R R Kabel Limited is one of the leading companies in the Bharatiya consumer electrical industry (comprising wires and cables and fast moving electrical goods ('FMEG')), with an operating history of over 20 years in Bharat. The Bharatiya consumer electrical industry was estimated at Rs 1,811.50 billion in FY 23 and is expected to grow at a CAGR of 10% until FY 27 to reach a market value of approximately Rs 2,665.00 billion. Company 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. In three months ended June 30, 2023, (i) 71% of the revenue from operations from the wires and cables segment and (ii) 97% of the revenue from operations from the FMEG segment, are from the B2C channel. Company undertakes the manufacturing, marketing and sale of (i) the wires and cable products under our 'RR Kabel' brand, and (ii) a variety of consumer electrical products, including fans and lights under the 'RR' brand, which is licensed by them. They also manufacture, market and sell fans and lights under the 'Luminous Fans and Lights' brand, which is licensed by them. The 'RRKabel' brand has over 20 years of operating history, while the 'RR' and the 'Luminous Fans and Lights' brands, which are licensed by them, have over 7 years and over ten years of operating history, respectively. Company owns and operates two integrated manufacturing facilities which are located at Waghodia, Gujarat and Silvassa, Dadra and Nagar Haveli and Daman and Diu in Bharat, which primarily carry out manufacturing operations in respect of wire and cables and switches. Additionally, they own and operate three integrated manufacturing facilities which are located at Roorkee, Uttarakhand, Bengaluru, Karnataka and Gagret, Himachal Pradesh in Bharat, which carry out manufacturing operations in respect of FMEG products. The Waghodia Facility is one of the largest consumer electrical manufacturing facilities in India as of March 31, 2023, with an annual manufacturing capacity of 2.1 million CKM of wires and cables. The manufacturing facilities give them the in-house ability to manufacture 100% of the requirements for wires and cables and approximately 37% of the requirements for FMEG products by value. They purchase the balance requirements for FMEG products from third parties and eventually sell them as traded goods. Company has an extensive pan-Bharat distribution presence and as on June 30, 2023, they have 3,450 distributors, 3,656 dealers and 114,851 retailers, on a non-exclusive basis. As on June 30, 2023, they have 789 employees in the sales and marketing team, who manage and coordinate with distributors, dealers and retailers. They also have a presence on recognized e-commerce platforms. As on June 30, 2023, they have 21 warehouses across 17 states and union territories in Bharat. They also export the range of wires and cable products directly as well as through distributors across the world. During FY21 to 23 and three months ended June 30, 2023, they sold the products to 63 countries in North America, APAC, Europe and Middle East. For the three months period ended June 30, 2023, 99% of the export revenue was derived from distributors, and 1% was derived from original equipment manufacturers ('OEMs'). As per financial performance, R R Kabel has posted total income / net profits of Rs 2745.94 Cr / Rs 135.40 Cr (FY21), Rs 4432.22 Cr / Rs 213.94 Cr (FY22), Rs 5633.64 Cr / Rs 189.87 Cr (FY23) and Rs 1613.60 Cr / Rs 74.35 Cr (Q1 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 16.97 and average RoNW of 14.78% for last three fiscals. Issue is priced at a P/BV of 7.69 as per NAV of 134.57 as on 30.06.23. If we attribute latest earnings of FY23 on fully diluted equity post issue, then asking price is at a P/E of around 61.49, as per TTM upto Q1 FY24 earnings P/E is around 47.45 and as per annualized FY24 earnings P/E is around 39.26, which looks fairly priced. As per RHP, peers comparison is shown in above table. On BRLM's front, one lead managers are associated with this IPO, and have handled around 10 IPOs in last three fiscals. Unistone Capital Private Limited : This is 11th IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, all are trading above issue price or at par. (As on 29.08.2023) As per financials, R R Kabel has shown good growth with brand value, RoNW is 13.66% and P/E is respectively 61.49, 47.45 and 39.26 as per FY23, TTM upto Q1 FY24 and annualized FY24 earnings. So issue looks fairly priced. Company is in business of consumer electrical products, which is highly fragmented and competitive. But the sector is expected to grow at good rate. Performance of BRLMs is good. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
✍️ Post a Comment