AA Plus Tradelink coming with an IPO to raise upto Rs 6.48 crore

AA Plus Tradelink

• AA Plus Tradelink has come out with an initial public offering (IPO) of 3600000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 18 per equity share.
• The issue will open for subscription on July 08, 2021 and will close on July 13, 2021.
• The shares will be listed on SME Platform of BSE.
• The share is priced 1.80 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is CS Mansi K. Shah.

Profile of the company

The company is currently engaged in the business of trading of products made of iron & steel, aluminium, graphite and other alloy products. It is a multi-product trading company with a diverse product portfolio. It is also in the business of supplying Epoxy Floor Coating, Industrial Epoxy Floor Coating, Epoxy Floor Coating Marine, PU Floor Coating, Epoxy Coating, Epoxy Primer, Epoxy High Build Coating, Epoxy Heat Resistance Coating. It is currently serving the corporate and other clients from construction and manufacturing industry. Further it intends to take the contracts from builders for the end to end supply and fitting of aluminium windows along with the glass. 

The company’s portfolio of products currently being traded by the company includes various industrial, metals and alloy products including iron and steel. It operates as an intermediary in the Iron & Steel and other metal and alloy Industry. It is currently serving the corporate and other clients from fabrication and manufacturing industry. It procure its material from various manufacturers and traders. It procures orders from its clients and accordingly supply the material to customers.

Proceed is being used for:

• Augmenting additional working capital requirements.
• General corporate purposes.

Industry overview

India holds a fair advantage in production and conversion costs in steel and alumina. Its strategic location enables export opportunities to develop as well as fast-developing Asian markets. India is home to 1,531 operating mines. The country has large reserves of iron ore, bauxite, chromium, manganese ore, baryte, rare earth and mineral salts. The country produces 95 minerals 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals). Rise in infrastructure development and automotive production are driving growth. Power and cement industries are also aiding growth for the sector. Demand for iron and steel is set to continue given the strong growth expectations for the residential and commercial building industry. Coal production in the country stood at 730.87 million tonnes (MT) in FY20 and reached 620.10 MT in FY21 (as of February 2021). Iron ore production in the country stood at 112 million tonnes in FY21 (up to November 2020). In FY20, India had a total number of 914 steel plants producing crude steel. In January 2021, India’s crude steel production increased by 7.4% YoY to reach 10 million tonnes (MT), as per the World Steel Association (worldsteel). Production of aluminium stood at 3.65 MT in FY20. In value terms, aluminium export from the country stood at $ 20.18 million in FY20.

Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. In India, the real estate sector is the second-highest employment generator, after the agriculture sector. It is also expected that this sector will incur more non-resident Indian (NRI) investment, both in the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.  Indian real estate sector has witnessed high growth in the recent times with rise in demand for office as well as residential spaces. Indian real estate attracted $5 billion institutional investments in 2020, equivalent to 93% of transactions recorded in the previous year.

Pros and strengths

Bouquet of metal and alloy products: The company offer various products to cater to the specific needs of its clients. Its diverse product portfolio includes products such as Aluminium Bars, Rods & Profiles, Aluminium Powder, Aluminium Scrap, Ammonium Molybdenum, G I Pipe, Graphite Flakes and Circle, Graphite Powder, Graphite Rods, Blocks and Plates, Graphite Scrap, Graphite Square and Round, M S Pipe, M S Sheet amongst others. It services its customers with products ranging to all sizes, grades, and standards under one roof. Its presence in diverse product lines of business enables it to reduce risks arising from service and client concentration.

Quality: The company has always been in the best quality in its products. The company is dedicated towards quality of its products and it adhere to quality standards as prescribed by its clients.

Risks and concerns

Substantial portion of revenues depends upon few clients: For the financial year ended March 31, 2021 the company’s top 5 customers contributed almost 89.43% of its sales. The loss of its major customers or a decrease in the volume of products sourced from it may adversely affect its revenues and profitability. It cannot assure you that it shall generate the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its operations and profitability.

Business is geographically located in one area: Majority of company’s business is based Mumbai. As a result, if there is any localized social unrest, natural disaster or breakdown of services and utilities in this area, it may affect its business adversely. Further its manufacturing activities are subject to operating risks, such as breakdown or failure of equipment, power supply or processes, performance below expected levels of output or efficiency, obsolescence, labour disputes, strikes, continued availability of services of its external contractors, earthquakes and other natural disasters, industrial accidents etc. It has not experienced any of these operating risks in the past. It cannot assure it will be adequately able to mitigate all of its operating risks.

Outlook

Incorporated in 2016, AA Plus Tradelink is engaged in the trading of products made of iron & steel, aluminium, graphite, and other alloy products. It offers a diversified range of products such as aluminium bars, Aluminium Scrap, Aluminium Powder, G I pipes, Graphite Flakes, Graphite Powder, Graphite Rods, Blocks and Plates, Graphite Square and Round, M S Pipe, M S Sheet, Nickel Powder, Zirconium Alloy, etc to clients in construction and manufacturing sector. The company’s top management and key executives enjoy the confidence of several corporate clients. It interacts with its customers to get the feedback on the quality of products and services and improve the same as well. The marketing team regularly stays in touch with its customers. The company has been focusing on acquiring new customers through its direct and indirect channels. Till date its top management have been instrumental in getting the business. On the concern side, its business operations require it to obtain and renew from time to time, certain approvals, licenses, registrations and permits, some of which may expire and for which it may have to make an application for obtaining the approval or its renewal. It does not have any long-term contracts with its clients and any change in the business pattern of its existing clients could adversely affect the business of the company.

The company is coming out with an IPO of 3600000 equity shares of Rs 10 each at a fixed price of Rs 18 per equity share to mobilize Rs 6.48 crore. On the performance front, other income for the FY 2021 was Rs 78.93 lakh as compared to Rs 75.76 lakh during the FY 2020. Hence the total income for the FY 2021 is Rs 951.45 lakh as compared to Rs 1731.76 lakh during the FY 2020 showing decrease of 45.06%. Profit after Tax and restatement adjustment (PAT) decreased from Rs 14.21 lakh for the FY 2020 to Rs 13.33 lakh in FY 2021. The company strategy is to increase the number of client relationships and then leverage those client relationships into offering in a whole suite of products. It is in the process of taking the contracts from builders for the end to end supply and fitting of aluminium windows along with the glass. It intends to build a specialized team for the same which will supervise the entire execution of the project. It intends to provide services which will satisfy its clients needs as per their specialized requirements.