Omnipotent Industries coming with an IPO to raise upto Rs 19 crore

Omnipotent Industries

• Omnipotent Industries is coming out with an initial public offering (IPO) of 3000000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 63 per equity share.
  
• The issue will open for subscription on November 16, 2021 and will close on November 22, 2021.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 6.30 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 Suvarna Y. Sukale.
  

Profile of the company

The company is engaged in the business of supplying bulk and packed bitumen as well as other bituminous products. It sources its products either through direct imports or buys from third party importers and sells it to its various distributors as well as corporates. It import bulk as well as drum bitumen. It is ISO 9001:2015 and ISO 14001:2015 certified for import, trading and processing of petroleum & petrochemical products.

The company’s products include bitumen 60/70 & 80/100, bitumen VG10, VG30, VG 40; bitumen emulsion, blown bitumen, micro surfacing bitumen and modified bitumen CRMB, PMB, NRMB. Bitumen is most commonly used in construction of roads and highways. Bitumen has excellent water-proofing properties and is widely used for making roofing products along with a range of other household and industrial applications, from emulsion paints to sound-proofing. Bitumen is also extensively used for surfacing of road and pavements and is also used as adhesive substance in the production of binders. Entire marketing of the products is managed, through a team of sales and marketing personnel.

It is also engaged in the consultancy of setting up of plants for Bitumen & Bituminous products. Its consultancy include end to end solutions from identification of land, plant & machinery to imparting training & making policy with staff on marketing & quality testing. It has also set up a bitumen decanter plant for melting of bitumen purchased in drums. Road contractors prefer the melted bitumen. It also solves availability and logistics issue with bitumen.

Proceed is being used for:

• Repayment of loans.
  
• Augmenting additional working capital requirements.
  
• General corporate purposes.
  

Industry overview

Oil and gas sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. India’s economic growth is closely related to its energy demands, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment. The Government has adopted several policies to fulfil the increasing demand. It has allowed 100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others. Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. India’s energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the country’s share in global primary energy consumption is projected to increase by two-fold by 2035. Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tones in 2017. India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020. Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by 2040 from 58.10 million tonnes in 2018.

Oil and gas sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. India’s economic growth is closely related to its energy demands, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment. The Government has adopted several policies to fulfil the increasing demand. It has allowed 100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others. Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. India’s energy demand is expected to double to 1,516 mega tonnes of oil equivalent (Mtoe) by 2035 from 753.7 Mtoe in 2017. Moreover, the country’s share in global primary energy consumption is projected to increase by two-fold by 2035. Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tones in 2017. India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020. Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by 2040 from 58.10 million tonnes in 2018.

Pros and strengths

Focus on procurement, sales and customer service: The company is mainly focused on increasing its sales and improving customer service. It has also set up a bitumen decanter plant for melting of bitumen purchased in drums. Its plant is located at Panvel and it has given it to a third party on contractual basis for operating and managing the plant. This helps it in focusing on its core strength of procurement sales and customer service. It engage closely with its customers from order initiation to delivery and aim to have the quality of products should be as per its customer requirements. It also meets regularly with its customers to review its performance in a number of areas including quality, delivery and cost.

Business associations: The company is focused on cost efficiency. It has business associations with various importers, manufacturers, transporters, warehousing & bulk storage entities. Due to these tie-ups, the company as a whole reduces the cost of logistics and also result in manpower optimization. These collaborations also help it in ensuring supply of materials in case of an urgent order from its customer.

In house process: The company has Audit and Documentation management setup at In-house offices. It makes faster its documentation process. It also provides the safety of its confidential documents. It has dedicated staff at the point of location of filling & loading at its import locations, who manages all material sources and make availability of material at any point of sale.

Risks and concerns

Face significant competition: The company sells its products in highly competitive markets and faces competition; however it is not possible to compute the present market share of the company since the Indian Bitumen industry is largely an unorganised industry and there are no reliable source / report which carry this data on market share. Further, the competition in these markets is based primarily on demand creation and as a result, to remain competitive in its markets, it must continuously strive to effectively market its products. In each of its markets, it face competition primarily from the unorganized market, Indian corporates and MNCs. In the event of price competition from its competitors, it may be required to reduce the price of its products while maintaining quality standards and the company may not always be able to do so. Some of its competitors may have greater financial resources, generate higher revenues, and therefore, be able to better respond to market changes and shifts in consumer spending patterns and changes in consumer sentiments and tastes.

Dependent on third party transportation providers: The company uses third party transportation providers for the supply of its materials and delivery of its products to its domestic customers. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on the supplies from its suppliers and deliveries to its customers. These transportation facilities may not be adequate to support its existing and future operations. In addition, the materials, and products maybe lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of raw materials and products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its products to its customers may have an adverse effect on its business and results of operations.

Dependent upon few suppliers: For the financial year ended March 31, 2021 and for the 4 months ended July 31, 2021 the company’s top 10 suppliers contributed 78.47% and 93.38% respectively of its purchases. Any problems faced by its supplier resulting in delays or non-adherence to quality requirements could adversely impact its ability to meet its customer’s requirements in time and its operations would be affected to the extent it is unable to line up supplies from alternate suppliers.

Outlook

Omnipotent Industries are primarily engaged in the business of supplying bulk and packed bitumen as well as other bituminous products. The company either directly imports these products or buys from third-party importers and sells them to their various distributors as well as corporates. The company's products include bitumen 60/70 & 80/100, bitumen VG10, VG30, VG 40; bitumen emulsion, blown bitumen, micro surfacing bitumen, and modified bitumen CRMB, PMB, NRMB. The company is also engaged in consultancy services of setting up of plants for Bitumen & Bituminous products. The company provides end-to-end solutions from identification of land, plant & machinery to imparting training & making policy with staff on marketing & quality testing. On the concern side, the company’s 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 monitors its inventory levels based on its own projections of future demand. Because of the length of time necessary to produce commercial quantities of its products, it must make production decisions well in advance of sales. An inaccurate forecast of demand for any product can result in the unavailability / surplus of products.

The company is coming out with a maiden IPO of 3000000 equity shares of Rs 10 each at a fixed price of Rs 63 per equity share to mobilize Rs 18.90 crore. On the performance front, the total Income for FY 2021 is Rs 10085.42 lakh as compared to Rs 5017.98 lakh during FY 2020 registering an increase of 100.99%. Profit after Tax (PAT) increased from Rs 36.75 lakh for the FY 2020 to Rs 139.52 lakh in FY 2021. During FY 2021, the company recorded PAT margin of 1.38% as against 0.73% for FY 2020. The company intends to continue developing and nurturing existing market, and create new distribution channels in under and non-penetrated geographies. It aims to further develop its domestic sales networks in those territories where there are lower transportation costs and those which have a significant demand of its products, where it can sell at price-points that can effectively offset higher transportation costs.