Refractory Shapes coming with IPO to raise upto Rs 18.60 crore

Refractory Shapes

• Refractory Shapes is coming out with initial public offering (IPO) of 60,00,000  shares of Rs 10 each in a price band Rs 27-31 per equity share. 
• The issue will open for subscription on May 6, 2024 and will close on May 9, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 2.70 times of its face value on the lower side and 3.10 times on the higher side.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Neelam Mandawat. 

Profile of the company

Refractory Shapes is primarily engaged in the manufacturing of different types of Bricks, Castables, High Alumina Catalyst and Ceramic Balls which includes Pre Cast & Pre Fired Blocks (PCPF), Burner Blocks, Special shaped Refractory bricks, Dense & Insulating Castables & Mortars. The company started developing and supplying products to Refineries and Steel Industries since its inception in 1973. In the year 2007 and 2011, The company had for the first time become an approved vendor with Engineer India (EIL) and also got enlisted with EIL for ‘High Alumina Refractory Bricks’, the company is the Original Equipment Manufacturer in many projects executed by EIL, which increased the opportunities of the Company in many green field projects, this EIL enlistment is re-validated every 3 years.

The tailored made products shaped by the Company finds its application in a diverse range of Industries, including Steel, Refineries, Fertilizers, Petrochemicals, Glass, Cement etc. The company's refractories are engineered to endure the harsh conditions of these industries, contributing to enhanced operational efficiency and extended equipment life. The tailored made finished goods provide diversity in the products being manufactured by the Company wherein modern manufacturing equipment are installed for scaling the manufacturing. 

In addition to the manufacturing activity being carried out by the Company, Refractory Shapes is often involved in receiving orders for those items from clients which are not a part of company’s operations in manufacturing activities. These items include Metallic Anchors which are used as support for installing refractory castables for which Raw Materials such as tabular alumina, low alumina bricks and insulation bricks, etc are required, For such orders, the company procures these items from their approved vendors and sells to the clients, hence, the Company is also involved in trading of the aforesaid products. Also, Company offloads the finished products from the manufacturing quantity with its vendors to meet the delivery period of the client.

Proceed is being used for:

• Funding of Capital expenditure towards civil construction required for Expansion of existing manufacturing unit at the existing location situated at Wankaner, Gujarat. 
• Funding of Capital expenditure towards purchase of Plant and Machineries for Expanding existing manufacturing unit at the existing location situated at Wankaner, Gujarat. 
• Repayment/prepayment of all or certain of its borrowings availed of by the Company.
• Purchase of commercial vehicle. 
• General corporate purposes.

Industry overview

Manufacturing is emerging as an integral pillar in the country’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors. India has the capacity to export goods worth $1 trillion by 2030 and is on the road to becoming a major global manufacturing hub. With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025. 

Manufacturing exports have registered highest ever annual exports of $447.46 billion with 6.03% growth during FY23 surpassing the previous year (FY22) record exports of $422 billion. By 2030, Indian middle class is expected to have the second-largest share in global consumption at 17%. India’s gross domestic product (GDP) at current prices stood at Rs 51.23 lakh crore ($694.93 billion) in the first quarter of FY22, as per the provisional estimates of gross domestic product for the first quarter of 2021-22. The manufacturing GVA at current prices was estimated at $77.47 billion in the third quarter of FY22 and has contributed around 16.3% to the nominal GVA of during the past ten years. India has potential to become a global manufacturing hub and by 2030, it can add more than $500 billion annually to the global economy.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of $2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors. The Indian Cellular and Electronics Association (ICEA) predicts that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to $100 billion by 2025 through policy interventions.

Pros and strengths

Raw material excellence: One of the key factors that set the Company apart is its meticulous selection and processing of raw materials. The company produces and refractory aggregates from carefully chosen materials, giving it a competitive edge over other manufacturer. This attention to details ensures that the raw materials used in each product are of the highest quality.

Wide & strong Customer base: The Company has PAN India presence. It has a wide customer base in all major states of India including Andhra Pradesh, Assam, Chhattisgarh, Delhi, Dadra & Nagar Haveli, Goa, Haryana, Jharkhand, Kerala, Madhya Pradesh, Karnataka, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal and Gujarat. This is a testament to its growing and wide customer base. Over the past few years, it has also developed granularity in the business and less dependency on top customers. The Company has set itself apart due to its openness to change and its ability to respond to the changes it sees in the industry.

Vast experience and track record in the Industry: The Company has been in the manufacturing of different types of bricks, castables for more than 2 decades and manufacturing High Alumina Catalyst and Ceramic Balls since 2003. Dayashankar Krishna Shetty, one of the Promoters and Executive Director of the Company has a vast experience in the field of Refractories and entered into the field of manufacturing in the year 1996. The Company is currently promoted by Dayashankar Krishna Shetty, Pratibha Dayashankar Shetty, Prajna Shravan Shetty and Suraj Sadanand Shetty who manage and control the major affairs of its Business Operations with their considerable experience in this Industry.

Risks and concerns

Do not have long-term agreements: Its Business is significantly affected by the availability, cost and quality of the raw materials and components with which it needs to develop its products. Its principal raw materials include a Tabular Alumina, Clay, Different grades of Aggregates and cement for manufacturing the final product. It usually does not enter into long-term supply contracts with any of its raw material suppliers. The prices and supply of its raw materials depend on factors beyond its control, including General Economic Conditions, competition, production levels, transportation costs and duties. If, for any reason, its suppliers of raw materials curtail or discontinue their delivery of such materials to it in the quantities it needs or at prices that are competitive or expected by the company, its ability to meet the requirements of its customers could be impaired and its Earnings and Business could suffer.

Dependent on third-party transportation providers: Its Manufacturing Facilities are strategically located which in turn makes it possible for it to procure raw material in an effective and timely manner. It arranges transportation on lowest price and availability basis. However, despite being strategically located, the Company is dependent upon third party service providers for the transport of the raw materials and finished products. As a manufacturing business, its success depends on the uninterrupted supply and transportation of raw materials required for its Manufacturing Facilities. It may or may not undertake the responsibility of delivery of raw materials or final products to or from its Manufacturing Facilities or to its Customers. It relies on third-party logistic service providers and freight forwarders for the purpose of the same. Factors such as transportation strikes could adversely impact the supply of raw materials and the delivery of its products and may have an adverse effect its Business, Results of Operations and Financial Condition. 

Face competition: The Refineries and Steel Industries provides for significant competition in its business based on pricing, relationships with customers, research and development and product quality. Over the Decade, diversified products were introduced by the Company and modern manufacturing equipment was installed for scaling the manufacturing. Over time, the Company started developing many proprietary products which are supplied to Refineries and Steel Industries. It faces pricing pressures from companies, that are able to manufacture Refractory products at competitive costs and consequently, may supply their products at cheaper prices. It is unable to assure that it shall be able to meet the pricing pressures imposed by such competitors domestically, which would adversely affect its business, financial condition and results of operations.

Outlook

Refractory Shapes is engaged in the manufacturing of different types of Bricks, Castables, High Alumina Catalyst and Ceramic Balls which includes Pre Cast & Pre Fired Blocks (PCPF), Burner Blocks, Special shaped Refractory bricks, Dense & Insulating Castables & Mortars. The tailored made products shaped by the Company find applications in a diverse range of Industries, including steel, cement, glass, petrochemicals, etc., Having a diversity of products in the Company gives it the chance to meet the needs of various Customers based on their preferences. It caters to different types of Industries, Petrochemicals, Refineries, Aluminium, Fertilizers, Iron and Steel and Glass. On the concern side, the company is dependent upon third party service providers for the transport of the raw materials and finished products. As a manufacturing business, its success depends on the uninterrupted supply and transportation of raw materials required for its Manufacturing Facilities.

The company is coming out with an IPO of 60,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 27-31 per equity share. The aggregate size of the offer is around Rs 16.20 crore to Rs 18.60 crore based on lower and upper price band respectively. On performance front, revenue from operations had increased by 48.88% from Rs 2550.32 lakh in Fiscal 2022 to Rs 3796.92 lakh in Fiscal 2023. This increase was due to increase in sales of products during the year. The company reported a net profit of Rs 191.74 lakh in Fiscal 2023 as compared to a net profit of Rs 287.04 lakh in Fiscal 2022. Meanwhile, In order to expand its product offerings and widen the customer base, the company is currently in process to get the Refractory Manufacturing unit approved by Reputed Licensors viz. KBR USA & Haldor Topsoe Denmark for its Refractory bricks & Castables, which will enhance its capacity to produce high end products and enter into new customer centric products.