MV Electrosystems IPO: A Comprehensive Retail Investor Guide

भारत में आमतौर पर कीमती धातुओं की खरीद साल की दूसरी छह माहि में बढ़ती हुई दिखाई देती है। इस बीच, कच्चे तेल के भाव में बढ़त और सोने के इम्पोर्ट में बढ़ोतरी से भारत का ट्रेड बैलेंस -20.7 बिलियन बढ़कर -24 बिलियन हो गया है जिससे डॉलर मजबूत हो कर 83.20 रुपये पर पहुंच गया है। भारत में त्यौहार शुरू होने के पहले सोने का इम्पोर्ट इस साल अगस्त 2022 की तुलना में 40 प्रतिशत अधिक रहने का अनुमान है जिससे सोने और चांदी के भाव को घरेलु मांग का सपोर्ट भी मिल रहा है। जबकि इस साल मानसून कमजोर रहने के चलते मुद्रास्फीति को बल मिल सकता है जो सेफ हैवन मांग बढ़ा सकता है। कॉमेक्स वायदा में सोने और चांदी की कीमतों में दो हफ्तों से चल रहा दबाव फेड बैठक के पहले कम होता दिखाई दिया है। अमेरिकी कंस्यूमर और प्रोडूसर मुद्रास्फीति में हुई बढ़ोतरी मामूली रहने के चलते अनुमान लगाया जा रहा है की फेड इस सप्ताह होने वाली बैठक में ब्याज दरे नहीं बढ़ाएगा। हालांकि, बढ़ती मुद्रास्फीति पर नियंत्रण करने के लिए हॉकिश टिपण्णी, कीमती धातुओं के भाव में बढ़ोतरी की सम्भावना को सीमित कर सकती है। यूरोपियन सेंट्रल बैंक द्वारा पिछले सप्ताह मुद्रास्फीति को स्थिर करने के लिए डिपोसिट रेट में बढ़ोतरी की गई है जबकि चीन द्वारा अपनी अर्थव्यस्था को बढ़ाने और लोकल बैंक को सपोर्ट करने के लिए रिज़र्व आवश्यकता में कटौती की है, जो चांदी की ग्लोबल मांग के लिए अच्छा होगा। इस सप्ताह फेड की बैठक कीमती धातुओं के भाव को नै दिशा है।

‍तकनिकी विश्लेषण :

इस सप्ताह कीमती धातुओं के भाव में सुधार रहने की सम्भावना है। एमसीएक्स अक्टूबर वायदा सोने में सपोर्ट 58000 रुपये पर है और रेजिस्टेंस 59700 रुपये पर है। दिसंबर वायदा चांदी में सपोर्ट 70000 रुपये पर है और रेजिस्टेंस 74000 रुपये पर है।

Zaggle Prepaid Ocean Services Limited is a leading player in spend management with a diversified offering of fintech and SaaS products and services to corporates. Their SaaS platform is designed for (i) business spend management (including expense management and vendor management); (ii) rewards and incentives management for employees and channel partners; and (iii) gift card management for merchants, which they refer to as customer engagement management system (CEMS).

OBJECTS OF THE ISSUE

• Expenditure towards Customer acquisition and retention.
• Expenditure towards the development of technology and products.
• Payment of certain borrowings availed by the company.

Raj P Narayanam

Executive Chairman of the Company. He has been on the Board of the Company since April 30, 2012. He completed post graduate diploma in business management with specialisation in finance from the FORE School of Management, New Delhi. He has experience in the technology and fintech industry.

Hari Priya

Company Secretary and Compliance Officer of the Company. She joined the Company on January 18, 2022. Prior to joining this company, she worked with Axis Clinicals Limited as assistant general manager- company secretary, Gayatri Projects Limited as assistant company secretary and Spandana Sphoorty Financial Limited as deputy company secretary and manager– corporate affairs

Avinash Ramesh Godkhind

Managing Director and Chief Executive officer of the Company. He has been on the Board of the Company since May 7, 2012. He holds a bachelors’ degree in engineering from Bangalore University, and a masters’ degree in business administration from the University of Chicago. Prior to this, he worked as an Assistant Vice President at Citibank N.A., India.

Venkata Aditya Kumar Grandhi

Chief Financial Officer of the Company. He joined the Company as vice president-finance and accounts on May 9, 2022 and was promoted as the Chief Financial Officer on August 25, 2022. He is a member of the Institute of Chartered Accountants of India, New Delhi. Prior to joining this Company, he worked at Spandana Sphoorty Financial Limited.

COMPANY PROFILE

• Zaggle Prepaid Ocean Services is a leading player in spend management, with more than 50 million prepaid cards issued in partnership with banking partners and more than 2.27 million users served, as of March 31, 2023’.
• The Company’s network of corporate customers (“Customers”) covers the banking and finance, technology, healthcare, manufacturing, FMCG, infrastructure, and automobile industries, among others. The Company has relationships with brands such as TATA Steel, Persistent Systems, Vitech, Inox, Pitney Bowes, Wockhardt, MAZDA, PCBL (RP – Sanjiv Goenka Group), Hiranandani group, Cotiviti, and Greenply Industries.
• Its core product portfolio includes i) ‘Propel’ (a corporate SaaS platform for channel rewards and incentives, employee rewards and recognition), ii) ‘Save’ (a SaaS-based platform and a mobile application to offer expense management solution), iii) ‘CEMS’ (a customer engagement management system), iv) ‘Zaggle Payroll’ Card (a prepaid payroll card), and v) ‘Zoyer’ (an integrated data-driven, SaaS- based business spend management platform).

COMPETITIVE STRENGTHS

• Differentiated SaaS-based fintech platform, offering a combination of payment instruments, mobile applications, and API integrations.
• In-house developed technology and strong network effect.
• Business model with diverse sources of revenue and low customer acquisition and retention costs. Diversified customer relationships across sectors along with preferred banking and merchant partnerships.
• Seasoned management team with deep domain expertise supported by a professional workforce.

KEY STRATEGIES

• Continue to increase the Customer base of corporate accounts, SMB accounts, start-ups and merchants.
• Continue to scale and expand by increasing user penetration and cross-selling within the existing Customer base.
• Continue to innovate to introduce new products and use cases.
• Leverage strategic partnerships with financial institutions and merchants.

KEY CONCERNS

• The Company is dependent on their relationships with their banking partners, for a substantial portion of their revenue, which is derived from Program Fees generated from their arrangements with such banking partners.
• The Company is dependent on third-party Payment Networks, channel partners, and third-party providers for various aspects of its business and its growth.
• It may encounter challenges with the adoption and usage of the products if it is not able to successfully integrate with other software applications.
• The Company operates in a highly competitive industry.
• It experienced negative operating cash flows in Fiscal 2023 and negative net worth as of March 31, 2022, and March 31, 2021.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

There are no directly listed companies in India, or internationally, whose business portfolio is comparable with that of our business and comparable to Zaggle Prepaid Ocean Services Limited’s scale of operations. Hence, it is not possible to provide an industry comparison in relation to this Company.

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

Zaggle Prepaid Ocean Services Limited is a uniquely positioned player in the fintech industry, offering a diversified suite of products and services. The company has a SaaS-based fintech platform and in- house-developed technology. Additionally, the company has diverse sources of revenue and a low-cost operation model.

However, there are some concerns about the company's financial performance. The company has a major dependency on third parties, and it has faced negative cash flow and a decline in its profitability in recent years. Additionally, the company operates in a highly competitive industry.

The IPO is coming at a P/E valuation of 66.6x, which is significantly higher than the valuations of its listed peers. The company's debt-to- equity ratio is also high.

Overall, we believe that the risks outweigh the potential rewards for this IPO. We would avoid investing in this IPO.

DISCLAIMER:

The information contained herein are strictly confidential and are meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika Investmart Ltd. (“SIL”). The contents of this document are for information purpose only. This document is not an investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and the investor would be doing so at his/her/its own risk. The information contained in this document should not be construed as forecast or promise or guarantee or assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past performances if any, are not indicative of future results. The actual returns on investment may be materially different than the past. Investments in Securities market products and instruments including in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low risk tolerance. Such Investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company.

Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

CORPORATE & ADMINISTRATIVE OFFICE - 48, Jaora Compound, M.Y.H. Road, Indore - 452 001 | Phone 0731 - 6644000

Compliance Officer: Ms. Sheetal Duraphe Email: compliance@swastika.co.inPhone: (0731) 6644 241

Swastika Investmart Limited, SEBI Reg. No. : NSE/BSE/MSEI: INZ000192732 Merchant Banking: INM000012102 Investment Adviser: INA000009843 MCX/NCDEX: INZ000072532 CDSL/NSDL: IN-DP-115-2015 RBI Reg. No.: B-03-00174 IRDA Reg. No.: 713.

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SAMHI Hotels Limited is a branded hotel ownership and asset management platform in India. SAMHI Hotels has a portfolio of 4,801 keys across 31 operating hotels in 14 of India's key urban consumption centers, including Bengaluru, Hyderabad, National Capital Region (NCR), Pune, Chennai and Ahmedabad, as of March 31, 2023. The company also has 2 hotels under development with a total of 461 keys in Kolkata and Navi Mumbai.

OBJECTS OF THE ISSUE

• Payment of certain borrowings availed of by the company and the subsidiaries.
• General corporate purposes.

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Ashish Jakhanwala

Chairman, Managing Director and Chief Executive Officer of the Company. He has been a member of the Board since December 28, 2010. He has experience in the field of hotel operations, design, consulting and investment

Gyana Das

Executive Vice President and Head of Investments of the company. He joined the Company on February 8, 2011.

Previously, he was associated with Inter Globe Hotels Private Limited.

Sanjay Jain

Senior Director - Corporate Affairs, Company Secretary and Compliance Officer of the Company. He is a member of the Institute of Company Secretaries of India and a member of the Institute of Cost and Works Accountants of India.

Rajat Mehra

Chief Financial Officer of the Company. He joined our Company on December 11, 2012. Previously, he was associated with Religare Corporate Services Limited as an executive vice president finance change management

Tanya Chakravarty

General Counsel of the Company. She joined the Company on May 2, 2017. Previously, she was associated with Phoenix Legal, Vaish Associates Advocates and Unitech Limited

COMPANY PROFILE

• The company has a branded hotel ownership and asset management platform in India, with the third- largest inventory of operational keys.
• Within 12 years of starting business operations, the Company built a portfolio of 3,839 keys across 25 operating hotels in 12 of India’s key urban consumption centers, including Bengaluru, Hyderabad, National Capital Region, Pune, Chennai, and Ahmedabad, as of March 31, 2023.
• Pursuant to the completion of the ACIC Acquisition on August 10, 2023, the company portfolio has further increased to 4,801 keys across 31 operating hotels.
• The company categorizes its hotel portfolio into three distinct hotel segments based on brand classification-Upper Upscale, Upper Mid-scale, and Mid-scale.

COMPETITIVE STRENGTHS

• Company’s ability to acquire dislocated hotels and demonstrated track record to re-rate hotel performance through renovation and/or rebranding.
• The company’s portfolio’s scale and diversification are further enhanced by sector tailwinds. The track record of managing hotels efficiently.
• It’s ability to create operating efficiencies and long-term performance using analytics tools. The company’s has strong governance and seasoned management team.

KEY STRATEGIES

• Its hotels are positioned to benefit from favorable demand trends in the hospitality industry and enhance operating efficiencies.
• Complete development of identified opportunities that are currently under development. Integrate the ACIC Portfolio to drive enhanced performance.
• Pursue growth opportunities via programmatic capital deployment, tactical mergers and acquisitions.
• Ensure disciplined capital allocation and reduction of debt.

KEY CONCERNS

• Business is subject to seasonal and cyclical variations that could result in fluctuations in results of operations.
• A significant portion of revenues are derived from a few hotels and from hotels concentrated in a few geographical regions.
• Company experienced restated losses and negative net worth in recent years.
• The hospitality industry is intensely competitive and company inability to compete effectively may adversely affect business, results of operations and financial condition.
• Company subject to extensive government regulation with respect to safety, health, environmental, real estate, excise and labor laws.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

SAMHI Hotels Limited is a branded hotel ownership and asset management platform in India. The company has a track record of successfully renovating or rebranding hotels to improve performance, and it actively pursues growth prospects through tactical mergers, acquisitions and programmatic capital investment.

SHL, is currently a loss-making hospitality company. The company's financial performance has been poor for the last three years, but it is making progress on cutting losses. But business is subject to seasonal and cyclical variations that could result in fluctuations in the results of operations.

The company is loss-making, so we do not have a P/E ratio. However, its sales multiple is 3.7X, which is below when compared to the industry average. However, as the company is in financial trouble, we won't apply for this IPO.

DISCLAIMER:

The information contained herein are strictly confidential and are meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika Investmart Ltd. (“SIL”). The contents of this document are for information purpose only. This document is not an investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and the investor would be doing so at his/her/its own risk. The information contained in this document should not be construed as forecast or promise or guarantee or assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past performances if any, are not indicative of future results. The actual returns on investment may be materially different than the past. Investments in Securities market products and instruments including in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low risk tolerance. Such Investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company.

Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

CORPORATE & ADMINISTRATIVE OFFICE - 48, Jaora Compound, M.Y.H. Road, Indore - 452 001 | Phone 0731 - 6644000

Compliance Officer: Ms. Sheetal Duraphe Email: compliance@swastika.co.inPhone: (0731) 6644 241

Swastika Investmart Limited, SEBI Reg. No. : NSE/BSE/MSEI: INZ000192732 Merchant Banking: INM000012102 Investment Adviser: INA000009843 MCX/NCDEX: INZ000072532 CDSL/NSDL: IN-DP-115-2015 RBI Reg. No.: B-03-00174 IRDA Reg. No.: 713.

पिछले सप्ताह फेडरल रिजर्व की एक रिपोर्ट से स्पष्ट हुआ है कि जुलाई और अगस्त में श्रम बाजार में सुस्ती और धीमी मुद्रास्फीति के दबाव के बीच अमेरिकी आर्थिक विकास मामूली रहा है, जिससे उम्मीदों को बल मिला कि केंद्रीय बैंक ने ब्याज दरों में बढ़ोतरी या तो कर दी है, या इसके अंत के करीब है। फेड की बीइंग बुक के मुताबिक जुलाई-अगस्त में आर्थिक विकास माध्यम रहा है। टूरिस्म खर्चो में बढ़ोतरी हुई है, जबकि रिटेल स्पेंडिंग में लगातार गिरावट देखने को मिल रही है। मूल्य वृद्धि धीमी हुई है, लेकिन फेड सर्वे के अधिकतर जिलों ने संकेत दिया कि इनपुट कॉस्ट वृद्धि बिक्री मूल्य से कम धीमी है, क्योकि कम होती मांग के कारण व्यापार बढ़ी हुई लागत को बिक्री मूल्य में शामिल करने में असमर्थ है। लेकिन, कच्चे तेल की कीमतों में बढ़ोतरी से मुद्रास्फीति फिर से बढ़ने की सम्भावना है जिससे यह अनुमान है की फेड सितम्बर में होने वाली बैठक में अपना रुख हॉकिश रखेगा। हालांकि, अमेरिका के आर्थिक आंकड़े यह दर्शाते है की अर्थव्यवस्था की स्तिथि अभी बेहतर बनी हुई है और उम्मीद है की आर्थिक मंदी इस साल के लिए टल जाएगी जिससे सुरक्षित आश्रय की मांग कम हुई है। उधर, चीन की अर्थव्यवस्था में सुस्ती, इसके आर्थिक आकड़ो में देखि जा सकती है जिससे अमेरिकी डॉलर के विरुद्ध चीन की मुद्रा में गिरावट देखि जा रही जिससे एशिया की अन्य अर्थव्यवस्थाओं की मुद्रा भी गिरावट की चपेट में आ गई है। यूरोपियन यूनियन की मुद्रा यूरो में डॉलर की तुलना में गिरावट बनी हुई है जिससे छः प्रमुख मुद्राओ का मापक अमेरिकी डॉलर इंडेक्स, में तेज़ी देखने को मिल रही है और कीमती धातुओं के भाव में दबाव बना हुआ है। इस सप्ताह अमेरिका मुद्रास्फीति, रिटेल सेल्स, कंस्यूमर सेंटीमेंट और यूरोपियन सेंट्रल बैंक की मॉनेटरी पॉलिसी, कीमती धातुओं के भाव के लिए महत्वपूर्ण रहेंगी।

तकनिकी विश्लेषण :

इस सप्ताह कीमती धातुओं के भाव सीमित दायरे में रहने की सम्भावना है। एमसीएक्स अक्टूबर वायदा सोने में सपोर्ट 58000 रुपये पर है और रेजिस्टेंस 60000 रुपये पर है। दिसंबर वायदा चांदी में सपोर्ट 68000 रुपये पर है और रेजिस्टेंस 75000 रुपये पर है।

R R Kabel Limited is one of the leading companies in the Indian consumer electrical industry (comprising wires and cables and fast- moving electrical goods (“FMEG”)), with an operating history of over 20 years in India. They sell products across two broad segments - (i) wires and cables including house wires, industrial wires, power cables, and special cables; and (ii) FMEG including fans, lighting, switches, and appliances.

OBJECTS OF THE ISSUE

• Repayment or prepayment of borrowings availed by the company from banks and financial institutions.
• General corporate purposes.

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Tribhuvanprasad Rameshwarlal Kabra

Executive Chairman of the Company. He has completed his secondary level school education from Hindi High School, Mumbai. He has extensive experience in the electrical industry. Previously, he was associated with Shramik Winding Wires Private Limited as a director. He was appointed to RR Kabel’s Board of Directors with effect from May 13, 1997.

Shreegopal Rameshwarlal Kabra

Managing Director of the Company. He has extensive experience in the electrical industry. Previously, he was associated with the International Copper Association as the chairman of wire and cable product council and the Indian Electrical and Electronics Manufacturers’ Association as the president.

Mahendrakumar Rameshwarlal Kabra

Joint Managing Director of the Company. He has extensive experience in the electrical industry. Previously, he was associated with MEW Electricals Limited as a director. He was appointed to the Board of Directors with effect from February 6, 1995.

Rajesh Babu Jain

Chief Financial Officer of the Company. He joined the Company on July 1, 2000 and is responsible for heading the financial functions of the Company including leading various initiatives in the organization of business excellence and operational efficiency of the Company.

Dinesh Aggarwal

Chief Executive Officer of the Company. He joined the Company on December 16, 2022 and is responsible for handling the domestic business administration of the Company.

Himanshu Navinchandra Parmar

Company Secretary and Compliance Officer of the Company. He joined the Company on June 1, 2013 and is responsible for secretarial and legal functions of the Company. Previously, he has worked with MEW Electricals Limited.

Company Profile

• The company manufactures, markets, and sells wires and cables under the RR Kabel brand, and a variety of consumer electrical products, including fans and lights under the ‘RR’ and ‘Luminous Fans and Lights brands.
• RR Kabel was the first company in India to introduce low smoke zero halogens (“LS0H”) insulation technology in their wires and cables products and to introduce unilay core technology products. They have actively diversified and expanded their product portfolio in adjacent areas such as FMEG, both organically and inorganically.
• They have a dedicated team of 60 employees focused on research and development, of which 22 employees exclusively work on research and development involving FMEG products.
• The Company owns and operates two integrated manufacturing facilities which are located at Waghodia, Gujarat, the Waghodia Facility, and Silvassa, Dadra and Nagar Haveli and Daman and Diu (“Silvassa Facility”) in India,

COMPETITIVE STRENGTHS

• Scaled B2C business in the large and growing wire and cables industry. A diverse suite of products with global certifications and accreditations. Extensive domestic and global distribution network.
• Well-recognized consumer brands.
• Technologically advanced and integrated precision manufacturing facilities Well-positioned for growth in the FMEG segment.
• Experienced and committed professional management team.

KEY STRATEGIES

• Expand distribution and establish a leadership position for the wires and cables segment in India. Enhance the geographical footprint of their wires and cables segment.
• Capitalize on the market opportunity in the wires and cables segment. Enhance productivity and operational efficiencies.

KEY CONCERNS

• Increases or fluctuations in raw material prices may have a material adverse effect on the business. Distribution to the overseas market is dependent on a few distributors and significant changes to their business arrangements with these distributors may impact the business.
• The availability of counterfeit products could have an adverse effect on the business and its competitive position.
• They are subject to warranty claims, which may increase in the future and have a material adverse effect on the financial condition.
• The Company faces risks related to foreign currency fluctuations. The company faces significant competitive pressures in the business.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

RR Kabel is a well-established player with strong brand recall and quality products. The company has a diverse product portfolio and an extensive domestic and global distribution network, and it is working on strategies for further enhancement as well. Other than the wire and cable industries, they are also well-positioned for growth in the FMEG segment.

Financial performance has been mixed, where there is growth in revenue and net worth but pressure on its margins with declining profits. The issue size is around 1964 crore, but most of its portion belongs to the offer for sale. Finally, the IPO is coming at a P/E valuation of around 60.5x, which is looking high-priced.

Due to the high valuation and current market sentiments, we will avoid this IPO for listing benefits. However, it could be a good pick for the long term, and investors may consider it during any post-listing correction.

Ratnaveer Precision Engineering Limited is a stainless steel (“SS”) product manufacturer focused on producing finished sheets, washers, solar roofing hooks, pipes, and tubes. Their products find application across various industries and their products are used in both commercial and residential sectors and are sold within India and overseas.

OBJECTS OF THE ISSUE

• Funding working capital requirements of the company.
• General corporate purposes.

Vijay Ramanlal Sanghavi

Chairman, Managing Director and Chief Financial Officer of the Company. He has been associated with the Company since its incorporation. He has over two decades of experience in ferrous and nonferrous metal industries.

Babulal Sohanlal Chaplot

Whole time Director of the Company. He has over four decades of experience and has worked in different sectors such as metals, agriculture, automobile etc. He has been associated with the Company since past fifteen years and has been acting as a Director on the Board since 2011. He oversees production as well as commercial functions.

Prerana Rajeshbhai Trivedi

Company Secretary & Compliance Officer of the Company. She is an associate member of the Institute of Company Secretaries of India. She has over 5 years of experience in secretarial and compliance field.

Nanubhai Panchal

Chief Operating Officer of the Company. He has been associated with the Company since 2011. He holds Diploma degree in Mechanical Engineering. He has over 50 years of experience in terms of consultant as well as employee of the various Company.

COMPANY PROFILE

• Ratnaveer precision engineering limited operates out of four manufacturing units, out of which two (Unit-I and Unit-II) are located at GIDC, Savli, Vadodara, Gujarat, one (Unit-III) is located at Waghodia, Vadodara, Gujarat and the other one (Unit-IV) is located at GIDC, Vatva, Ahmedabad, Gujarat..
• They manufacture SS finishing sheets, SS washers and SS solar mounting hooks at their Unit I and SS pipes and tubes at their Unit II. Unit III and Unit IV are dedicated for the backward integration process. They intend to expand their portfolio of SS washers by adding circlips into the product line. They currently offer over 2500 SKUs of SS washers to their customers including inner ring washers, spring washers, nord lock washers, retaining rings, internal tooth washers and external tooth washers of different sizes and specifications.
• The Company has undertaken R&D activity for developing circlips, has developed the required tools, and identified prospective customers.

COMPETITIVE STRENGTHS

• Synergistic Business Model focused on Backward Integration. Consistent financial performance.
• Wide product portfolio and multiple designs. R&D set up for new product development. Customer Diversification.
• Synergy of young and experienced management team with a committed employee base. Effective quality control checks.

KEY STRATEGIES

• Diverse, longstanding, and growing global customer base.
• Continue to add to the product portfolio by introducing new designs.
• Technology integration and plant automation for cost efficiency and improved productivity.

KEY CONCERNS

• Pricing in the steel industry is subject to market demand, volatility, and economic conditions. Fluctuations in steel prices may have a material adverse impact on their business.
• They are dependent on a few customers for a major part of their revenues.
• Their business requires a significant amount of working capital primarily as a considerable amount of time passes between the purchase of raw materials and the collection of receivables post-sales to customers.
• This business is a high-volume low-margin business.
• They operate in a highly competitive and fragmented industry with low barriers to entry. The Company has a high debt to equity ratio.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

Ratnaveer Precision Engineering Limited is a manufacturer of stainless steel products with a wide range of products and multiple designs. The company has a backward-integrated business model, which gives it control over the supply chain, and a research and development (R&D) setup for new product development. It has also reported strong financial performance in the last three years.

However, the steel industry is subject to market volatility and economic conditions. Additionally, it is a highly competitive industry. The major concern for investors here is the high debt-to-equity ratio and low-margin business. However, the IPO is coming at a fair price-to-earnings (P/E) valuation of 13.49x.

Thus, after considering all the factors, we suggest applying for this IPO for listing gain.

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Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

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