the business, size and scale, B2C mix, scope to improve margins and healthy cash flow growth going ahead. On the upper price band, the issue is valued at a P/E of 61x based on FY2023 earnings, mostly at par with other peers in the industry. We, therefore, recommend a SUBSCRIBE rating for the issue.

India has 18% of the world’s total population, but only 4% of its water resources, making it among the most water-stressed countries in the world. A large number of Indians face high to extreme water stress, according to a recent report by the government’s policy think tank, the NITI Aayog. India’s dependence on an increasingly erratic monsoon for its water requirements increases this challenge. The World Bank is helping to support the government’s national groundwater program, the Atal Bhujal Yojana, to help improve groundwater management. EMS has successfully completed 67 projects as on July 31, 2023, and gradually intends to expand its business operations to other regions of the country, especially North-East and South India. Almost all of the company’s projects are World Bank-funded through local state government bodies. This is the main reason for their robust cash flows/timely payments, and no bad debts, which helps them to take on more projects with the help of internal accruals only. As a result, there is savings in the finance cost which helps to improve the profit margin. On the upper price band, the issue is valued at a P/E of 9.1x based on FY2023 earnings, which we feel is fairly valued compared to its peers. We, therefore, recommend an SUBSCRIBE rating for the issue.

Jupiter Life Line Hospitals has been operating for over 15 years as a corporate quaternary care healthcare service provider in densely populated micro markets in the western regions of India and currently operates three hospitals under the Jupiter brand in Thane,  Pune and Indore, with an operational bed capacity of 961 beds, as of March 31, 2023. The company follows a patient-first ideology by creating the best infrastructure, technology and support to put the patient first and foremost and be futuristic and innovative in healthcare delivery. The company now intends to improve hospital occupancy rates and equipment utilization by continuing to maintain and recruit new medical professionals of high caliber in specified fields and focus on clinical excellence. Further, the company has a track record of sustained revenue growth, growing at a CAGR of 35.5% during the FY21-23 period. With strong operational efficiency, Jupiter Life Line Hospitals has demonstrated good financial performance among peers. Further, the growth in the healthcare segment with robust financial performance and expansion to new areas will drive the company’s performance going ahead. On the upper price band, the issue is valued at a P/E of 52.7x based on FY2023 earnings, which we feel is fairly valued compared to its peers. We, therefore, recommend an SUBSCRIBE rating for the issue.

As of 2022, the Indian stainless-steel sector is the second largest producer and consumer in the world, with a total manufacturing installed capacity of more than 6.5 mn tons of stainless steel annually. Despite this, the domestic per capita stainless-steel consumption remained low at 2.5kg in 2019 compared to the global average of 6 kg, thus creating attractive opportunities in the existing sector for companies like RPEL. Over the fiscals, the business has displayed a consistent improvement in its revenue performance along with expansion in its GP margins and EBITDA margins to 11.8% and 9.8% in FY23 compared to 8.8% and 6.8% in FY21, respectively. On the financial front, the ROE and ROCE increased to 29.1% and 12.6% in FY23 in comparison with 10.2% and 10.3% in FY21, respectively, while the debt/equity lowered to 2.2 in FY23 as against 2.7 in FY21. Considering the above factors and based on the upper end of the price band, the issue is valued at a P/E of 13x based on FY2023 earnings which we feel is fairly valued compared to its listed peers. However, it is to be noted that the business operates in a highly fragmented and competitive industry with low barriers to entry which makes its ability to sustain this consistent growth momentum a key monitorable. We, therefore, recommend a “SUBSCRIBE” for the benefit of listing gains for the issue.

Following a contraction in 2020 due to the COVID-19 pandemic, the Indian economy has rebounded sharply by 9.1% in 2021, followed by a 6.8% growth in 2022 and a growth expectation of 5.9% in 2023. India is largely considered as a bright spot in the current global economic scenario. One of the contributors to the economic strength is the country’s manufacturing sector which is aided by resilient domestic demand, government incentives, a progressive tax structure, and the availability of skilled labour. Based on the current market scenario, the market for electrical automation components, metering, control and protection devices and solar inverters is looking quite mature globally. The Indian Electrical Automation market was valued at USD 6,367.8 million in 2022 and is forecast to grow at a CAGR of 9% to reach USD 9,802.6 million by 2027. Among its end users, automotive and transportation, food and beverage, FMCG, chemicals, and textiles are major end users of electrical automation. The Metering, Control and Protection Devices market is well established globally where its products are used in applications such as electrical distribution, industrial panels, and process control, and their end users include residential buildings, commercial buildings, industrial buildings, and other industries such as Railways, Defense, Steel & Cement, Oil & Gas, and Utilities. The Indian Metering, Control and Protection Devices market was valued at USD 660.8 million in 2022 and is forecast to grow at a CAGR of 5.5% to reach USD 864.5 million by 2027. Out of the business segments, electrical automation and Metering, Control, and Protection Devices segments form a major portion of revenue and operations. The company has a track record of sustained Revenue/EBITDA/PAT growth which grew at a CAGR of 20.85%/11.02%/17.58% during the FY21-23 period, respectively. On the upper price band, the issue is valued at a P/E of 34.6x based on FY2023 earnings which we feel is richly valued. Moreover, with exports forming a major part of revenues, we would prefer to be on the sidelines against the backdrop of a weakening global macroeconomic scenario. We, therefore, recommend a “Avoid” rating for the issue. However, we would reassess the company on improvement in financial metrics over a sustained period.

In recent times, India has been focusing on improving its infrastructure sector as it is a key driver for the Indian economy. There was a steep increase in the government capital outlay to Rs 10 lakh crore, (which forms 22.2% of total expenditure) for FY24 compared to the capital outlay of Rs 7.5 lakh crore (which formed 19% of total expenditure) in FY23, driven by roads, railways, and highway infrastructure. Such expansion is unsustainable without efficient planning and provision of utility services, especially clean and affordable water. Also, India being one of the most populous country in the world faces the challenge of serving its population with adequate water supply. Accordingly, water management emerges as a crucial area to be looked into and appropriately managed in upcoming years. Considering all the above factors, the company emerges as a formidable solution provider covering all the above areas of growth. The company is an EPC company that has its core focus on the WSP segment which forms a significant portion of its revenue. The company has WSP projects spanning multiple states in India with a concentrated focus on the state of Rajasthan. The company also undertakes railway projects, road projects, and irrigation network projects. The company procures the majority of its projects from the central and state governments and local bodies through the process of bidding. The company has so far undertaken projects on an independent basis, barring a few which were undertaken on a joint venture basis. The company has shown consistent growth by leveraging its experience, management team, and technical and financial capabilities. The company has a track record of sustained Revenue/EBITDA/PAT growth which grew at a CAGR of 55.1%/85.72%/118.23% during the FY21-23 period, respectively. On the upper price band, the issue is valued at a P/E of 9.5x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.

The global SS flexible hose industry is estimated to be worth USD 25 billion in 2020 with the size of SS corrugated hose estimated at USD 12.5 billion. This is expected to expand to USD 38 billion and USD 18 billion, respectively by 2027. The short-term growth is expected to be driven by the traditional industry segments like manufacturing, automotive, oil & gas (Exploring & Refineries), and HVAC system. Meanwhile, the increasing focus on industries with government support like electric vehicles and renewables (increase in solar power generation capacity) and high precision products like semiconductor and robotic applications are poised to drive the long-term growth of the business. A key monitorable for the business remains the low cost of rubber/ polymer hose which is expected to narrow with increasing awareness of stainless steel corrugation. On the financial front, the business has effectively scaled its operational margins to 20.05% in FY23 compared to 15.43% in FY21 and its debt/equity ratio has declined to 0.39x in FY23 as against 0.9x in FY22. On the upper end of the price band, the issue is valued at a P/E of 41x based on FY23 earnings which we feel is fairly valued given the large headroom for growth. We, therefore, recommend a “Subscribe” rating for the issue.

Pyramid Technoplast is an industrial packaging company involved in the business of manufacturing polymer-based molded products mainly used by chemical and pharma companies for their packaging requirements. The company uses blow molding technology to manufacture Polymer Drums and IBCs. Their products are marketed and sold under the brand name Pyramid. The company also has long-term relationships with distributors both domestic and international, and has multiple vendors for particular components rather than relying on single sources to de-risk themselves from supply chain problems. This allows them to ensure the continued availability of raw materials as well as enables them to secure the best possible prices for their products. The company has a track record of sustained Rev/EBITDA/PAT growth which rose at a CAGR of 23.7%/29.3%/36.9% during the FY21-23 period. On the upper price band, the issue is valued at a P/E of 16.2x based on FY2023 earnings. The high competitive intensity, thin margins and volatility due to commoditized nature of the business (dependent on crude and steel prices) and consistent levels of debt makes us     cautious on the issue. We, therefore, recommend a “Avoid” rating for the issue.

The Indian logistics sector is one of the largest in the world and is critical for the country’s economic growth. After contracting by 2% in FY21, the market witnessed a strong post-COVID recovery in FY22. The market grew by 14% and was valued at US$435 billion in FY22 and is projected to grow to US$591 billion by FY27, driven by factors such as strong demand from manufacturing (led by the “Make in India” campaign), retail, automotive and pharmaceutical sectors. Other drivers for industry growth include the need for efficiency improvement in the newly created demand, increasing shift of industry preferences towards integrated supply-chain services and other sophisticated solutions like inventory optimization and data analytics from isolated offerings like transportation or warehousing, and growth of e-commerce in India that demands specialized needs of online delivery (amongst others, faster delivery, return management and cash on delivery). Over the years, the company’s operations, backed by the strong parentage of TVS Group, have significantly grown, with a presence in 26 countries including India, the United Kingdom, Spain, Germany, Australia and Singapore. As of March 31, 2023, the company managed 4,686,032 square feet of logistics warehouse space in North America, Asia, Australia, the United Kingdom and Europe. In fiscal 2023, the company carried 28,524 tons of air freight and 74,558 TEU of sea freight in the rest of the world (i.e. geographies other than India). In FY23, they provided ISCS services to 104 customers and NS services to 7,782 customers in the rest of the world (i.e. geographies other than India). On the financial performance front, TVS has posted growth in its top line and has turned the corner for FY23 after marking reduced losses for the reported periods. On the upper price band, the issue is valued at a P/E of 193.3x based on FY23 earnings which we feel is richly valued, as it is higher than other industry players such as TCI Express, Delhivery, and Mahindra Logistics. Hence, we recommend an “Avoid” rating on the issue and would reconsider the company following sustained improvement in financial metrics (especially margin expansion) and reasonable valuation.

NBFCs have shown remarkable resilience and gained importance in the financial sector ecosystem, growing from less than Rs. 2 trillion AUM at the turn of the century to Rs. 34 trillion at the end of FY23. CRISIL MI&A expects NBFC credit to grow at 12-14% CAGR between FY23 and FY25. Their share in the overall credit pie has increased from 12% in FY08 to 18% in FY23 and is projected to remain stable in FY24. NBFCs will remain a force to reckon with within the Indian credit landscape, given their inherent strength of providing last-mile funding and catering to customer segments that are not catered by banks. We believe that SBFC is one of the decent NBFCs in the space growing at a healthy pace. With the management having vast experience, an HDFC background and an in-house sales team, we remain comfortable on the credit profiling and corporate governance front. Moreover, the lender has a strategic focus on diversifying its loan portfolio across the states, thereby avoiding concentration risk and helping it to grow at a faster pace. With the company’s limited leverage position and the current P/BV multiple of 2.9x, we believe that the company is fairly valued and advise investors to “Subscribe” from a medium to long-term perspective