Advait Infratech coming with an IPO to raise up to Rs 6.88 crore

Advait Infratech

• Advait Infratech is coming out with an initial public offering (IPO) of 13,50,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.
• The issue will open on September 15, 2020 and will close on September 18, 2020.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is ISK Advisors.
• Compliance Officer for the issue is Dipesh Panchal.

Profile of the company

The company was incorporated as Advait Infratech Private limited on March 15, 2010 under Companies Act, 1956. The Name of the company was subsequently changed to ‘Advait Infratech Limited’ pursuant to a special resolution passed by the shareholders of the company at the Extra Ordinary General Meeting held on October 21, 2019. A fresh certificate of incorporation consequent upon change of name was issued on November 29, 2019 by the Registrar of Companies, Ahmedabad.

The company is into business of providing products and solutions for power transmission, power substation and telecommunication infrastructure fields. It operates with various verticals such as Turnkey Telecommunication Projects, Installation of the Power Transmission, Sub Station and Telecom Products, Liasioning-marketing and providing end to end solutions for the overseas customers operating in the field Power Transmission and Sub Station, Trading of the similar products, and manufacturing through OEM of the stringing Tools. The major Products and Solutions offered by the company are Optical Fibre Ground Wire (OPGW) and OFC cables and its solutions; Insulators for the EHV - Extra High Voltage Transmission Lines; Stringing Tools for construction of Transmission lines; Gas Insulators Sub Stations supply from its partners and providing end to end solutions; Earthing Solutions; and Transmission line and Sub Station Lines specialized products.

Proceed is being used for:

• Working capital requirement.
• General corporate purpose.

Industry overview

Power is one of the most critical components of infrastructure, crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy. Transmission, an important element in the power delivery value chain, facilitates evacuation of power from generating stations and its delivery to the load centers. For efficient dispersal of power to deficit regions, strengthening the transmission system network and enhancing the Inter-State power transmission system network are required. Distribution is the most important link in the entire power sector value chain. As the only interface between utilities and consumers, it is the cash register for the entire sector. India‘s power sector is one of the most diversified in the world. In May 2018, India ranked 4th in the Asia Pacific region out of 25 nations on an index that measures their overall power. Demand for power transmission and distribution equipment correlates with investment in transmission and distribution network. India is on the verge of becoming a major power nation among developing economies, and increasing demand for electricity, new power generation capacity additions and expansion of transmission and distribution infrastructure have become major growth drivers for the sector.

Besides, India has a number of advantages in the manufacturing sector that make it an attractive investment destination. Apart from a large and growing domestic market, India also has a well-developed supplier base, availability of skilled manpower at relatively lower costs, supportive regulatory environment and good support infrastructure. Additionally, Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing & testing facilities. The Government of India has released its roadmap to achieve 175 GW capacities in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power. Going forward, increasing population and growing penetration of electricity connections, along with increasing per-cap capita usage would provide further impetus to the power sector. Also, the strong public spending in infrastructure development and capacity building, especially in urban transportation, railways, oil and gas, sub-transmission etc, are expected to boost the sector.

Pros and strengths

Existing client base: The company is providing products and solutions to major power utilities in India and abroad, and to all Main EPC actively working in this field. It has successfully retained clients from both private and public sector. It has developed a strong client base for its product and services and enjoy certain level of an established relationship with them with its continuous innovation and customer first philosophy. Its business and growth are significantly depending on its ability to maintain the client relationship and offering innovative solution to customers. It has gained significant experience and has established track record and reputation for efficient and timely delivery of its product and services. This has helped it to maintain a long term working relationship with its customers and retain clients.

Selective bidding with focus on effective execution record: The company seeks to bid on projects in its business areas on a selective basis. It has developed an experienced bidding team, and execution team and conduct extensive due diligence on project-specific, client-specific and country-specific risks and uncertainties. It endeavors to factor such risks and uncertainties into its bids and contracts to manage and allocate risks and uncertainties in a manner that reduces its financial exposure. It intends to continue to focus on effective order execution in order to maximize client satisfaction and margins. In addition, to facilitate decision making and to deliver satisfactorily on commitments to its clients, it intends to continue to strengthen the team for its execution.

Optimal utilization of resources: The company constantly endeavors to improve its service process, and will increase its procurement process to optimize the utilization of resources. It has invested significant resources, and intends to further invest in its existing supplier relationship, experienced management team, existing client base, strong balance sheet and financial position, optimal utilization of resources activities to develop customized systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for operations of company which enable it to identify the areas of bottlenecks and correct the same. This helps it in improving efficiency and putting resources to optimal use.

Risks and concerns

Substantial portion of revenues depends upon few clients: The loss of any significant client would have a material effect on the company’s financial results. It cannot assure you that it can maintain the historical levels of business from these clients/distributors or that it will be able to replace these clients/distributors in case it lose any of them. Furthermore, major events affecting its clients, such as changes in government policies and bankruptcy, change of management, mergers and acquisitions in other cases could impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, impacting its income and financial condition.

Face competition: The company may has to confront pressures in respect of pricing; product quality etc. from the clients and such pressures may put strain on its profit margins which may consequently affect the financial position of the company. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players. Its competitiveness is also measured by the technology it adopts as the industry is rapidly growing in India. Its inability to compete with this intense competition; will have material adverse impact on the company's financial position.

Depends on key managerial personnel: The company is depending significantly on the expertise, experience, and continued efforts of its Key Managerial Personnel. If one or more members of its Key Managerial Personnel are unable or unwilling to continue in his/her present position, it may be difficult to find a replacement, and business might thereby be adversely affected. Its industry requires personnel with specific technical knowledge and experience. Competition for Key Managerial Personnel in its industry is intense and it is possible that the company may not be able to retain existing Key Managerial Personnel or may fail to attract/ retain new employees at equivalent positions in the future. As such, loss of Key Managerial Personnel could adversely affect its business, results of operations and financial condition.

Outlook

The Ahmedabad-based Advait Infratech company is incorporated in 2010. It operates in the power infrastructure industry. The business has various verticals including Turnkey Telecommunication Projects, power transmission installation, Power substation, and telecom products, Liasioning-marketing, and many others to meet the demand of the power sector. It has diversified products for power transmission and power substation field and has a strong order book. Its major product offering through trading vertical includes stringing tools-Optical Fiber Ground Wire (OPGW). It is finding unique opportunities for offering Niche and specific products for specific market giving it the higher profitability. Besides, the knowledge and experience of company’s promoter and management will enables it to identify new opportunities, rapidly respond to market conditions, adapt to changes in the business landscape and competitive environment and enhances the growth in the business. On the concern side, the industry it cater is characterized by rapid technological changes, evolving industry standards, changing client preferences that could result in product obsolescence and short product life cycles. Besides, the company is dependent on third party transportation providers for the delivery of its raw material and products. Accordingly, continuing increases in transportation costs or unavailability of transportation services for them, as well the extent and reliability of Indian infrastructure may have an adverse effect on business, financial condition, results of operations and prospects.

The company is coming out with a maiden IPO of 13,50,000 equity shares of Rs 10 each at a fixed price of Rs 51 per equity share to mobilize Rs 6.88 crore. On the performance front, in fiscal 2020, the company’s revenue from operations had increased by Rs 1647.81 lakh or 58.76%, from Rs 2804.12 lakh in fiscal 2019 to Rs 4,451.93 lakh in fiscal 2020. The increase in the fiscal 2019 was due to increase in the sale of products. The company’s Profit after Tax had decreased by Rs 194.98 lakh or 78.30%, from Rs 249.02 lakh in fiscal 2019 to Rs 54.04 lakh in fiscal 2020. The company intends to continue to strengthen its technical capabilities to enable it to move up the value chain. This will lead it to generate deep understanding of network requirements of its customers. It aims to enhance the growth by leveraging its relationships and further enhancing customer satisfaction. It plans to increase its customers by completing orders in hand on time, maintaining its customer relationship and renewing its relationship with existing buyers.