Started in 2007, Vectus Industries Limited is a Gwalior - Madhya Pradesh based Company is a B2C focussed water storage and piping solutions provider in India, catering to residential, commercial, industrial, infrastructure and agricultural sectors. Company operates across three distinct product verticals namely: (i) water tanks, (ii) pipes and fittings, and (iii) household plastics and others. Vectus is among the top two players in the plastic water tanks vertical in terms of revenue with a pan-India presence and strong brand recall (as per CRISIL Report). Company manufactures a diverse range of products using a variety of polymers, including linear low density polyethylene ('LLDPE'), high density polyethylene ('HDPE'), chlorinated polyvinyl chloride ('CPVC'), polypropylene random copolymer ('PPR') and polyvinyl chloride ('PVC'). They were also the first to introduce blow moulded tanks in India and are currently the largest manufacturer of blow-moulded tanks in India (as per CRISIL Report). Vectus is one of the fastest growing water tanks player in the industry. Its water tanks product vertical comprised over 1,000 SKUs as at March 31, 2018 and the product range includes overhead (including loft tanks) and underground tanks (including septic tanks), in a variety of colours and layers with varied capacities ranging from 60 litres to 2,000 litres for blow moulded tanks and from 100 litres to 10,000 litres for rotational moulded tanks. Company's pipes and fittings vertical comprises over 2,500 SKUs as at March 31, 2018 and includes CPVC pipes and fittings, PVC (ASTM, SWR and Agri-drainage, Column and casing) pipes, composite pipes and fittings (PE-Aluminium-PE), PPR pipes and fittings, HDPE pipes and PE manholes. Company has entered into an exclusive arrangement for license and technical assistance with Floteks Plastik Sanayi Ve Ticaret Anonim Sirketi ('Floteks'), a Turkish entity, with respect to technical know-how for manufacture and sale of PE manholes in India, in accordance with EN 13598 standards. In fiscals 2018, 2017, 2016, 2015 and 2014, the pipes and fittings contributed 52.00%, 51.93%, 48.78%, 47.28% and 45.90% of the Adjusted Revenue, respectively. Company also manufactures household plastics and other products, which comprised over 300 SKUs as at March 31, 2018 and includes buckets, dustbins, stools, planters, tubs, mugs and milk cans, using injection moulding and blow moulded technology. In fiscals 2018, 2017, 2016, 2015 and 2014, the household plastics and others contributed 8.10%, 7.47%, 8.56%, 9.72% and 9.77% of the Adjusted Revenue, respectively. Company's products from all three product verticals are distributed through dealers and distributors, who resell the products to sub-dealers, retailers, contractors and end-users. As at March 31, 2018, they had a network of over 4,300 dealers and distributors across 24 States/Union Territories across India, of which 84.40% were from semi-urban and rural areas and contributed to 73.84% of the Adjusted Revenue in Fiscal 2018. Company distributes the products through all the manufacturing facilities and the eight depots. VIL manufactures products at 13 strategically located manufacturing facilities in the States of Chhattisgarh, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Rajasthan, Tamil Nadu, Uttarakhand and Uttar Pradesh. The total installed capacity for Water Tanks, Pipes and Fittings and Household plastics are respectively 12,81567 k litres, 39,081 MT and 5930 MT with capacity utilisation 60%, 62% and 65% in fiscal 2018. As at March 31, 2018, VIL had 1,176 full-time employees and 1,080 personnel at the manufacturing facilities, on a contract basis. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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