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Tracxn Technologies Ltd: Avoid

Tracxn Technologies Ltd: Avoid
  • Date

    10 Oct 2022 - 12 Oct 2022

  • Price Range

    ₹75 - ₹80

  • Minimum Order Quantity

    184

  • (D) RHP

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Tracxn Technologies Limited is a business and market intelligence data provider for private companies. The company’s extensive global database, customized solutions, and features allow its customers to source and track companies across sectors and geographies to address their requirements. The business is one of the top five global players in terms of the number of companies listed that provide data on private market enterprises across industries and geographies. The company operates a Software as a Service (“SaaS”)-a based platform called Tracxn, which, as of June 30, 2022, has scanned over 662 million web URLs, and profiled over 1.84 million entities over 2,003 Feeds. The company has an asset-light business model and the platform has 3,271 Users across 1,139 Customer Accounts in over 58 countries, as of June 30, 2022, which includes several Fortune 500 companies and/or their affiliates. The company offers its customers data of private companies for deal sourcing, identifying M&A targets, deal diligence, analysis, and tracking emerging themes across industries and markets, among other uses, through its subscription-based platform. The company particularly focuses on the global emerging technology sector, providing its user’s detailed profiles of companies, including information on funding rounds and acquisition-related information, taxonomies and market maps, global competitor benchmarking, financial information, valuation and capitalization tables, employee count, investor profiles, competitor mapping, information on founders,
key team members, and board members, company and sector-specific reports, and news events.
Objects of the issue:

The following uses will be made of the IPO proceeds:

To achieve the benefits of listing the equity shares on the Stock Exchanges and the sale of up to 38,672,208 Equity Shares by the selling shareholders

Investment Rationale:

Growth of Private Equity Firms/Funds

There is a constant growth in the number of PE firms globally as more and more private companies and start-ups are incorporated. Private equity businesses’ Asset Under Management (AUM) has significantly expanded. As a result, the private equity market has seen an infusion of new participants who wish to target high-growth private market companies. Globally, PE firms are renowned for their use of manual analytics approaches and numerous paper-based processes and procedures. PE firms are required to expand digitally by the changing environment and intense competition in the investment space. The company carters to such PE firms by providing market intelligence, deal sourcing, identifying M&A targets along with tracking emerging themes across industries and markets.

High Technology-based platform developed with continuous research

The company’s platform i.e Tracxn is a highly advanced tech-based platform developed by its inhouse team. The platform, which uses both technology and human analysts, can process enormous amounts of data. For hosting on cloud infrastructure, the platform has been created and constructed primarily using cutting-edge technology. The platform already has profiled over 1.84 million entities and also adds approximately 1000+ entities on a daily basis. The platform’s uptime percentage was 99.99% throughout Fiscal 2022 and 100% during the three months that concluded on June 30, 2022. Also for gathering private market data, the company has developed a data engine that scans 500+ million web domains in the back-end.
Valuation and Outlook:
The general growth in the private markets and rising need for accurate data on private companies put Tracxn Technologies in a strong position to further expand its reach. The company has a strong customer base due to its global presence which includes Fortune 500 companies. The in-house developed platform is technologically advanced along with scalable and secure. The company’s repeat customer rate currently stands at 74% of its customer base. The company has a cost advantage due to the majority of its operations being based in India. However, the company was loss-making in FY22 with a high risk from the fluctuations in foreign currencies and stiff competition on a global level. On the upper end of the price band, the issue is valued at a PE of 285x based on FY23 annualised earnings, which we believe is aggressively priced. As company is loss making, we are not comfortable with current valuation which is being offered, we suggest investors to “AVOID” this issue.

Electronics Mart India Limited: Subscribe

Electronics Mart India Limited: Subscribe
  • Date

    04 Oct 2022 - 07 Oct 2022

  • Price Range

    ₹56 - ₹59

  • Minimum Order Quantity

    254

  • (D) RHP

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Electronics Mart India Ltd. (EMIL) began operations in 1980 with its first store in Hyderabad. Since then, they are the largest regional organized player in the South of India in revenue terms with dominance in the states of Telangana and Andhra Pradesh and the 4th largest electronics retailer in India. The company operates its business activities across three channels – retail, wholesale, and ecommerce and offers a diversified range of products with a focus on large appliances (air conditioners, televisions, washing machines, and refrigerators), mobiles and small appliances, IT, and others. Currently, EMIL has 6,000+ SKUs across product categories from more than 70 consumer durable and electronic brands. As on August 31, 2022, EMIL had 112 stores of which 100 stores are Multi Brand Outlets (MBOs) and 12 stores are Exclusive Brand Outlets (EBOs). EMIL’s 89 MBOs are under the name “Bajaj Electronics”, eight MBOs under the name of “Electronics Mart” in the NCR, two specialized stores under the name “Kitchen Stories” which caters to the kitchen-specific demands of the customers, and one store under the name of “Audio & Beyond”. The company is present in 14 cities in Andhra Pradesh, 20 cities in Telangana, and 2 cities in the NCR region having a total retail business area of 1.12 million sq. ft
key team members, and board members, company and sector-specific reports, and news events.
Objects of the issue:
The following uses will be made of the IPO proceeds:
  • Funding of capital expenditure for expansion and opening of new stores and warehouses.
  • Funding incremental working capital requirements.
  • Repayment/prepayment, in full or part, of all or certain borrowings availed by the company
  • General corporate purposes
Investment Rationale:

Strategically located logistics and strong inventory management

The core strength of Electronics Mart India lies in its ability to effectively manage inventory levels across its large warehouses and several individual storage areas. The company’s robust IT system and its extensive network of suppliers enable the company to deliver products to customers within a reasonable period. Further, EMIL’s strategy of warehousing facilities within the reach of their consumer durable and electronic retail stores allows them to offer cost-competitive prices due to the reduced logistic costs. Currently, the company operates nine large warehouses with an average area
of 28,114 sq. ft. with six warehouses located in Hyderabad, one central warehouse in Vijayawada for the Andhra Pradesh region, and two warehouses in the NCR region.

Business model providing operational flexibility

The company aims to build long-lasting relationships with the customers by emphasizing identifying ‘growth pockets’ i.e., places in major cities where addressable population density is high. This is done by making a partial investment in the refurbishment of the locations which allows the management to keep the rentals & subsequent annual hikes low. EMIL follows a flexible strategy of owning or leasing the premises according to availability, cost, and other considerations. This helps them in
reduced operational costs and target higher profitability and thus offer products at competitive pricing. As of August 31, 2022, out of the total 112 stores, 93 retail stores are leased, 11 retail stores are owned and 8 retail stores are partly owned and partly leased by the company who makes bearing cages.
Valuation and Outlook:
The organized market in the consumer durables space is growing rapidly due to changing consumer preferences, expansion of organized Brick & Mortar players, and deeper internet penetration. However, household penetration of consumer durables in India remains much lower than that of many developed and developing nations thus showing significant growth opportunity is available in this segment. Electronics Mart India Ltd aims to continue to increase its store network in its existing clusters
to increase its market share in the Hyderabad, Telangana, and Andhra Pradesh markets and also intends to expand its presence in the NCR region by opening 26 MBOs. The company also focuses on expanding its EBOs, specialized stores, and brand network to provide a better brand-centric and
specialized service experience to the customer. The total store count grew from 71 in Financial Year 2020 to 112 as on August 31, 2022, while the retail business area grew from 0.76 million sq. ft. to 1.12 million sq. ft. over this period.On the upper end of the price band, the issue is valued at a PE of
17.1x based on FY22 annualized earnings, which we believe is fairly priced. Hence, we recommend a “SUBSCRIBE” rating on this issue for the long term.

Harsha Engineers International Limited: Subscribe

Harsha Engineers International Limited: Subscribe
  • Date

    14 Sep 2022 - 16 Sep 2022

  • Price Range

    ₹314 - ₹330

  • Minimum Order Quantity

    45

  • (D) RHP

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Harsha Engineers International Ltd is one of the largest manufacturers of precision bearing cages, having approximately 50-60% market share in the organised sector in India. The Company’s product line-up is diverse in terms of end-user sectors and geographical regions. In the organised sector, which includes brass, steel, and polyamide bearing caps, the company has a global market share of roughly 5–6%. The company’s primary line of business is the production of bearing cages (in brass, steel, and polyamide materials), intricate and specialised precision stamped components, welded assemblies, brass castings, cages, and bronze bushings. It also operates in the solar EPC sector, where it offers comprehensive turnkey solutions for all solar photovoltaic requirements. In the engineering operations segment, the company has four strategically placed manufacturing facilities, two of which are in India’s Gujarat state near Ahmedabad, at Changodar and Moraiya, and one each in Changshu, China and Ghimbav-Braşov, Romania.
Objects of the issue:
The following uses will be made of the IPO proceeds:
  • Pre-payment or scheduled repayment of a portion of the existing borrowing availed by our Company
  • Funding capital expenditure requirements toward the purchase of machinery.
  • Infrastructure repairs and renovation of our existing production facilities, including office premises in India.
  • General corporate purposes
Investment Rationale:

Strong Demand for Customized Bearings

Today’s bearing industry is expanding as a result of expansion in the industrial sector and strong demand across various other sectors, such as equipment, construction, automotive, aerospace, and defence. To fulfil their changing needs, manufacturers are focusing on the use of customised bearings as a result of the growing use of new technologies and digitalisation. The market will be further boosted by the increased demand for customised bearing solutions that satisfy various industry-specific needs, such as the growing EV sector. The automotive industry is turning its attention to electric automobiles. The demand is going to shift progressively towards exact dimension, and dirt-free bearing, steel and polyamide cages as a potential option at a premium price as the need for more silent and lighter bearings and their components are required. The company can produce precision stamping components and steel cages suitable for the electric car industry, including that of import substitutes, thanks to in-house tool and design facilities, modern machinery, specialised cleaning equipment, and software

Strategically positioned industrial plants both domestically and globally.

The Company’s global presence in China and Romania aids them in overcoming substantial entry barriers allowing them to access these markets more deeply than their rivals. Engineering and producing goods in several areas enables them to provide services, and customer requests from alternative places, providing the customer with the benefit of regular supply and cost-competitive manufacturing operation. Although China is regarded as the centre of the world’s manufacturing, current macro factors like the US-China trade conflict and the global Covid-19 outbreak prompted manufacturers to establish production facilities in certain areas other than China in emerging markets like India, which is positive for companies like Harsha Engineering who makes bearing cages.
Valuation and Outlook:
The general rise in the global economy and a rise in the technological advancements in the bearing cage manufacturing business provide HEIL with strong support to further grow in global markets. The company has a stronghold in India and long-standing relationships with leading clientele supplying to the Top-6 global bearing manufacturers. The wide application of bearings growing in different sectors coupled with substantial government initiatives to promote the manufacturing sector is a robust driver for the company. However, the rising raw material prices remain a top concern for the manufacturer. On the upper end of the price band, the issue is valued at a PE of 27.7x (based on FY22 earnings), which we believe to be fairly priced in comparison with the listed peers (Timken – 77.3x & Rolex Rings – 39.2x). Due to the above factors, we give this issue a “SUBSCRIBE” rating for the long term as well as for the Listing gains.

DreamFolks Services Ltd: Subscribe

DreamFolks Services Ltd: Subscribe
  • Date

    24 Aug 2022 - 26 Aug 2022

  • Price Range

    ₹308 - ₹326

  • Minimum Order Quantity

    46

  • (D) RHP

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DreamFolks Services Limited began operations in 2013 by facilitating lounge access services for the consumers of Mastercard. They transformed from being an airport lounge access aggregator to an end-to-end technology solutions provider offering services like lounge access, food and beverage offerings, spa services, meet and assist, airport transfer services, transit hotel and nap room access, baggage transfers and others from door-step to the airport, within the airport, and again from the airport to the door-step at the destination. As of 31st March 2022 they have 50 Clients including the Card Networks and many of India’s card Issuers like ICICI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, HDFC Bank Limited (in respect of debit card lounge program) and SBI Cards and Payment Services Limited. They also focus on the operators who provide the services and give them the option of a single point access to the consumers along with consolidated footfall and revenue, while also giving them technology to validate the benefits available to consumers.
Objects of the issue:
The IPO proceed will be used towards the following purposes:
  • To carry out an offer for sale by selling shareholders.
  • To realize the listing benefits of equity shares on the stock exchange
Investment Rationale:

Dominant player in the airport lounge aggregator industry in India:

DreamFolks Services Ltd has coverage across 54 operational airport lounges constituting 100% of airport lounges in India, as at March 31, 2022. They hold a 95% market share of all India issued credit card and debit card (Card Based) access to airport lounges and accounted for around 68% of the overall lounge access volume in India in Fiscal Year 2022. Currently they facilitate access to 100% of the 54 lounges currently operational in India and have a global footprint extending to 1,416 touch-points in 121 countries across the world out of which, 244 touch-points are present in India and 1,172 Touch-points overseas.
Asset and human resource light business model with a strong track record of delivering consistent growth
DreamFolks is designed to be an asset light business model thus scaling up the business requires minimal capital deployment leading to a higher operating leverage. This is one of their key reasons of consistent growth and high capital efficiency. Additionally DreamFolks is not very human resource intensive, their force comprising of 60 full time employees including the senior management team. Their technology and employee related expenses during Fiscal 2022, Fiscal 2021 and Fiscal 2020, was INR73.43 million, INR147.54 million and INR188.67 million, constituting 6.58%, 13.62% and 5.82%, respectively, of their total consolidated expenses.
Valuation and Outlook:
The Indian air travel industry propensity (i.e. the ratio of passenger traffic to the overall population in a given region) is low at 0.08 in CY 2020 but has significant expected growth potential with air travelers increasing from 175 million in 2019 to around 1 billion in 2040. DreamFolks Services Ltd has the first mover advantage and a market share of 95 %in the airport lounge aggregator industry thus, making it the beneficiary. The company’s experienced management, partner eco-system, and service offerings coupled with its robust technology have led to its client base increasing from 14 in FY 2018 to 50 in FY2022. The company does not have any listed peer companies for comparison of performance as it operates in an industry that is in its initial stages. On the upper end of the price band, the issue is valued at a PE of 104.82x (based on FY22 earnings), which we believe is to be overpriced. However, with the positive market sentiment toward this IPO on the back of their future growth strategies like increasing the wallet share in their existing clients, expanding into the newer sector to create customer engagement, and capitalizing on the dominance in the airport lounge access market we recommend a “SUBSCRIBE” rating for the listing gains.

Aether Industries Ltd.: Avoid

Aether Industries Ltd.: Avoid
  • Date

    24 May 2022 - 26 May 2022

  • Price Range

    ₹610 - ₹642

  • Minimum Order Quantity

    23

  • (D) RHP

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Incorporated in 2013, Aether Industries Limited is a manufacturer of speciality chemicals. The company is the sole manufacturer in India of chemicals such as 4-(2-Methoxyethyl) Phenol (4MEP), 3- Methoxy-2-Methylbenzoyl Chloride (MMBC), Thiophene-2-Ethanol (T2E), Ortho Tolyl Benzo Nitrile (OTBN), N-Octyl-D-Glucamine, Delta-Valerolactone and Bifenthrin Alcohol. Aether Industries has two manufacturing sites at Sachin in Surat, Gujarat. Manufacturing Facility 1 is a 3,500 square metre facility including R&D and Hydrogenation Facilities and Pilot Plant. Manufacturing Facility 2 encompasses roughly 10,500 square metres, with an installed capacity of 6,096 MT per year spread among three buildings and 16 production streams as of September 30, 2021. As of March 31, 2022, Aether Industries Limited’s product portfolio comprised over 25 products which were sold to over 34 global companies in 18 countries and to over 154 domestic companies. The company is the largest manufacturer of 4MEP, T2E, NODG and HEEP products in the world by volume.
Objects of the issue:
The company proposes to utilise the net proceeds from the fresh issue towards funding the following objects:
  • Funding capital expenditure requirements for the Proposed Greenfield Project
  • Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company
  • Funding working capital requirements of the company; and
  • General corporate purposes.
Investment Rationale:

Focus on R&D to leverage core competencies of chemistry and technology

Due to its market leadership position in many speciality chemical product areas, Aether is wellpositioned to capitalize on these market opportunities. Their revenue for their key products has grown much faster than the industry highlights. They benefit from their established relationships with multinational, regional and local customers. In particular, they propose to introduce new products with varied applications across industries. They also intend to capitalize on the growing demand for their products by expanding their manufacturing capacities, strengthening their sales and distribution network in existing markets, and gaining access to newer markets. Apart from Organic growth, Aether is looking for strategic acquisition targets in the United States and the EU for R&D and manufacturing assets in line with their existing or desired competencies. They also look for opportunities to acquire businesses to add additional chemistry or technology competencies or to add business segments where they are currently not present. (for example, cytotoxic compounds, advanced silicone products, API and formulations). At the upper end of the price band, the issue is valued at a P/E of 72.3x based on FY22 annualized earnings, which we believe is aggressively priced. As we are witnessing the negative market sentiment towards the expensively valued stocks and due to limited financial track record, we suggest investors to “Avoid” this issue.

eMudhra Ltd.: Avoid

eMudhra Ltd.: Avoid
  • Date

    20 May 2022 - 24 May 2022

  • Price Range

    ₹243 - ₹256

  • Minimum Order Quantity

    58

  • (D) RHP

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eMudhra Limited was incorporated on June 2006. It is India’s largest licenced Certifying Authority (“CA”). The company’s business is divided into two verticles Digital Trust Services and Enterprise Solutions. eMudhra Limited is engaged in the business of providing services like individual/ organizational certificates, digital signature certificates, SSL/TLS certificates and device certificates, a portfolio of digital security and paperless transformation solutions, multi-factor authentication, mobile application security, website security testing, IT policy assessment, etc. The company has strong digital signature certificate expertise and is the only Indian company to be directly recognised by renowned browsers and document processing software companies such as Microsoft, Mozilla, Apple, and Adobe, allowing it to sell digital identities to individuals and organisations worldwide and issue SSL/TLS certificates for website authentication. The company has issued over 50 million digital signature certificates through the network of 88,457 channel partners spread across India. As of September 30, 2021, the company is serving 36,233 retail customers and 563 enterprises.
Objects of the issue:
The net proceeds from the Fresh Issue are proposed to be utilized by the company for the following objects:
  • Repayment or pre-payment, in full or in part of all or certain borrowings.
  • Funding working capital requirements.
  • Purchase of equipments and funding of other related costs for data centers proposed to be set-up in India and overseas locations
  • Funding of expenditure relating to product development
  • Investment in eMudhra INC for augmenting its business development, sales, marketing and other related costs for future growth
  • General corporate purposes.
Investment Rationale:

Largest licensed Certifying Authority in India

Extensive experience of the promoter in the information technology industry and Emudhra Limited’s (Emudhra) established track record of operations and strong market position as a leading licensed certifying authority for issuing digital signature certificate (DSC) in India, supported by its wide sales and distribution network across the country. Its diversified customer base in the DSC segment given it is largely retail in nature and established relationship with reputed customer base and strong order book in the enterprise solutions segment. Further, the company has invested a total amount of ~INR 303mn in its overseas subsidiaries to increase its market share in the foreign market. At the upper end of the price band, the issue is valued at a P/E of 96x based on FY22 annualized sales, which we believe is fully priced. Therefore, we suggest investors to “Avoid” this issue.

Ethos Ltd.: Avoid

  • Date

    18 May 2022 - 20 May 2022

  • Price Range

    ₹836 - ₹878

  • Minimum Order Quantity

    17

  • (D) RHP

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Ethos Limited is the largest luxury and premium watch retailer in India. The company delivers premium luxury watches through websites, social media platforms and physical stores. Ethos Limited operates on an omnichannel model and allows customers to order products either offline or online and have the flexibility of buying products at one store and returning at another or browsing product catalogues and placing orders online with doorstep delivery. The company’s watch portfolio has 50 premium brands including Omega, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Bvlgari, H. Moser & Cie, Rado, Longines, Baume & Mercier, Oris SA, Corum, Carl F. Bucherer, Tissot, Raymond Weil, Louis Moinet and Balmain. The company has 50 physical retail stores in 17 cities in India including New Delhi Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Chandigarh, Ahmedabad, Jaipur, Lucknow, Gurgaon, Guwahati, Ludhiana, Nagpur, Noida, Pune and Thane. Ethos Limited has 7,000 different premium watches and 30,000 watches in stock at any given time.
Objects of the issue:
The net proceeds of the Fresh Issue are proposed to be utilised as:
  • Repayment or pre-payment, in full or in part, of all or certain borrowings availed by the company;
  • Funding working capital requirements of the company
  • Financing the establishment of new stores and renovation of the certain existing stores
  • Financing the upgradation of ERP
  • General Corporate Purposes
Investment Rationale:
Strategically located and well-invested store network with an attractive in-store experience
Ethos is the largest retailer for luxury watches in India commanding a 20% market share of the organized market for luxury watch retail in India. They have the sizeable portfolio of premium and luxury watches in India enabling them to retail 50 premium and luxury watch brands. Ethos benefits from strong levels of domestic demand for luxury watches. Brands command significant pricing power, which has enabled them to raise the list prices of their products almost every year and to carefully monitor and control potential arbitrage across regions. The company derives significant benefits from the tendency of consumers in the luxury watch markets to become repeat customers and span age and income groups. The company’s understanding of the luxury customers has enabled them to evolve their luxury customer base, enabling them to drive the sales of their luxury and high luxury watches. Their networks of retail stores allow them to cater to a large section of consumers and ensure effective penetration of the luxury watch brands that they retail. At the upper end of the price band, the issue is valued at a P/E of 96x based on FY22 annualized sales, which we believe is aggressively priced. As we are witnessing the negative market sentiment towards the expensively valued stocks, we suggest investors to “Avoid” this issue

Paradeep Phosphate Ltd.: Subscribe

Paradeep Phosphate Ltd.: Subscribe
  • Date

    17 May 2022 - 19 May 2022

  • Price Range

    ₹39 - ₹42

  • Minimum Order Quantity

    350

  • (D) RHP

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Incorporated in 1981, Paradeep Phosphates Limited (PPL) is a manufacturer of non-urea fertilizers in India. The company is engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-Potassium (namely NPK-10, NPK-12 and NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid. Paradeep Phosphates Limited is the second largest private sector manufacturer of non-urea fertilizers and Di-Ammonium Phosphate (DAP) in terms of volume sales for the nine months ended December 31, 2021. The company’s fertilisers are marketed under the brand names Jai Kisaan-Navratna and Navratna. The manufacturing facility of Paradeep Phosphates Limited is located in Paradeep, Odisha, and includes a DAP and NPK production facility, a Sulphuric acid production plant and a Phosphoric acid production plant. The company established an extensive sales and distribution network, with a strong presence in the eastern part of India.
Objects of the issue:
The net proceeds of the Fresh Issue are proposed to be utilised in the following manner:
  • Part-financing the acquisition of the Goa Facility.
  • Repayment/prepayment of borrowings.
  • General corporate purposes
Investment Rationale:
Well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations
PPL is one of the largest manufacturers of DAP/NPK fertilizers in India, with a total installed capacity of 1.5MMTPA post debottlenecking of two trains in FY21. The capacity will increase further to 1.7 MMTPA in FY2023 post debottlenecking of the remaining two lines. Post the acquisition of ZACL’s assets the company will have around 2.5 MMTPA of annual manufacturing capacity of phosphatic fertilizers making it the third largest P&K manufacturer in the country. PPL is partially backward integrated into production of phosphoric acid by using rock phosphate and sulphuric acid which provides cost advantage to PPL as phosphoric acid produced is cheaper than imported phosphoric acid. PPL had commissioned a 1.32 MMTPA sulphuric acid plant in FY16 which has improved the company’s cost structure due to lower cost of power (produced from steam generated from the sulphuric acid plant) sulphuric acid. Additionally, with the company in midst of installing an evaporator to increase the inhouse production of strong phosphoric acid and increase in the phosphoric acid production capacity to 1500 TPD, the extent of backward integration will further improve, leading to improvement in the contribution margins. At the upper end of the price band, the issue is valued at a P/E of 7x based on FY22 annualized earnings, which we believe is reasonably priced. Hence, we recommend a “SUBSCRIBE” rating on this issue for the long term.

Venus Pipes & Tubes Ltd.: Subscribe

Venus Pipes & Tubes Ltd.: Subscribe
  • Date

    11 May 2022 - 13 May 2022

  • Price Range

    ₹310 - ₹326

  • Minimum Order Quantity

    46

  • (D) RHP

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Venus pipes & tubes ltd. was incorporated in 2015. The company is one of the growing stainless steel pipes and tubes manufacturer and exporter in India. Over six years of experience in the manufacturing of stainless steel tubular products in two broad categories are seamless tubes/pipes and welded tubes/pipes under which five categories of products are manufactured namely, stainless steel high precision & heat exchanger tubes, stainless steel hydraulic & instrumentation tubes, stainless steel seamless pipes, stainless steel welded pipes and stainless steel box pipes. The products under which the brand name “Venus” that they supply their products for application in diverse sectors including chemicals, engineering, fertilizers, pharmaceuticals, power, food processing, paper and oil & gas. Venus Pipes & Tubes Limited has one manufacturing plant which is located at BhujBhachau highway, Dhaneti (Kutch, Gujarat) with an installed capacity of 10,800 MT per annum. The company sells products in both domestic and international markets. Venus Pipes & Tubes exports its products to 18 countries including Brazil, the UK, Israel and countries in the European Union, etc.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • To meet long-term working capital requirements.
  • General corporate purposes.
  • Financing project costs for capacity growth, technology upgrades, operational cost optimization, manufacturing facility support, and backward integration for hollow pipe manufacturing.
Investment Rationale:

International Accreditations and product approvals

Currently, Venus Pipes has a total production capacity of 10.8 ktpa, of which 3.6 ktpa is dedicated to seamless SS pipes & 7.2 ktpa for welded SS pipes. The company plans to expand its seamless capacity to 9.6 ktpa and welded capacity to 14.4 ktpa and 9.6 ktpa of new capacity towards backward
integration to manufacture mother hollow pipes. Total capacity would double from 10.8ktpa to 24ktpa. Their products are largely used in industries like pharmaceuticals, food processing, etc. The
GoI has announced Production Linked Incentive (“PLI”) schemes for boosting the domestic manufacturing in certain sectors, which shall have a consequent positive impact on their order book. Backward integration with in-house production of hollow pipes, acquisition of slitting machine for cutting steel strips/coils as per desired width and enriched product mix with higher diameter pipes would lead to continued improvement in margins. At the upper end of the price band, the issue is valued at a P/E of 21x based on FY22 annualized earnings, which we believe is reasonably priced. Hence, we recommend a “SUBSCRIBE” rating on this issue for the long term.

Delhivery Ltd.: Avoid

Delhivery Ltd.: Avoid
  • Date

    11 May 2022 - 13 May 2022

  • Price Range

    ₹462 - ₹487

  • Minimum Order Quantity

    29

  • (D) RHP

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Delhivery Ltd. was incorporated on 22nd June 2011. Delhivery is India’s largest and fastest-growing fully-integrated logistics services player by revenue as of FY 2021. The company aim to build an operating system for commerce. Their business is guided by three principles i) people centricity; ii) growth through partnership; iii) efficiency. Delhivery provided supply chain solutions to a diverse base of 23,113 Active Customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and SMEs across several verticals. Their in-house logistics technology stack is built to meet the dynamic needs of modern supply chains. They have over 80 applications through which they provide various services. Delhivery operates a pan-India network and provides its services in 17,488 postal index number (“PIN”) codes, as of Dec 31, 2021. Company’s express parcel delivery network, which serviced 17,488 PIN codes in the 9 months ended Dec 31, 2021, covering 90.61% of the 19,300 PIN codes in India.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • Funding organic growth initiatives.
  • Funding inorganic growth through acquisitions and other strategic initiatives.
  • General corporate purposes.
Investment Rationale:
Proprietary logistics operating system
Delhivery is the largest integrated and fastest growing fully integrated logistics services player in India by revenue as of FY21. Their revenue from contracts with customers has grown from INR16.5bn in FY19 to INR 36.5bn in FY21, or a CAGR of 48.5%. Further, the revenue from contracts with customers has improved from INR 26.4bn for the 9MFY21 to INR 48.1bn for the 9MFY22, or an increase of 81.9%. The company’s network structure, quality of engineering and technology and data intelligence capabilities have helped them establish scale in all of their business lines and ensure synergies across them. This has driven higher network utilization, resulting in cost efficiencies while maintaining service speed and reliability. At the upper end of the price band, the issue is valued at a Price/Sales of 5.5x based on FY22 annualized sales, which we believe is aggressively priced. Moreover, despite improvement in the topline, the company continues to make losses. As we are witnessing the negative market sentiment towards the similar category stocks (Zomato, PayTM), we suggest investors to “Avoid” this issue.