Uravi T and Wedge Lamps coming with an IPO to raise Rs 15 crore

Uravi T and Wedge Lamps

• Uravi T and Wedge Lamps is coming out with an initial public offering (IPO) of 1,500,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100.00 per equity share.
  
• The issue will open on  March 16, 2018 and will close on March 20, 2018.
  
• The shares will be listed on EMERGE Platform of NSE.
  
• The share is priced 10 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Aryaman Financial Services.
  
• Compliance Officer for the issue is Aditi Kamalakar.

Profile of the company

The company was incorporated as ‘Uravi T and Wedge Lamps Private Limited’ on April 19 2004, under the Companies Act, 1956 with the Registrar of Companies, Mumbai. The status of the company was changed to a public limited company and the name of the company was changed to ‘Uravi T and Wedge Lamps Limited’ by a special resolution passed on December 11, 2017. A fresh certificate of incorporation consequent to the change of name was granted to the company on January 16, 2018, by the Registrar of Companies, Mumbai.

The company is a lamps and lighting products manufacturing and distribution company with core focus on automotive lamps and instrument cluster lighting. It specializes in manufacturing and distributing Stop and Tail Lamps /Signal Lamps /Indicator Lamps and Wedge Lamps for Two-wheelers, Four-wheelers, Tractors and Industrial applications for various Indian automobile manufacturers. The company is ISO/TS certified and holds certifications from the Automotive Research Association of India and E-mark for the products manufactured. Keeping in line with the current technological advancements in the field of automobile and home lighting, it has recently entered into a co-operation agreement with a Philippines based company named Global Lighting Phils. Inc for developing LED lighting products vertical of the company. The LED lamps are manufactured by Global Lighting Phils. Inc. under the brand name 'UVAL' and are imported, distributed and sold in India by the company. It has recently entered into trading of LED Lamps.

Proceed is being used for:

• Funding Long-Term Working Capital Requirement, and
  
• Funding expenditure for General Corporate Purposes.
  

Industry Overview

The Indian automotive lighting market has witnessed significant growth on account of increased automotive sales and economic growth. In addition, it is driven by increasing population and concerns about vehicle safety triggered by government regulations.  Lighting is a vital component in automotive vehicles, playing an important role in automotive safety. The Indian automotive lighting market is expected to garner $3.1 billion by 2022, registering a CAGR of 5.6% from 2016-2022.

The Indian auto industry is one of the largest in the world. The Two Wheelers segment with 80 per cent market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 14 per cent market share. India is also a prominent auto exporter and has strong export growth expectations for the near future.

The Indian auto-components industry has experienced healthy growth over the last few years. The auto ancillary industry can be broadly classified on a functional basis into engine parts, transmission and steering parts, suspension and braking components, electrical equipment and others.

Pros and strengths

Established Marketing Setup and Diversified Customer Base: The company has an efficient sales & marketing team which consists of well experienced and professional people to develop maintain and increase relations with their customers. Their Wedge lamps and Stop and Tail/Signal/Indicator Lamps cater to Automotive Components sector and require a unique marketing approach. Their clients include companies across the automotive industries in the national market. Some of their top customers include various OEMs and the ultimate user for their products are automobile manufacturers. Their marketing team also plays an important role in the development of new products based on their study and feedback on latest industrial needs. They maintain their customer relations by providing quality, timely delivery, maintaining design confidentiality and also suggesting them value added propositions. 

Consistency in Quality and Service Standards: The company has an in-house testing and quality control mechanism having fully automated testing machines operated by skilled operators, under proper quality control and strict supervision. Their in-house testing equipments includes testing for Linear Measurements, Electrical Parameters Measurement, Light Measuring Instruments, Load Measurement Instruments, Bulb Performance Measurements, Reliability and Endurance Testing, etc. For these testing some of their equipment include – Vernier Caliper, Profile Projector, Digital Voltmeter AC/DC, Digital Multimeter, Digital Lux Meter, Polarimieter, Push Pull gauge, Crushing Strength Tester, Photometric Integrator and Calorimeter, Life Test Racks, Vibration Testing, Humidity Chamber, Viscosity Cup, etc.  

Risks and concerns

Revenues are dependent on few customers: The company is engaged in the manufacture of Wedge Lamps and Stop/Tail Lamps/Indication Lamps. The top five customers accounted for 72.55% of their net sales during Financial Year 2017. Concentration of their business on few customers may adversely affect them in case they lose one or more contracts with these customers. Significant revenue from few customers increases the potential volatility of their results and exposes them to risks which may have an adverse effect on financial performance of the business.

High working capital requirements: The business requires significant amount of working capital. Major Portion of their working capital is utilized towards debtors and inventory. Inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect their financial condition and result of their operations. Further, they have high debtors which may result in a high risk in case of non-payment by these debtors.

Outlook:

Uravi T and Wedge Lamps is a lamps and lighting products manufacturing and distribution company with core focus on automotive lamps and instrument cluster lighting. It specializes in manufacturing and distributing Stop and Tail Lamps /Signal Lamps /Indicator Lamps and Wedge Lamps for Two-wheelers, Four-wheelers, Tractors and Industrial applications for various Indian automobile manufacturers. The company has an efficient sales & marketing team which consists of well experienced and professional people to develop maintain and increase relations with their customers. Their marketing team also plays an important role in the development of new products based on their study and feedback on latest industrial needs. They maintain their customer relations by providing quality, timely delivery, maintaining design confidentiality and also suggesting them value added propositions. On the concern side, the company has experienced negative cash flows from operating activities, investing activities as well as financing activities in the previous years, and that could impact their growth and business plans in the future. 

The company is coming out with a maiden IPO of 1,500,000 equity shares of Rs 10 each at a fixed price of Rs 100 per share to mobilize Rs 15 crore. On performance front, the income from operations posted by the company were Rs 2,714.86 lakh, Rs 2,944.20 lakh and  Rs 2,901.78 lakh for the Financial Years 2014-15, 2015-16 and 2016-17 respectively. While, the net profits posted by the company were Rs 82.55 lakh, Rs 93.65 lakh and Rs 104.90 lakh for the periods 2014-15, 2015-16 and 2016-17, respectively. The revenue earned from operations for the six months period ended September 30, 2017 stood at Rs 1,641.94 lakh and net profit posted by the company for the same period was Rs 156.40 lakh. The company’s management team’s experience and their understanding of the automotive component business will enable them to continue to take advantage of both current and future market opportunities. It is also expected to help them in addressing and mitigating various risks inherent in their business, including significant competition, reliance on independent agents, and fluctuations in automotive lights prices.