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Gopal Snacks Ltd IPO : SUBSCRIBE

Gopal Snacks Ltd IPO
  • Date

    06th March 2024 - 11th March 2024

  • Price Range

    Rs. 381 to Rs. 401

  • Minimum Order Quantity

    37

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Company Overview

Established in 1999 and having an experience of over two decades in the Indian snack industry, Gopal Snacks Ltd. is an FMCG company in India offering ethnic snacks, western snacks, and other products. The company offers a variety of savoury products such as namkeen and gathiya, western snacks such as wafers along with fast-moving consumer goods that include papad, spices, gram flour or besan, noodles, rusk, and soan papdi under the brand name ‘Gopal’. Leveraging its experience and by understanding the preferences of its customers and target markets, the company has developed a variety of products over the years which has enabled the company to strengthen its foothold in the Indian snacks industry. Having a product portfolio of over 84 products and 276 SKUs under various product categories, the company addresses a wide variety of tastes and preferences. To increase its foothold and expand footprint across India, the company has implemented a distribution management system that helps it to coordinate with its distributors and provides visibility on the inventory levels and distributor sales, enabling the company to optimize its distribution network. The company’s products are being sold in over 523 locations in 10 States and two Union Territories and its distribution network comprises of three depots and 617 distributors. The company has three primary manufacturing facilities and three ancillary manufacturing facilities in India. The primary facility focuses on manufacturing finished products and the ancillary facility focuses on producing besan or gram flour, raw snack pellets, seasoning, and spices which are primarily used for captive consumption in the manufacturing of finished products. The aggregate annual installed capacity of the primary facilities stands at 303,668 MT and 101,060 MT in the case of ancillary facilities. In addition to this, the company engages third-party manufacturers on a need basis to produce its products such as chikki, nachos, noodles, rusk, soan papdi, and washing bars. Over the years, the company has put efforts towards building its brand through marketing and brand-building initiatives, resulting in a positive brand recall among its target audience which has helped the company establish a loyal customer base.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Carry out the Offer for Sale of up to 16,209,476 Equity Shares aggregating up to Rs. 6,500 million by the Selling Shareholders; and
  • Achieve the benefits of listing the equity shares on the stock exchanges.

Investment Rationale:

Strong distribution network a key enabler for market share gains in future

The company has three depots and 617 distributors, which help the company reach retailers located across 10 States and two Union Territories in India, including Gujarat, Maharashtra, and Uttar Pradesh. The company has developed longstanding relationship with a number of its distributors. The company’s distributors have established sales channels with conventional grocery retailers, supermarkets and hypermarkets which helps the company’s products reach the end consumers located in urban, semi-urban and rural regions efficiently. A majority of products are sold through the general trade channel which includes conventional grocery retailers, supermarkets, and hypermarkets. In addition to this, the company’s products are sold through a retail store chain in Gujarat and e-commerce platforms. The company’s products have also started to gain recognition in international markets. In the last three Fiscals and in the six months ended September 30, 2023, the company sold its products to 37 countries including Australia, Kuwait, Saudi Arabia, UAE, and the USA through direct exports

Diversified product portfolio encompasses taste of a wide range of consumers

The company offers a diversified portfolio of savory snacks, including ethnic savories such as namkeen and gathiya and western snacks such as wafers, extruded snacks and snack pellets, that cater to varied consumer tastes and preferences. The company also offers fast-moving consumer products that include papad, spices, besan or gram flour, chikki, nachos, noodles, rusk, soan papdi, and washing bar. During the past few years, , the organized segment has been consolidating its  position in the market for savory snacks through the introduction of new products and product innovations that primarily target urban as well as rural consumers. The company is committed to providing consumers with value products that meet their expectations through quality ingredients and advanced manufacturing techniques. As the company forayed into manufacturing spices and besan or gram flour, which are key ingredients for namkeen and gathiya products, this allowed the company to not only control the quality and consistency of its ingredients but also helped expand its product portfolio by introducing spices and besan or gram flour as standalone products. The expansion into these product categories demonstrates the company’s commitment to advancing its offerings and the dedication to keeping up with industry trends to meet the evolving needs of consumers.

Valuation and Outlook:

Currently, the retail market in India contributes around 10% to the GDP in India which is estimated at Rs. 67.9 trillion in 2023 and is expected to grow at a CAGR of 8.7% to touch approximately Rs. 94.9 trillion by 2027. Among the various retail segments, food and grocery accounts for the maximum share in the retail industry with 63% share and is expected to maintain such dominance.  Various factors such as an increase in disposable income, rising middle-class population, growing preference for packaged foods, emergence of consumerism, and rising sales via e-commerce platforms have led to a rise in retail consumption. Increasing disposable income, the rising population of urban middle-class consumers, and the rising population of working women across the country have led to the surging demand for high-value, pre-packed ‘on-the-go’ and ‘ready-to-eat’ products in India. The per capita spending on packaged food stood at Rs. 3,657 in 2023 and is expected to witness an 11% CAGR growth over the FY2023-27 period. Effectively benefiting from such macro and industry factors, Gopal Snacks Ltd. offers a large variety of savory snacks according to the preferences and tastes of its target customer market. Recording a revenue of Rs 13,946 million in FY23, the company has grown its revenue by 11.5% over the FY2021-23 period. Also the constant reduction of debt over the years have led to better PAT margins and improved return on capital employed during FY2021-23. Having committed to providing consumers with value products that meet their expectations through quality ingredients and advanced manufacturing techniques, Gopal Snacks possesses the perfect mix of macroeconomic opportunities and a well-established brand image that will cater to a robust growth story for the company. On the financial performance front, the company’s Revenue/EBITDA/PAT grew at a CAGR of 11.2%/80.3%/130.6% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 44.5x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.

Krystal Integrated Services Ltd IPO : SUBSCRIBE

Krystal Integrated Services Ltd IPO
  • Date

    14th March 2024 - 18th March 2024

  • Price Range

    Rs. 680 to Rs. 715

  • Minimum Order Quantity

    20

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Company Overview

Providing a comprehensive range of service offerings across multiple sectors, Krystal Integrated Services Ltd. is India’s leading integrated facilities management services company, with a focus on healthcare, education, public administration airports, railways and metro infrastructure, and retail sectors. The company is one of the select companies in India that has a wide geographic presence and customer base, catering to almost all end-user segments. The company offers soft services such as housekeeping, sanitation, landscaping, and gardening; hard services such as mechanical, electrical, and plumbing services, solid, liquid, and biomedical waste management, pest control and façade cleaning; and other services such as production support, warehouse management and airport management services. The company also provides staffing solutions and payroll management to its customers, as well as private security and manned guarding services and catering services. The company is also a key solutions provider to the government sector and has a track record of executing large contracts. It is among select companies in India to qualify for and service large, multi-location government projects in sectors such as healthcare, education, airport, railways, and metro infrastructure. Operating on a B2B model and having a wide portfolio of services enable the company to design and deliver a range of customized solutions suited to the specific needs of its customers, which bolsters customer acquisition and retention capabilities. Through such a business model and by understanding the unique requirements and challenges across sectors, the company has built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors. Steering the company over the years, the company has a well-qualified management team that possesses robust experience in various sectors.  

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment/prepayment, in full or part, of certain borrowings availed of by the company;
  • Funding working capital requirements of the company;
  • Funding capital expenditure for purchase of new machinery; and
  • General corporate purposes

Investment Rationale:

Focused business model is well-positioned to capture favorable industry dynamics

Comprising about 73% of the company’s revenue, government projects form a major chunk of the company’s revenue. Having a track record of executing large contracts, the company is among the select companies in India to qualify for and service large, multi-location government projects. With the government prioritizing quality and service delivery for their clients to achieve higher customer satisfaction and an increase in outsourcing of facility management from the government segment, the integrated facility management services market in India is set to benefit from such an industry change. Over the years, the company has built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors, with healthcare and education forming about 57% of the company’s revenue. As a result, the company is set to benefit in the long term with its focused business model and increased government project execution.

One-stop solution provider with a comprehensive range of service offerings

The company under its integrated facilities management offerings provides soft services such as housekeeping, sanitation, landscaping, and gardening; hard services such as mechanical, electrical, and plumbing services, solid, liquid, and biomedical waste management, pest control, façade cleaning; and other services such as production support, warehouse management and airport management services. Having a comprehensive range of integrated facility management service offerings across multiple sectors, the company has a wide geographic presence and customer base, catering to almost all end-user segments. The company has been integrating its service offerings spanning across various sectors which requires shared expertise and investment in terms of technology, equipment, and special manpower training. This has enabled the company to provide a bundled solution of services to each customer that is tailored to their specific needs. The company caters to their requirements with relevant industry expertise and acts as a one-stop integrated solution for customers who consequently do not need to engage with multiple vendors or service providers.

Valuation and Outlook:

Having built expertise in catering to the healthcare, education, airport, railways, and metro infrastructure sectors, the company provides bespoke solutions for integrated facility management requirements. Being a key solutions provider to the government sector, the company is among the select companies in India to qualify for and service large, multi-location government projects. The company is one of India’s leading integrated facilities management services companies, catering to various sectors. With the outsourced integrated facility management market in India expected to grow at a CAGR of 14.6% during FY2023-28 period, the potential market size is estimated to be Rs. 1,935.9 billion. Accounting for almost 88% of the total market size, the public administration, industrial, commercial offices, healthcare, educational institutions, railways, and metro, and airport sectors are expected to drive demand for the market over the longer period. Also, with the growth opportunities arising from the government sector and the staffing and payroll management market, the company is set to derive benefits from the same. By maintaining quality standards for its services and expanding its service offerings to meet evolving industry requirements, the company has built long-term relationships with its customers across sectors. The company also has a competitive advantage as management services require an immense level of expertise, trust, and quality in the provision of service. Filling the gap of such a growing demand, the company emerges as a one-stop solution to cater to the market in the coming years. Considering the financial performance, the company’s Revenue/EBITDA/PAT grew at a CAGR of 22.5%/57.3%/86.7% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 21.5x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.

R K Swamy Ltd IPO : SUBSCRIBE

R K Swamy Ltd IPO : SUBSCRIBE
  • Date

    04th Mar 2024 - 06th Mar 2024

  • Price Range

    Rs. 270 to Rs. 288

  • Minimum Order Quantity

    50

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Company Overview

Founded in 1973, R K Swamy Ltd. (RKSL) is engaged in the business of integrated marketing communications, customer data analysis, customer data mining, customer insights mapping, full-service market research and syndicated studies. RKSL is essentially a data-driven, integrated marketing services provider. It successfully leverages the digital and the physical interfaces to offer a full service and 360-degree solution to the clients. It has a very extensive repertoire to its credit of works done. In FY23 alone, RKSL published more than 818 creative campaigns on behalf of its clients across various media platforms. In addition, RKSL also processed over 97.69 terabytes of data and conducted over 2.37 million consumer interviews via quantitative, qualitative, and telephone surveys. The company started as a publicity and advertising agency but has gradually embarked on the full gamut of digital marketing services that are in sync with the needs of modern growth stories. It has an impressive client roster, with some of its premium clients including Dr. Reddy’s Labs, EID Parry, Fujitsu, Gemini Edibles, Havells, IFB Industries, Mahindra & Mahindra, ONGC, Eicher Motors, Hawkins, HPCL, Himalaya Wellness, and Ultratech Cements. Among service industry players, its key clients include Birla Sun Life AMC, Cera, ICICI Prudential Life Insurance, Shriram Finance, and Union Bank of India. Many of its publicity and marketing campaigns have been quite iconic in terms of its impact on customers and the market, apart from the customer mindshare. RKSL currently employs over 2,391 personnel across its 12 offices and 12 field offices.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Funding working capital requirement of the company – Rs. 87 crores;
  • Funding capital expenditure to be incurred by the company for setting up a digital video content production studio (“DVCP Studio”) – Rs. 10.9 crores;
  • Funding investment in IT infrastructure development of the company, and the Material Subsidiaries, Hansa Research and Hansa Customer Equity – Rs. 33 crores;
  • Funding setting up of new customer experience centres (“CEC”) and computer aided telephonic interview centres (“CATI”) of the company – Rs. 21.7 crores; and
  • General corporate purposes.

Investment Rationale:

Strategic integration and diversification propel the company into marketing services landscape

RKSL boasts a rich heritage of over 50 years as a pioneer in integrated marketing services within India. Over the decades, the company has evolved into one of the nation’s leading integrated marketing service groups, offering a comprehensive suite of solutions spanning creative, media, data analytics, and market research services. Grounded in responsiveness to market trends and client needs, RKSL has cultivated enduring relationships with a diverse clientele comprising large corporates, state-owned enterprises, emerging entrepreneurs, and businesses across various sectors. As the marketing landscape continues to evolve, clients increasingly seek streamlined and efficient solutions to address their diverse marketing needs. In response, RKSL’s integrated service model emerges as a compelling value proposition, offering clients a single window for their marketing requirements. By leveraging its interrelated and complementary business segments, the company stands poised to provide comprehensive support across the entire media and marketing value chain. As clients navigate the complexities of modern marketing, the appeal of

Robust track record and client-centric approach bolster the company’s market dominance

RKSL’s exceptional 15-year track record in the Data Analytics and Marketing Technology (MarTech) segment underscores its position as a leader in market research and customer data analytics. Since its inception, the company’s subsidiary, Hansa Customer Equity, has been at the forefront of standalone customer data analytics, servicing over 200 clients across various sectors. Recognized as one of India’s top 50 companies for data scientists to work for by Analytics India Magazine, Hansa Customer Equity exemplifies excellence in the field of data science. With a comprehensive suite of services encompassing Marketing Automation Platforms, Media Planning Tools, and AI-driven insights, RKSL remains at the forefront of innovation in the industry. The company’s ability to deploy various technologies, including machine learning and in-house algorithms, positions it to address clients’ evolving business needs effectively. As the market for customer data analytics and MarTech solutions continues to expand, RKSL anticipates robust growth, with projections indicating significant market expansion by FY28. Furthermore, RKSL’s well-diversified client base and long-standing relationships underscore its market dominance and resilience. With over 4,000 client organizations served and a focus on key sectors such as BFSI, automotive, and FMCG, the company possesses deep domain expertise and a proven track record of delivering value-added solutions. By leveraging the reach and relevance of digital content, RKSL supports clients’ marketing initiatives across online and offline channels, further solidifying its position as a trusted partner in the marketing services landscape.

Valuation and Outlook:

RKSL, with its integrated marketing services approach, is strategically positioned to capitalize on India’s burgeoning digital infrastructure growth spurred by initiatives like the ‘Digital India’ campaign and the expansion of 4G/5G networks. This rapid digital transformation has facilitated increased connectivity, internet penetration, smartphone usage, and digital payments, thereby creating significant marketing opportunities, particularly in rural areas, and fostering industry expansion. Over the past three years, R K Swamy Ltd. has demonstrated robust revenue growth, with sales increasing by nearly 70% in the last two years alone. The company’s profitability metrics reflect this growth trajectory, with net profit margins reaching 10.7% in FY23 and marked a ten-fold increase in net profit over the past two years. Moreover, the impressive ROE of 69.1% and ROA of 10.0% underscore the company’s efficient utilization of resources and strong profitability. From a valuation perspective, R K Swamy Ltd.’s P/E ratio of 41x, based on FY23 earnings, is reasonable considering the industry average P/E of 69x. The inherent nature of the digital marketing analytics business is such that it entails higher initial risk followed by a phased replication model upon successful roll-out. While the IPO presents an opportunity for substantial returns, investors must be prepared for potential cyclical returns and a longer investment horizon. Based on the above positives, we give the issue a “SUBSCRIBE” rating.

Mukka Proteins Ltd IPO : SUBSCRIBE

Mukka Proteins Ltd IPO : SUBSCRIBE
  • Date

    29th Feb, 2024 - 04th Mar, 2024

  • Price Range

    Rs. 26 to Rs. 28

  • Minimum Order Quantity

    535

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Company Overview

Incorporated in 2003, Mukka Proteins Ltd. is engaged in the manufacturing of fish protein products. The principal vertical of the company is the production and supply of fish meal, fish oil and fish-soluble paste. These are essential ingredients for the production of aqua feed (fish and shrimp). In addition, they also go into poultry feed (broilers and layers) and pet food (dog and cat food). Mukka Proteins Ltd. operates six production facilities, with four production facilities located in India (Gujarat and Karnataka) and the remaining two are in Oman in the Middle East. These Oman facilities are owned through the global subsidiary Ocean Aquatic Proteins LLC. Apart from these production    facilities, Mukka Proteins also operates three blending plants and five storage facilities, so the      production process is fully forward and backward-integrated. All these blending and storage facilities are located in India. The company, Mukka Proteins Ltd, also has a very strong export franchise, with most of its blending storage facilities in India located near the coast. The company exports its     products to more than ten countries, including Bahrain, Bangladesh, Chile, Indonesia, Malaysia,  Myanmar, Philippines, China, Saudi Arabia, South Korea, Oman, Taiwan, and Vietnam. As of FY23, the company employed 385 people across its technical, production, marketing, sales, and operations divisions. The company also outsources some of its production on a contract basis.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Investment in Associate, viz. Ento Proteins Private Ltd, for funding its working capital requirements;
  • General corporate purposes. 

Investment Rationale:

Positioned as a leading manufacturer and exporter of fish protein products

Mukka Proteins is dominant in India’s fish protein industry, consistently receiving awards from MPEDA for export performance over the past seven years. The company offer a range of fish protein products, including fish meal, fish oil, and fish soluble paste, catering to various sectors such as aqua feed, poultry feed, pet food, pharmaceuticals, soap manufacturing, leather tanneries, and paint    industries. The company is among the first in India to commercialize insect meal and insect oil,       expanding offerings to include insect protein products. This shows the company’s commitment to innovation and adaptation to changing market demands. With exports to over ten countries, including Bahrain, Bangladesh, Chile, Indonesia, Malaysia, Myanmar, Philippines, China, Saudi Arabia, South Korea, Oman, Taiwan, and Vietnam, Mukka Proteins has been a key player in the global animal  protein market. In FY23, the company contributed 25-30% to the estimated revenue of the Indian fish meal and fish oil industry, indicating a significant market share. The industry’s estimated revenue growth from Rs. 32,000 mn to Rs. 41,000 mn suggests ample opportunities for further expansion and revenue generation. The growing recognition of the nutritional benefits of fish oil, especially Omega-3 supplements, further strengthens the demand  for product & ensures stable revenue in the long term

Established customer base and strong relationships to aid financial performance

Mukka Proteins has established enduring relationships with key customers who are significant aqua feed, poultry feed, and pet food producers. These long-standing partnerships serve as a key differentiator, emphasizing commitment to quality and customer satisfaction. The company’s focus on delivering high-quality products tailored to customer specifications has driven business growth and expanded market presence. This customer-centric attitude has developed existing relationships and enabled acquiring new clients. Over the recent years, Mukka Proteins has consistently expanded its customer base, serving many clients across domestic and international markets. As of September 30, 2023, a substantial portion of customers has been associated with the company for extended periods, contributing significantly to revenue. The export network extends to over ten countries, including Bahrain, Bangladesh, Chile, and China. This diverse international presence underscores the company’s ability to penetrate and thrive in global markets, strengthening the company’s revenue performance. The company’s established customer base, through long-standing relationships and a commitment to quality, global market reach, and consistent revenue contribution from exports, enables the company to take advantage of a robust & attractive investment opportunity in the fish protein industry.

Valuation and Outlook:

Mukka Proteins holds a dominant position in the fish protein industry in India. It offers a wide range of fish protein products, including fish meal, fish oil, and fish soluble paste, catering to various sectors such as aqua feed, poultry feed, pet food, pharmaceuticals, soap manufacturing, leather tanneries, and paint industries. The company also established a strong customer base and enduring relationships with major aqua feed, poultry feed, and pet food producers. The company facilities, being   strategically located, provide access to key raw materials, pelagic fishes such as sardine, mackerel, anchovy, etc., thus minimizing dependency on one particular coastal landing site and fish          catchments. As a manufacturer of fish protein products, these must be pre-approved by customers, as customers’ end products contribute indirectly to human consumption and are typically subject to stringent regulatory and industry standards. The company also has a record of sustained consolidated revenue from operations, growing at a CAGR of 39.3% during FY21-23. We believe that high  entry barriers, consistent financial performance, and innovative products have helped the company to grow its business successfully. As we advance, Mukka Proteins Ltd. presents a persuasive investment opportunity in the fish protein industry, given its strong market position, diversified product   portfolio, and global presence. The issue is valued at a P/E of 9.3x on the upper price band based on FY24 earnings, which is fairly valued. We, therefore, recommend an SUBSCRIBE rating for the issue.

Bharat Highways InvIT IPO : SUBSCRIBE

Bharat Highways InvIT IPO : SUBSCRIBE
  • Date

    28th Feb, 2024 - 01st Mar, 2024

  • Price Range

    Rs. 98 to Rs. 100

  • Minimum Order Quantity

    150

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Company Overview

Bharat Highways InvIT (Bharat InvIT) is an infrastructure investment trust established to acquire, manage, and invest in a portfolio of infrastructure assets in India and to carry on the activities of an infrastructure investment trust, as permissible under the SEBI InvIT Regulations. They were settled through the Original Trust Deed, by GRIL (GR Highways Investment Manager Private Limited) – the Settlor, and registered as an infrastructure investment trust with SEBI on August 3, 2022. The Sponsor – Aadharshila Infratech is engaged in testing services in the field of transportation engineering and has expertise in NSV survey, FWD survey, pavement design of roads and airports, physical and chemical testing of soil, lime, cement, road roughness testing, concrete and bituminous mix design of road projects. Nagaur Mukundgarh Highways Pvt. Ltd. (NMHPL), the Associate of the Sponsor is a road engineering, procurement, and construction company, with an experience in the design and construction of various road/highway projects. NMHPL has over six years of experience in the execution of infrastructure projects since 2017. Bharat InvIT’s initial portfolio consists of seven road assets, all operating on a HAM (hybrid annuity model) basis, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra, and Uttar Pradesh. As of January 31, 2024, the projects, which are owned, operated, and maintained by the Project SPVs, comprise the InvIT assets consisting of around 498 km of constructed and operational roads across the above five states in India. These roads are operated and maintained under concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GRIL. Further, the Bharat InvIT proposes to enter into a ROFO (right of first offer) agreement with GRIL, under which GRIL will grant a right of first offer to the InvIT to acquire certain other assets owned and developed by GRIL. All of the InvIT assets are HAM projects awarded by NHAI and its revenue stream is primarily through annuity payments from the NHAI. GRIL is monetizing future annuity payments (including interest payable thereon) and O&M (operations and maintenance) income receivable from the NHAI by transferring the InvIT assets to the Bharat InvIT. The net distributable cash flows of the InvIT (Distributable Income) are based on the cash flows generated from the underlying operations undertaken by the Project SPVs. In terms of the SEBI InvIT Regulations, the Project SPVs shall distribute not less than 90% of the net distributable cash flows to the InvIT, proportionate to the InvIT’s holding in the Project SPVs. In addition, each Project SPV has entered into a long-term Concession Agreement with the NHAI, with each agreement having a residual operations period of between 11.1 and 13.5 years as of January 31, 2024, thereby providing long-term cash flows to the Bharat InvIT. On a collective basis, the InvIT assets had a weighted average (based on bid project cost) residual project life of approximately 12.0 years as of January 31, 2024.

Objects of the issue:

The net proceeds will be utilized by the InvIT towards the following objects:

  • Providing loans to the Project SPVs for repayment/ pre-payment, in part or in full, of their respective outstanding loans (including any accrued interest and prepayment penalty); and
  • General corporate purposes.

Investment Rationale:

Sizeable portfolio of stable revenue-generating assets and long-term predictable cash flows

Bharat InvIt owns an initial portfolio consisting of seven InvIT assets having an aggregate length of approximately 498 km located on national networks across five states in India. The projects are located on national highway networks that experience both commercial and passenger vehicular traffic. In addition, each project SPV has entered into a long-term Concession Agreement with the NHAI, with each agreement having a residual operations period of between 11.1 and 13.5 years as of January 31, 2024, thereby providing long-term cash flows to the InvIT. On a collective basis, the InvIT Assets had a weighted average (based on bid project cost) residual project life of approximately 12.0 years as of January 31, 2024. Given that all its InvIT assets are on a HAM basis, its entire revenue is expected to continue in the future from annuities paid by the NHAI, which signifies the steady nature of income for the InvIT. In a HAM project, the concessioning authority shares a portion of the total project cost during the construction phase. As a mix of EPC and annuity models, HAM reduces the financial burden of a concessionaire during the project construction phase and provides assured revenue in the form of annuities, interest on reducing balance of completion cost (BCC), and O&M payments linked to inflation in the operational phase. Annuity payments eliminate the risk of income fluctuations resulting from changes in traffic volume. The geographically diverse project portfolio and its expertise leveraged from existing projects provide them with an advantage in capitalizing on new opportunities available in the roads and highways sector.Through the proposed ROFO Agreement, Bharat InvIT will have a right of first offer to acquire certain assets of GRIL, their proposed significant Unitholder, and the current majority shareholder of the Project SPVs, including the projects currently owned by GRIL or which may be acquired or developed by GRIL or its existing or future subsidiaries.

Consistent track record in operating and maintaining projects in the road sector

Bharat InvIT intends to leverage the experience and expertise of its sponsor, and its associate NMHPL, to gain a competitive advantage within the road and highways industry. NMHPL is a road engineering, procurement, and construction company, with experience in the design and construction of various road/highway projects and has over six years of experience in the execution of the projects. NMHPL has undertaken the development and augmentation of road projects in the state of Rajasthan, by two-laning / intermediate laning on an annuity basis, under a concession agreement dated March 3, 2017, entered with the Public Works Department, Rajasthan. The Sponsor has an established track record of assessing the roughness and balance life of road projects, which enables it to determine the appropriate maintenance activity to be undertaken on the road projects. The Sponsor will also act as the Project Manager of the InvIT. The Investment Manager intends to expand its initial portfolio by identifying and acquiring additional road projects that meet the investment objective in accordance with the provisions of the Amended and Restated Trust Deed.

Valuation and Outlook:

Bharat InvIT intends to leverage the experience and expertise of its sponsor, and its associate NMHPL, to gain a competitive advantage within the road and highways industry. NMHPL is a road engineering, procurement, and construction company, with experience in the design and construction of various road/highway projects and has over six years of experience in the execution of the projects. NMHPL has undertaken the development and augmentation of road projects in the state of Rajasthan, by two-laning / intermediate laning on an annuity basis, under a concession agreement dated March 3, 2017, entered with the Public Works Department, Rajasthan. The Sponsor has an established track record of assessing the roughness and balance life of road projects, which enables it to determine the appropriate maintenance activity to be undertaken on the road projects. The Sponsor will also act as the Project Manager of the InvIT. The Investment Manager intends to expand its initial portfolio by identifying and acquiring additional road projects that meet the investment objective in accordance with the provisions of the Amended and Restated Trust Deed.

Platinum Industries Ltd IPO : SUBSCRIBE

Platinum Industries Ltd IPO : SUBSCRIBE
  • Date

    27th Feb 2024 - 29th Feb 2024

  • Price Range

    Rs. 162 to Rs. 171

  • Minimum Order Quantity

    87

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Company Overview

Platinum Industries Ltd. is engaged in manufacturing stabilizers across various segments such as PVC stabilizers, CPVC additives, and lubricants. Operating in the specialty chemicals industry, the company is the third largest player in PVC stabilizers in terms of sales, with a 13% market share in the domestic market for FY23. The company’s product portfolio has various applications in PVC pipes, PVC profiles, PVC fittings, electrical wires and cables, SPC floor tiles, rigid PVC foam boards, packaging materials, etc. The company has one manufacturing facility in Palghar, Maharashtra which is strategically situated near JNPT (Nhava Sheva) Port, Maharashtra (JNPT) from where the company receives its supply of imported raw materials as well as exports its finished goods to the international market.  Traditionally, lead-based PVC stabilizers were commonly utilized for their stabilizing properties. However, during recent times, there has been a noticeable shift in the trends and preferences within the PVC stabilizer industry, particularly in sectors such as potable water distribution, agriculture, construction, medical consumables, wires, and cables. Recognizing the significance of this trend shift, the company has responded by gradually transitioning from lead-based PVC stabilizers to calcium zinc-based and calcium organic-based stabilizers which has allowed the company to align with current market demands and adhere to evolving safety and environmental norms. By offering calcium zinc-based stabilizers and calcium organic-based stabilizers, the company provides customers with products that meet their performance requirements while prioritizing health and sustainability. The company also undertakes trading activities of associated commodity chemicals such as titanium dioxide and PVC/CPVC resin. The company’s business model is aimed at consistently expanding its product portfolio by introducing new products to cater to multiple end-use applications. With a strict focus on product quality and a good track record in the distributor network, the company has established a brand image that helps the company penetrate new product categories. The company also intends to establish multiple projects in and outside India, where it shall venture into manufacturing PVC stabilizers (both lead-based and non-lead-based).

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Investment in the subsidiary, Platinum Stabilizers Egypt LLC (“PSEL”), for financing its capital expenditure requirements for setting up of a manufacturing facility for PVC stabilizers at SC Zone ‘Governorate of Suez Egypt’;
  • Funding of capital expenditure requirements of the company towards setting up of a manufacturing facility for PVC stabilizers at Palghar, Maharashtra, India;
  • Funding working capital requirements of the company; and
  • General corporate purposes.

Investment Rationale:

High entry barriers in the specialty chemical industry

Barriers to entry in the specialty chemical industry are typically high and the specialized nature of products leads to significant differentiation. Various other factors such as R&D requirements, technical know-how, capital intensive service capabilities, customer relationships, and engineered or regulated specifications also create important barriers to entry. Due to the nature of the application of the company’s products and the processes involved, the company’s products are subject to, and measured against, high-quality standards and rigorous product approval systems with stringent technical specifications. Further, with end products manufactured by the company typically subject to regulatory and industry standards, any change in the vendor of the products may require significant time and expense for customers, thereby acting as an entry barrier. Thus, customer acquisition is difficult and limits the number of competitors involved in the manufacturing of the company’s products. According to CRISIL, the specialty chemicals industry presents significant entry barriers, including customer validation and approvals, expectations from customers for process innovation and cost reduction, high-quality standards and stringent specifications, as well as various client and regulatory approvals that are required to be obtained. 

Varied product portfolio catering to diversified industries

The company has varied products for the PVC industry and multiple product categories such as low lead-based stabilizers, calcium zinc-based stabilizers, and organic-based stabilizers. Within each product category, there are multiple grades depending on application and customer requirements.The company’s efforts are focused on continuously identifying market demands and introducing relevant products with high quality. In PVC applications, the company has developed more than 400 grades, which has helped the company to cover a majority of its customers as well as different applications. The company diversifies its product portfolio in such a way that its products are customized for the customers and scale for each of the geographies the company serves. The company’s diversified product portfolio helps it to retain customers and strengthen its cross-selling efforts across product portfolios.

Valuation and Outlook:

The company has varied products for the PVC industry and multiple product categories such as low lead-based stabilizers, calcium zinc-based stabilizers, and organic-based stabilizers. Within each product category, there are multiple grades depending on application and customer requirements.The company’s efforts are focused on continuously identifying market demands and introducing relevant products with high quality. In PVC applications, the company has developed more than 400 grades, which has helped the company to cover a majority of its customers as well as different applications. The company diversifies its product portfolio in such a way that its products are customized for the customers and scale for each of the geographies the company serves. The company’s diversified product portfolio helps it to retain customers and strengthen its cross-selling efforts across product portfolios.

Exicom Tele-Systems Ltd IPO : SUBSCRIBE

Exicom Tele-Systems Ltd IPO : SUBSCRIBE
  • Date

    27th Feb 2024 - 29th Feb 2024

  • Price Range

    Rs. 135 to Rs. 142

  • Minimum Order Quantity

    100

  • (D) RHP

    -

Download Report

Company Overview

Incorporated in 1994, Exicom Tele-Systems Limited (ETL) specializes in power systems, electric vehicle (EV) charging, and Li-ion based energy storage solutions. The company operates under two verticals in its core business. The first vertical of power systems specializes in providing uninterrupted power solutions (UPS) for digital communication networks, which are extremely power-intensive, yet mission-critical for most organizations. The second core business vertical of ETL is the EV Charging Solutions vertical. As of date, ETL has deployed more than 6,000 AC (alternate current) and DC (direct current) chargers in India and Southeast Asia. Their EV charging solutions are designed to be tough and resilient and have the capacity to withstand harsh environmental and electrical conditions. ETL is among the early entrants to enter India’s EV charger manufacturing segment. This is a business that has high visibility in terms of growth in the coming years as India moves towards green mobility. ETL offers slow charging solutions (primarily AC chargers for residential use) and fast charging solutions (DC chargers for business and public charging networks in cities and highways). Further, ETL provides its customers with a wide range of services covering installation and commissioning, maintenance and operations, supplying individual spare parts, and repair and return. It has a robust customer base, which includes established automotive OEMs (for passenger cars and EV buses), charge point operators (CPOs), and fleet aggregators, who are running green vehicles as part of their fleet service. It has already installed 61,000 EV chargers across 400 locations in India and has deployed a total of 470,810 Li-ion (lithium ion) batteries for application in the telecom sector, equivalent to storage capacity of over 2.10 GWH. It has over 70 core customers and employs 1,190 personnel on full-time and contract basis. As of FY23, ETL has an in-house manufacturing capacity of 1.3+ lakh rectifiers, 12k DC Power Systems, 44.4k EV chargers and 56.4k Li-ion battery across its three plants.

Industry

The increasing demand for mobile data and voice services, the growing adoption of 4G and 5G networks, and the need for reliable and uninterrupted power supply for telecommunication towers are the key factors driving the growth of the global telecommunication power market. The market size for telecommunication DC power systems (including hybrid systems) in India is estimated at Rs. ~15 bn for FY23, with upgradation and replacement demand expected to drive the industry with 75% demand while balance 25% demand is expected on account of new tower additions. The energy storage solutions market for telecommunications is valued at Rs. 19.5 bn in FY23, while the market size for Li-ion battery energy storage systems in data centers is valued at Rs. 3.2 bn in FY23.
The domestic EV PV market has grown substantially at a CAGR of 127% from FY19 to FY23 reaching a total of 47,512 electric cars. It is estimated to grow at a CAGR of 50-60% between FY24-28E, with 9-12% EV penetration expected in FY28. The current EV charging market in India is estimated at Rs ~8.5 bn as of FY23. The public charging station market which is estimated to contribute ~50% of the overall Electric Vehicle Supply Equipment (EVSE) market size in FY24 is expected to grow at a CAGR of 45-50% between FY24-28. The E-buses charging stations market is expected to grow at a faster CAGR of 80-85% owing to higher scope of penetration. The residential charging segment is expected to grow at a CAGR of 60-65%.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  1. Part-financing the cost towards setting up of production/assembly lines at the planned manufacturing facility in Telangana – Rs. 146 crores;
  2. Repayment/pre-payment, in part or full, of certain borrowings of the company – Rs. 50.3 crores;
  3. Part-funding incremental working capital requirements – Rs. 69 crores;
  4. Investment in R&D and product development – Rs. 40 crores;
  5. General corporate purposes.

Investment Rationale:

Early-mover advantage and industry tailwinds to propel growth

ETL stands out as an established player with a significant early-mover-and-learner advantage in the rapidly growing Indian EV charger market. As one of the first entrants in the segment in 2019, the company has capitalized on its early presence to secure a substantial market share, particularly in the residential (60% market share) and public charging (25% market share) segments. The market also has significant entry barriers that include evolving technology standards, stringent performance requirements, grid infrastructure compatibility, the necessity for strategic partnerships, and demanding service setups. The rise of electric vehicle (EV) penetration in passenger vehicles, commercial vehicles, and electric buses presents a compelling growth opportunity for ETL. With PV EVs projected to grow at a remarkable CAGR of 50-60% between FY2023-28 to reach 5.5 lakh cars by FY28, the demand for EV chargers is set to soar. The company is well-positioned to capitalize on this trend, given its early entry into the market and comprehensive portfolio of EV charging solutions. Moreover, ETL has planned the set-up of two production/assembly lines – a) Critical Power and EV Charger production/assembly line and; b) Prismatic production/assembly line for Li-ion Batteries at its planned manufacturing facility in Hyderabad. Upon commencing operations, the facility would provide ETL increased capacity for the production of EV chargers and will enable it to capitalize on growth in demand for EV chargers. Additionally, the EV charging infrastructure market in India is at a nascent stage, with significant growth potential driven by favourable government policies, lower cost of ownership, and investments in charging infrastructure. ETL’s early-mover advantage, vertically integrated operations, robust R&D capabilities, and diversified product portfolio positions it to capitalize on the burgeoning EV industry in India and globally. With a projected total addressable market of Rs. 9.0-9.5 bn by FY28, ETL is poised for sustained growth and market leadership in the EV charger segment.

Customer-centric approach and vertically integrated operations to drive success

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.

Valuation and Outlook:

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.

GPT Healthcare Ltd IPO : AVOID

GPT Healthcare Ltd IPO : AVOID
  • Date

    22nd Feb, 2024 - 26th Feb, 2024

  • Price Range

    Rs. 177 to Rs. 186

  • Minimum Order Quantity

    80

  • (D) RHP

    -

Download Report

Company Overview

Company Overview

GPT Healthcare is one of the key regional corporate healthcare companies in Eastern India in terms of the number of beds and hospitals as of FY23. The company operates a chain of mid-sized full-service hospitals under the ILS hospital brand and provides integrated healthcare services, focusing on secondary and tertiary care. As of September 30, 2023, GPT operates four multispecialty hospitals in Dum Dum, Salt Lake and Howrah in West Bengal and Agartala in Tripura, with a total capacity of 561 beds. The company offers a comprehensive range of healthcare services across 35 specialties and super specialties, including internal medicine and diabetology, nephrology (including renal transplants), laparoscopic and general surgery, gynaecology and obstetrics, critical care, gastroenterology, orthopaedics and joint replacements, interventional cardiology, neurology, neurosurgery, paediatrics, and neonatology. Each hospital of the company provides integrated diagnostic services and pharmacies catering to patients. The company’s strategic focus on the relatively under-penetrated healthcare market in Eastern India, where they have presence in three cities, has provided an understanding of regional nuances, patient culture and the mindset of medical professionals. Its hospitals in West Bengal are strategically located in densely populated cities of Kolkata (West Bengal) and Howrah (West Bengal). India also benefits from medical value travel from neighbouring countries such as Bangladesh, Nepal and Bhutan, from patients who prefer to obtain quality healthcare services in India. Eastern India is geographically well positioned for medical value travel from Bangladesh, Nepal and Bhutan, owing to the lower average cost of treatment for healthcare services compared to the northern and western parts of India and due to Eastern India being more accessible from these neighbouring countries.

Objects of the issue

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment and / or prepayment in part or in full, of certain outstanding loans of company; from banks and financial institutions; and
  • General corporate purposes. 

Investment Rationale

A healthcare provider with a strong foothold in under-penetrated and densely populated regions of Eastern India

GPT Healthcare is one of the key regional corporate healthcare companies in Eastern India in terms of the number of beds and hospitals in FY23. The company has over 20 years of expertise in providing healthcare services in Eastern India since opening its first hospital in Salt Lake, Kolkata (West Bengal). The company’s strategic focus on the healthcare market in Eastern India, where they have a presence in three cities, has provided them with an understanding of regional nuances, patient culture, requirements, preferences and the mindset of medical professionals. The company is leveraging the opportunity in Eastern India where there is a significant and growing need for quality and affordable healthcare services. Additionally, specific departments, such as the Department of Minimal Access Surgery, have built a reputation in the market for their skilled professionals and specialized experience. As a result, GPT Healthcare has evolved as a brand that is recognized among the region’s patients, doctors, healthcare professionals and vendors.

Well-diversified specialty and location mix enables to cater to the growing demand for quality service

GPT Healthcare has an established presence in Eastern India, with multiple healthcare delivery verticals to serve various economic segments. The company’s operations encompass different levels of healthcare services from primary to tertiary and position GPT Healthcare as a one-stop destination for patient needs in the respective micro markets. The company offers a comprehensive range of healthcare services across 35 specialties and super specialties, including internal medicine and diabetology, nephrology (including renal transplants), laparoscopic and general surgery, gynaecology and obstetrics, critical care, gastroenterology, orthopaedics and joint replacements, interventional cardiology, neurology, neurosurgery, paediatrics and neonatology. Additionally, the company is associated with various consultant doctors in specialty service areas to ensure a diversified pool of resources and holistic expertise. As the company’s healthcare network serves diverse patient needs, this ecosystem of specialized doctors has enabled them to expand reach and leverage market opportunities to gain access to a larger patient base and achieve synergies across verticals while avoiding dependence on a limited pool of doctors.

 

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company;
  • Funding long-term working capital requirements of the company; and
  • General corporate purposes.

Investment Rationale:

Expertise in site selection and identifying opportunities to develop hotels

The company identifies micro-markets and locations within cities based on their proximity to airports, central business districts, areas with concentrated industrial catchments, and areas with high tourism activities. The company aligns the appropriate Hyatt sub-brand with each development. The right sub-brand, along with the right size of development in the optimal location in the chosen city, allows the company to cater to the high-end traveler and maximize long-term returns. The company has demonstrated a strong track record in establishing its presence across key cities. Its hotels and serviced apartments are located in (a) established markets such as Delhi and Mumbai; (b) emerging business destinations such as Ahmedabad, Lucknow, and Raipur; and (c) growing tourist destinations such as Hampi. In Raipur and Hampi, its hotels were the first international chain-affiliated hotels. The company believes that its foresight in identifying key locations to establish its hotels and serviced apartments has been key to the company’s success.

Increasing returns by having multiple revenue streams & complementary offerings

The company has introduced complementary revenue-generating streams at its hotels and benefits from revenue contribution from areas such as serviced apartments, restaurants, MICE services and other services to ensure optimal utilization of available resources. The company’s complementary offerings also result in a mix of customers and guests staying at its properties which improves its ARR. Further, the company consistently monitors the usage of available space at its hotels and aims to enhance its customer offering by adapting the available real estate space in its hotels to meet the ever-changing demands of the market. Guests at its serviced apartments consist a mix of expatriates and Indians and primarily comprise corporate employees. The average occupancy of its serviced apartments was 74.3%, 74.6%, 75.3%, 55.6%, and 47.2% in the six months ended September 30, 2023, and September 30, 2022, and Fiscals 2023, 2022, and 2021, respectively. The company’s hotels feature an aggregate of 22 renowned restaurants and bars, including several award-winning establishments. The company’s F&B offerings provide a dining experience that caters to a broad upscale demographic and its restaurants have developed a strong brand image and customer loyalty which has become an independent and significant business stream. The company also offers meetings, conferences, and banqueting spaces which are used to target customers for events, exhibitions, and meetings as well as for weddings and marquee social events such as G20 conference.

 

Valuation and Outlook:

Considering the current domestic environment, the hotel sector has much to contribute to India’s economy by way of GDP, asset and credit growth, employment, FDI, foreign exchange earnings, and tax revenues. The multiplier effect of developing a new hotel is significant. As of 2022, the overall travel and tourism sector contributed Rs. 15.7 trillion to India’s economy, with an expected increase to Rs. 16.5 trillion for 2023 and Rs. 37 trillion over the next 10 years. The sector is expected to employ 39 million persons by the end of 2023. The GDP contribution of the hotel sector was estimated at USD 40 billion in 2022, with a projected increase to USD 68 billion by 2027 and USD 1 trillion by 2047. The need and demand for hotel rooms and hotel services will benefit from and, in turn, support growth-orientated macroeconomic policies, economic development initiatives, and investments across multiple sectors as India moves towards becoming the third largest global economy. Infrastructure and air/road access enhancements have also helped the growth of leisure and will continue to enable further growth. Various factors such as increased use of hotels for leisure, weddings, and social travel; increased urbanization and access to infrastructure creating new travel destinations and micro-markets for hotels; changing demographics, with millennials and younger travelers seeking experiences and willing to spend on entertainment and recreation; and evolving attitudes towards recreation, entertainment, wellness, and lifestyle has created an opportunistic environment for the industry. These factors have provided a room for growth for asset-heavy business model companies like Juniper Hotels Ltd. to prosper in the longer run. On the financial performance front, the company’s revenue grew at a CAGR of 100.2% during the FY2021-23 period. The company’s EBITDA stood at Rs. 2,719 million in FY23 compared to a negative EBITDA of Rs. 43 million in FY21. The company’s net loss decreased to Rs. 15 million in FY23 from net loss of Rs. 1,995 million posted in FY21. However, considering the asset-heavy business model of the company, rising debt levels and continued loss-making status, we would recommend an “Avoid” rating for the issue. We would reconsider the company for further evaluation following sustained financial performance over the next few quarters.

Juniper Hotels Ltd IPO : AVOID

Juniper Hotels Ltd IPO : AVOID
  • Date

    21st Feb 2024 - 23rd Feb 2024

  • Price Range

    Rs. 342 to Rs. 360

  • Minimum Order Quantity

    40

  • (D) RHP

    -

Download Report

Company Overview

Juniper Hotels Ltd. is a luxury hotel development and ownership company. The company is the largest owner of hotels by number of keys of Hyatt-affiliated hotels in India. Benefiting from a unique and longstanding partnership of over 40 years between Saraf Hotels and Hyatt Hotels Corporation, the company has built a portfolio of over seven hotels and serviced apartments and operates over 1,800 room keys. The company has extensive experience in identifying opportunities in hospitality destinations, developing high-end hotels in these locations, and nurturing them through active asset management to provide quality guest experience while operating their assets efficiently. The company has hotels and serviced apartments across the luxury, upper upscale, and upscale categories of hotels around established landmarks in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur, and Hampi. The business model of the company allows it to identify and acquire sites to develop its hotels and serviced apartments. Moreover, its expertise in development allows it to move swiftly from a capital deployment phase to a revenue generation phase by making its assets operational. The company is the flagship entity for the Saraf Group, through ownership of a unique portfolio of luxury, upper upscale, and upscale hospitality assets, located in highly desirable locations across key locations. The company’s continued strategy is to expand on its current ownership of marquee assets across India, bringing in more luxury and upscale hotels and serviced apartments into the portfolio by consolidating the interests of Saraf Hotels and its affiliates in entities incorporated in India or through new opportunities.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company;
  • Funding long-term working capital requirements of the company; and
  • General corporate purposes.

Investment Rationale:

Expertise in site selection and identifying opportunities to develop hotels

The company identifies micro-markets and locations within cities based on their proximity to airports, central business districts, areas with concentrated industrial catchments, and areas with high tourism activities. The company aligns the appropriate Hyatt sub-brand with each development. The right sub-brand, along with the right size of development in the optimal location in the chosen city, allows the company to cater to the high-end traveler and maximize long-term returns. The company has demonstrated a strong track record in establishing its presence across key cities. Its hotels and serviced apartments are located in (a) established markets such as Delhi and Mumbai; (b) emerging business destinations such as Ahmedabad, Lucknow, and Raipur; and (c) growing tourist destinations such as Hampi. In Raipur and Hampi, its hotels were the first international chain-affiliated hotels. The company believes that its foresight in identifying key locations to establish its hotels and serviced apartments has been key to the company’s success.

Increasing returns by having multiple revenue streams & complementary offerings

The company has introduced complementary revenue-generating streams at its hotels and benefits from revenue contribution from areas such as serviced apartments, restaurants, MICE services and other services to ensure optimal utilization of available resources. The company’s complementary offerings also result in a mix of customers and guests staying at its properties which improves its ARR. Further, the company consistently monitors the usage of available space at its hotels and aims to enhance its customer offering by adapting the available real estate space in its hotels to meet the ever-changing demands of the market. Guests at its serviced apartments consist a mix of expatriates and Indians and primarily comprise corporate employees. The average occupancy of its serviced apartments was 74.3%, 74.6%, 75.3%, 55.6%, and 47.2% in the six months ended September 30, 2023, and September 30, 2022, and Fiscals 2023, 2022, and 2021, respectively. The company’s hotels feature an aggregate of 22 renowned restaurants and bars, including several award-winning establishments. The company’s F&B offerings provide a dining experience that caters to a broad upscale demographic and its restaurants have developed a strong brand image and customer loyalty which has become an independent and significant business stream. The company also offers meetings, conferences, and banqueting spaces which are used to target customers for events, exhibitions, and meetings as well as for weddings and marquee social events such as G20 conference.

 

Valuation and Outlook:

Considering the current domestic environment, the hotel sector has much to contribute to India’s economy by way of GDP, asset and credit growth, employment, FDI, foreign exchange earnings, and tax revenues. The multiplier effect of developing a new hotel is significant. As of 2022, the overall travel and tourism sector contributed Rs. 15.7 trillion to India’s economy, with an expected increase to Rs. 16.5 trillion for 2023 and Rs. 37 trillion over the next 10 years. The sector is expected to employ 39 million persons by the end of 2023. The GDP contribution of the hotel sector was estimated at USD 40 billion in 2022, with a projected increase to USD 68 billion by 2027 and USD 1 trillion by 2047. The need and demand for hotel rooms and hotel services will benefit from and, in turn, support growth-orientated macroeconomic policies, economic development initiatives, and investments across multiple sectors as India moves towards becoming the third largest global economy. Infrastructure and air/road access enhancements have also helped the growth of leisure and will continue to enable further growth. Various factors such as increased use of hotels for leisure, weddings, and social travel; increased urbanization and access to infrastructure creating new travel destinations and micro-markets for hotels; changing demographics, with millennials and younger travelers seeking experiences and willing to spend on entertainment and recreation; and evolving attitudes towards recreation, entertainment, wellness, and lifestyle has created an opportunistic environment for the industry. These factors have provided a room for growth for asset-heavy business model companies like Juniper Hotels Ltd. to prosper in the longer run. On the financial performance front, the company’s revenue grew at a CAGR of 100.2% during the FY2021-23 period. The company’s EBITDA stood at Rs. 2,719 million in FY23 compared to a negative EBITDA of Rs. 43 million in FY21. The company’s net loss decreased to Rs. 15 million in FY23 from net loss of Rs. 1,995 million posted in FY21. However, considering the asset-heavy business model of the company, rising debt levels and continued loss-making status, we would recommend an “Avoid” rating for the issue. We would reconsider the company for further evaluation following sustained financial performance over the next few quarters.

Vibhor Steel Tubes Ltd IPO : SUBSCRIBE

Vibhor Steel Tubes Ltd IPO : SUBSCRIBE
  • Date

    13th Feb 2024 - 15th Feb 2024

  • Price Range

    Rs. 141 to Rs. 151

  • Minimum Order Quantity

    99

  • (D) RHP

    -

Download Report

Company Overview

Incorporated in 2003, Vibhor Steel Tubes Limited is a manufacturer and exporter of Mild Steel/Carbon Steel ERW Black and Galvanized Pipes, Hallow Steel Pipe, and Cold rolled Steel (CR) Strips/Coils to various heavy engineering industries in India. Its product portfolio comprises of ERW pipes which find application in water transport, oil, gas, and other non-toxic supplies, while hot-dipped galvanized pipes find extensive application in agriculture and infrastructure. In addition, the company makes hollow section pipes in square and rectangular forms, primer-painted pipes as well as crash barriers for application in railways, highways, and roads. The company has established a longstanding partnership with Jindal Pipes Limited since 2003. It has a contract to manufacture and supply 100,000 MT of pipes for Jindal Pipes annually till 2029 starting April 2023, under the renowned brand name ‘Jindal Star’. Currently, the company has two manufacturing facilities located at Raigad in the state of Maharashtra and Mahabubnagar district in the state of Telangana. The total capacity of the company combining the two plants is at 2.21 MTPA, which the company plans to expand by 1.2 MTPA to 3.41 MTPA in the next few years. For storing its products, VSTL also has a warehouse in Hisar in the state of Haryana. The Maharashtra unit’s stability is ensured by the company’s existing presence in the export market, while the Hyderabad unit is safeguarded by the company’s experience in producing highway guardrail products. The company has been granted an allotment letter for land to establish a new facility of Vibhor Steel Tubes Limited in Odisha. Given that Odisha is the largest iron market, this move is poised to reduce the company’s raw material costs and enhance profit margins in future. As on 30 September 2023, the company had a total of 636 employees on its rolls.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Funding of long-term working capital requirements of the Company;
  • General corporate purposes.

Investment Rationale:

Strategic alliances and efficient operations driving growth

The association between VSTL and Jindal Pipes Limited (JPL) underscores a strategic partnership that has propelled the company’s growth trajectory. Leveraging a long-standing relationship between the promoters of both entities, VSTL benefits from a seamless business relationship with JPL, marked by transparency in pricing and effective procurement processes. Through the production of pipes under the renowned brand “Jindal Star,” VSTL not only secures a steady stream of orders but also taps into JPL’s extensive network of customers. This symbiotic alliance not only ensures consistent demand but also fosters trust and reliability in the market. Additionally, VSTL’s strategic manufacturing locations in Raigad, Maharashtra, and Mahabubnagar district, Telangana, further optimize operational efficiency. The proximity to key industrial areas facilitates streamlined logistics, access to essential resources, and a skilled workforce, thereby enabling the company to meet customer demand effectively. The combined expertise of the promoters, Mr. Vijay Kaushik and Mr. Vibhor Kaushik, with decades of experience in the steel pipes and tubes industry, underscores VSTL’s commitment to excellence and innovation. Through strategic alliances, efficient operations, and experienced leadership, VSTL is poised for sustained growth and market leadership in the steel tubes segment.

Global expansion strategy and diversified operations enhance resilience

VSTL’s commitment to diversification and global expansion positions the company for long-term success and resilience in the competitive marketplace. By leveraging its partnership with Jindal Pipes Limited and capitalizing on established networking channels, VSTL has successfully exported its products to ten countries worldwide under the prestigious brand “Jindal Star.” This strategic approach not only enhances the company’s brand visibility but also mitigates risks associated with operating in limited geographical areas. By diversifying its operational footprint, the company guards against the impact of localized economic fluctuations and ensures sustained revenue streams. Furthermore, VSTL’s distribution and marketing network, coupled with a focus on customer service excellence, facilitate efficient supply chain management and short turnaround times for product delivery.

Valuation and Outlook:

VSTL emerges as a pivotal player within the Indian steel industry, set against the backdrop of a burgeoning demand landscape and ambitious national targets for per capita steel consumption. Despite India’s per capita finished steel consumption standing at 81 kg, significantly below the global average of 222 kg, the National Steel Policy 2017 envisions a substantial increase to 158-160 kg per capita by FY31, highlighting the sector’s significant domestic potential in driving economic growth. The qualitative advantages of VSTL underscore its competitive positioning and operational strengths. With an integrated in-house design, engineering, and execution team, the company maintains meticulous control over quality and costs, enhancing its ability to meet client requirements efficiently. Moreover, its longstanding client relationships, built on a foundation of strong execution and quality, further reinforce its market standing. Notably, the company’s specialization in certain products has established it as a preferred supplier, fostering an advantage within a limited competitive landscape. Delving into the financials of VSTL reveals a pattern of robust and stable revenue growth, with sales nearly doubling over the past three years. Despite relatively lower net profit margins compared to industry peers, attributed to a lack of pricing power, extra discounts to their largest customer, and front-loading of costs, the company maintains attractive returns on equity of 25.5% and return on capital employed of 16.5%, supported by lean equity and asset base. Of particular note is the company’s commendable asset turnover rate, averaging around 3.8X in the latest fiscal year, signifying efficient asset utilization and operational excellence. However, the rising debt cost in the last two years need to be monitored going forward. While the value-added steel products business entails front-loaded costs, the trajectory suggests higher risks in the initial phases, gradually transitioning to lower risks as operations mature. In terms of valuation, the upper band pricing translates to a P/E of 10.2x based on FY23 EPS. This valuation appears attractive, especially considering the company’s outperformance compared to its listed peers by a considerable margin in terms of both valuation and returns. We, therefore, give a “SUBSCRIBE” rating to the IPO