Energy-Mission Machineries (India) coming with IPO to raise upto Rs 41 crore

Energy-Mission Machineries (India)

• Energy-Mission Machineries (India) is coming out with initial public offering (IPO) of 29,82,000 shares of Rs 10 each in a price band Rs 131-138 per equity share. 
• The issue will open for subscription on May 9, 2024 and will close on May 13, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 13.10 times of its face value on the lower side and 13.80 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Bhargavi Dilipbhai Gupta. 

Profile of the company

Energy-Mission Machineries (India) designs and manufactures CNC, NC and conventional metal forming machines which caters to the industrial sector requirement for metal fabrication solutions. Its wide spectrum of metal forming machines includes press brake machines, shearing machines, plate rolling machines, iron workers machines, hydraulic presses and busbar bending, cutting & punching machine. Through its array of products, it provides manufacturers with vital precision machines which are required for metal cutting and forming operations. Its machines are utilized across a wide gamut of industries such as automotive, steel, pre-engineered building, furniture, HVAC, agricultural equipments, road construction equipments, elevators, food processing machinery, metalworking workshops and many others. 

It offers over 600 variants of metal forming machines and during the last 3 Fiscals and the nine months period i.e. April 2023 to December 2023, the Company has supplied 1657 machines to over 1150 customers. During the last 3 Fiscals and the nine months period i.e. April 2023 to December 2023, it has sold its products in India and several other countries across the globe which include USA, Switzerland, Russia, Nepal, Kenya, Uganda, UAE, Saudi Arabia and other Middle east countries. It also provides machinery tools and spare parts such as Die punch, Shearing Blade, Roller Set, Holding Spring, Limit Switch, Foot Switch, Seal Kit, Linear Scale etc. which also aids in addressing after-sales support and services.

Its manufacturing operations comprise, in addition, to its production lines, CNC Plasma cutting shop, machine shop, heavy fabrication shop, hydraulic Cylinder Shop, hydraulic power pack shop, Electrical Panel wiring, sheet metal shop, shot blasting chamber, paint booth chamber, assembly lines and testing facilities. It also outsource certain proportion of its production process relating to zinc plating, powder coating, cylindrical grinding, hard chrome plating, hardening, honing etc. to third parties job workers. 

Proceed is being used for:

• Funding of capital expenditure towards civil construction work at existing manufacturing unit located at Sanand, District Ahmedabad, Gujarat. 
• Funding of capital expenditure towards installation of new plant & machineries. 
• Meeting working capital requirements. 
• General corporate purpose.

Industry overview

India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Capital Goods sector contributes to 12% of India’s manufacturing output 97 and 1.8% to GDP. Market valuation of the capital goods industry was $43.2 billion in FY22. Indian Electrical equipment is the largest sub-sector followed by Plant equipment & Earth moving/ mining machinery. The electrical equipment market share in India is expected to increase by $33.74 billion from 2021 to 2025, and the market's growth momentum will accelerate at a CAGR of 9%. Investment in engineering R&D sector is expected to reach $63 billion by 2025. The Index of Industrial Production (IIP), in absolute terms, increased to 146.5 in January 2023 from 145.3 in December 2022.

The Indian machine tool market size reached $1.4 billion in 2022. The market is expected to reach $2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28. The manufacturers of machine tools are mostly SMEs, few of them are mid-sized manufacturers which have an annual turnover varying between $36-60 million. The types of machine tools currently manufactured are general/special purpose machines, standard Computer Numerical Control (CNC) machines, gear cutting, grinding, medium size machines, electrical discharge machining (EDM), presses, press brakes, pipe bending, rolling, bending machines, etc.

According to the Automotive Component Manufacturers Association of India, India’s auto component industry is projected to grow 10-15% annually till FY24. In December 2022, Spark Minda inaugurated 28th automotive component manufacturing plant in India. In December 2022, Honda Cars India has announced a tie-up with Maruti Suzuki Toyotsu India (MSTI), to offer vehicle scrapping services to its customers through its dealer network. In November 2022, ARAI, Ansys signs MoU for research in emerging automotive technologies. PLI schemes in automobile and auto component sector with financial outlay of Rs 25,938 crore ($3.49 billion) introduced under Atmanirbhar Bharat 3.0

Pros and strengths

In-house manufacturing facility: It presently carry all its manufacturing operations through its manufacturing facility located in Sanand (District - Ahmedabad), which is situated on a vast land area of over 18,234 sq. mtrs and is equipped with capabilities to design, develop and manufacture its product portfolio. Its manufacturing operations comprise, in addition, to its production lines, CNC Plasma cutting shop, machine shop, heavy fabrication shop, hydraulic Cylinder Shop, hydraulic power pack shop, Electrical Panel wiring, sheet metal shop, shot blasting chamber, paint booth chamber, assembly lines and testing facilities.

Stringent quality control mechanism ensuring standardized product quality: Its manufacturing facility has obtained ISO 9001:2015 certification and as on December 31, 2023, it has the capacity to manufacture 900 machines p.a. it employ an extensive and stringent quality control mechanism during the manufacturing of its products which includes tests such as surface roughness testing, hardness testing, straightness testing, coating thickness, noise level measurement, oil contamination testing, final product trial runs etc. that are required to ensure that its finished product conforms with the standard quality.

Varied product range appealing to a diverse customer base: It offers over 600 variants of metal forming machines and during the last 3 Fiscals and the five months period, the Company has supplied 1657 machines to over 1150 customers. Its wide spectrum of metal forming machines includes press brake machines, shearing machines, plate rolling machines, iron workers machines, hydraulic presses and busbars which are required for metal cutting and forming operations. It also provides machinery tools and spare parts such as Die punch, Shearing Blade, Roller Set, Holding Spring, Limit Switch, Holding Seal Set, Guide Plate, Bush Pin, Linear Scale etc. 

Risks and concerns

Does not have long-term agreements with suppliers: Its business depends on the availability of commercially viable and high-quality input materials in the quantities required by the company. The input materials involved in the manufacturing of its products require special properties including dimensional stability, machinability and workability, corrosion resistance, and impact resistance.  It does not have any contracts with, or long-term arrangements for sourcing input materials from suppliers of input materials. The absence of long-term contracts makes the company susceptible inter alia to short-term supply challenges and exposes it to volatility in the prices of input materials. If its primary suppliers of key input materials curtail or discontinue their delivery of such materials or products to the company in the quantities it needs, or on commercially acceptable terms, production and delivery schedules could be disrupted, and its business and results of operations could be adversely affected.

Significant portion of revenue from key product: It generates a significant portion of its revenue from its key product i.e. CNC press brake machines which contributed to 67.74% of its total revenue in Fiscal 2023 amounting to Rs 6707.43 lakh and 65.86% of its total revenue for the nine months period ending December 31, 2023 amounting to Rs 5452.21 lakh. Any decline in the sales of CNC press brake machines on account of any reason including increased competition, pricing pressures or fluctuations in the demand for or supply of such products may adversely affect its business, results of operations and financial condition.

High working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards inventories, payment to creditors and to some extent in trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high outstanding amount due from its debtors which may result in a high risk in case of non-payment by these debtors. In case of any such defaults from its debtors, may affect its business operations and financials.

Outlook

Incorporated in 2011, Energy-Mission Machineries (India) designs and manufactures CNC, NC and conventional metal forming machines which caters to the industrial sector requirement for metal fabrication solutions. Its wide spectrum of metal forming machines includes press brake machines, shearing machines, plate rolling machines, iron workers machines, hydraulic presses and busbar bending, cutting & punching machine. Through its array of products, it provides manufacturers with vital precision machines which are required for metal cutting and forming operations. Its machines are utilized across a wide gamut of industries such as automotive, steel, pre-engineered building, furniture, HVAC, agricultural equipments, road construction equipments, elevators, food processing machinery, metalworking workshops and many others. On the concern side, the industry in which it operates is highly competitive and fragmented. Its competition varies across various markets and geographical areas. It faces competition from both domestic and international companies. It competes primarily on the basis of product quality, technology, cost, delivery and service, as well as quality and depth of senior level relationships.

The company is coming out with an IPO of 29,82,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 131-138 per equity share. The aggregate size of the offer is around Rs 39.06 crore to Rs 41.15 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 10,066.12 lakh as compared to Rs 7,906.57 lakh in financial year 2021-22 representing an increase of 27.31%. Restated Profit after Tax for the financial year 2022-23 was Rs 790.01 lakh as compared to Restated profit after tax of Rs 336.17 lakh during the financial year 2021-22 representing an increase of 135%. Meanwhile, the company intends to focus on adhering to the quality standards of the products. Quality of the product is very important for the company from the customer’s point of view. Continuous quality review of products and timely corrective measures in case of quality diversion are keys for maintaining quality standards of the products. Providing the desired and good quality products help it in enhancing customer trust and creating goodwill of the company.