Maks Energy Solutions India coming with an IPO to raise around Rs 4 crore

Maks Energy Solutions India

• Maks Energy Solutions India has come out with an initial public offering (IPO) of 19,98,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 20 per equity share.
  
• The issue will open on September 16, 2022 and will close on September 20, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 2 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Sun Capital Advisory Services.
  
• Compliance Officer for the issue is Shreyas Mokashi.
  

Profile of the company

The main business of the company is purchasing Diesel Engines, Alternators and other parts from their suppliers and assembling the Diesel Generating Sets and selling these Diesel Generating Sets and the spare parts of DG Sets into domestic and export markets. In addition to the above, the company has recently also entered into the business of distribution of auto spare parts in the state of Maharashtra, India.

The company commenced its operations in the year 2010 as a dealer of generator sets. Over the years, it has diversified the scope of its operations from dealing in generator sets to trading, assembling, selling, installing, testing and commissioning of DG Sets. It has also acted as non-exclusive Original Equipment Manufacturer (OEM) of DG Sets for some of its clients in the domestic market and for exports in international market. It source the engines used in DG Sets from its suppliers and assemble the sets with other required peripherals sourced from other suppliers, such as control panels, customized synchronized panels, base frames, fuel tanks, canopy, acoustic enclosure and room acoustic materials and sell the DG Sets. Domestically, it has sold DG Sets in Maharashtra, Delhi, Karnataka, Telangana, Punjab and Jharkhand. It also exported the generator sets to countries in the Middle East, South East Asia and some parts of Africa. Its assembling facility is located at Yeolewadi, Kondhwa - Saswad Road, Kondhwa, Pune, Maharashtra and at Amane Engineers, Tal Khed, Waki Bk, Waki BK, Pune, Maharashtra. In year 2019, it has also diversified into the business of distribution of commercial vehicle spare parts in the state of Maharashtra.

Proceed is being used for:

• Repayment/ pre-payment, in full or part, of certain borrowings availed by the company.
  
• General corporate purpose.
  

Industry overview

The Indian energy sector has been rapidly evolving and has witnessed several changes in recent times. The energy sector is undergoing a transforming and disruption and the government has undertaken various programmes such as the Integrated Power Development Scheme and the Deendayal Upadhyaya Gram Jyoti Yojana, and changes are already evident. India has the fifth largest power generation capacity in the world. The country ranks third globally in terms of electricity production. Demand supply scenario has improved considerably for most of the states across India. From an era of deficits, the states have moved considerably towards a situation where the average deficit has narrowed down significantly. The country has witnessed a combination of unprecedented coal-based generation capacity additions (led significantly by the private sector) as well as lower than expected demand growth which has led to improvement in the power deficit situation over the years. Factors such as policy clarity, political push as well as administrative reforms have helped in aggressive addition of generation capacities (predominantly coal based) in the recent years.

A diesel generator is used to generate electric energy by using a diesel engine with the help of an electric generator. Diesel gensets convert the mechanical energy generated by the diesel engine into electricity using alternators. India is reportedly the third-largest electricity producer & consumer in the world after the US & China. Around one fourth of the energy generated in India is lost during transmission or stolen. Peak supply falls short & frequent power outages last for hours in many regions of the country. This deficient in power sector and the demand-supply gap in power distribution made growth in domestic backup power market in the last few years. The power backup sector can broadly be categorized into 4 broad segments of UPS, DGs, inverters and batteries. The increase in demand for diesel gensets is due to unreliable power & in some cases, due to the lack of access to grid electricity. Residential, commercial, infrastructure and industrial sector have used backup power extensively to continue their activities to counter frequent grid shutdown issues. There are various critical end-user industries like hospitals, airports, data centers, manufacturing facilities, water & sewage facilities, etc, require continuous power supply for ensuring seamless operation, apart from call centers, luxury hotels, apartments, etc. Normally, Diesel generator sets are operated only for a short period of time during the day & are used as a back-up power supply.

Pros and strengths

Established operation capability: Over the years, the company has established operational capabilities for assembly of diesel generator sets in India. Its existing assembling facility in India is equipped with required machines and equipment that covers all kinds of necessary tests and standard as required to supply quality products to its customers. It assemble wide range of diesel generator sets for its customers, with capacities ranging from 15 kVA up to 1250 kVA which cater to requirements of almost all market segments including industrial and corporate end-users from various industries such as service, manufacturing, realty, education, automotive, FMCG, dairy, hospitality, logistics, pharmaceuticals and information technology.

Proven track record: Through the company’s longstanding presence in the diesel generator business led by its experienced Promoter and Directors, it has a track record of assembling and supplying a range of diesel generator sets. This experience and track record of its Directors in diesel generators has been key to developing its brand.

Strong technical and execution capabilities: The company’s sufficient equipment base, qualified and experienced employees, implemented systems, procedures and capabilities enable it to supply quality diesel generator sets to meet the national standards.

Risks and concerns

Significant portion of revenues dependent on export sales: A significant portion of the company’s revenues is dependent on export of diesel generator sets to Middle East, South East Asia and Africa. During the Fiscal 2020, Fiscal 2021 and Fiscal 2022, the revenues generated through export sales were 54.08%, 9.83% and 8.64% respectively, of the total sales. In the event of a slowdown in these regions, or any developments that make its products less attractive in these regions, it may experience more pronounced effects on its business, results of operations, and financial condition than if it had further diversified sales across different geographical locations. Its business, results of operations and financial condition have been and will continue to be largely dependent on the prevailing conditions affecting grid-generated electricity and the resulting market for diesel generator sets in these regions.

High working capital requirements: The company’s business requires high amounts of working capital and it relies on its lenders for availing the working capital facilities. In the Fiscal 2020, Fiscal 2021 and Fiscal 2022, the working capital requirement of the Company were was 45.31%, 88.46% and 66.60%. If these facilities are withdrawn at any point of time by its lenders, it may lead to major impact or temporary disturbances in its operations. Further, the operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the prospective demands and credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them.

Dependent on external suppliers: The company source key raw materials and components such as engines, alternators, controllers and metal sheets from external suppliers. During the Financial Years Fiscal 2020, Fiscal 2021 and Fiscal 2022, it has procured 92.65%, 73.06% and 76.58% respectively, of total purchases from its top 5 suppliers. The quality of its products and customer acceptance of its products depends on the quality of raw materials and components and its ability to deliver its products in a timely manner. The failure of its suppliers to deliver these raw materials or components in the necessary quantities, to adhere to delivery schedules or to meet specified quality standards or technical specifications, could adversely affect its production processes and its ability to deliver orders on time.

Outlook

Maks Energy Solutions India is engaged in the business of trading, dealing, assembling, selling, installing, testing and commissioning generator and Diesel Generator (DG) Sets. In the DG Sets business, it assemble, market and sell a wide range of DG Sets, with capacities from 15 kVA up to 1250 kVA and sale of other ancillary products such as alternators. It source the engines used in its DG Sets from its dealers and assemble the sets with other required peripherals source from other vendors, such as control panels, customized synchronized panels, base frames, fuel tanks, canopy, acoustic enclosure and room acoustic materials. The company is also engaged in the business of supplying commercial vehicle spare parts to the State Transport Bodies, Government sector and other affiliated bodies within the state of Maharashtra. Its qualified and experienced management team has been responsible for the growth in its operations. It is backed with a team of professionals. On the concern side, the company’s business could suffer damage from fire, natural calamities, misappropriation or other causes, resulting in losses, which may not be fully compensated by insurance. Besides, its engine and generator set suppliers are subject to statutory and regulatory requirements governing emission and noise, including standards imposed by various regulatory agencies.

The company is coming out with a maiden IPO of 19,98,000 equity shares of Rs 10 each at a fixed price of Rs 20 per share to mobilize around Rs 3.99 crore. On performance front, revenue from operations had increased by 23.31%, from Rs. 2,070.95 lakh in Fiscal 2021 to Rs. 2,553.76 lakh in Fiscal 2022. Its profit after tax had increased to Rs 51.43 lakh in Fiscal 2022 against the loss of Rs 0.80 lakh. The company plans to grow its business primarily by increasing the number of clients and retaining the existing client base, as this will add stability to its Business. It intends to retain existing relationships and also focus on bringing new clients into its portfolio. It also intends to continue to pursue alliances that may provide it with greater access to advanced technologies and allow it to diversify its product and customer base in India.