Containe Technologies coming with an IPO to raise upto Rs 2.62 crore

Containe Technologies

• Containe Technologies is coming out with an initial public offering (IPO) of 1744000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 15 per equity share.
  
• The issue will open on September 20, 2022 and will close on September 22, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 1.50 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Finshore Management Services.
  
• Compliance Officer for the issue is Nikitha Sarda.
  

Profile of the company

Containe Technologies is founded and promoted by Anand Kumar Seethala in the year 2008 and is engaged in the business of Automobile Safety and GPS solutions in Automobile Sector. It manufactures wide range of technology-intensive electronic and mechanical automotive products. These have applications across vehicle segments, including for four-wheeler passenger vehicles, light commercial vehicles, heavy commercial vehicles. The company is manufacturing electronic Speed Limiting Device (SLD), ‘MOTOREYE & LIMITS’ Brand Electronic Fuel Regulator & Pedal Interface, suitable for the latest Vehicle of BS-IV Standards to the Oldest Vehicles. The Speed Limiting Devices are Tested and Approved by Automotive Research Association of India (ARAI), Pune. It is suitable for all types of commercial transport category of vehicles and educational institutions Buses. The company is also manufacturing Vehicle Location Tracking Devices (VLTD), ‘TRANOPRO’ Brand, suitable for all types of vehicles.

The Vehicle Location Tracking Devices are Tested and Approved by International Centre for Automotive Technology (ICAT). The company has one manufacturing unit at Marriguda, Secunderabad, Hyderabad. It employs an extensive and stringent quality control mechanism at each stage of the manufacturing process in these facilities to ensure that its finished product conforms to the exact requirements of Central Motor Vehicle (CMV) Rules, Government of India. Its products are mainly sold through distributors and dealers. The company appoints Distributors in various states and the distributors appoint dealers under them. The company supplies its products to the distributors and in turn distributors supplies the products to the dealers. It has built strong and long-standing relationships with its distributors by aligning its offerings with their business needs.

Proceed is being used for:

• Meeting working capital requirements.
  
• Meeting issue expenses.
  
• General corporate purposes.
  

Industry overview

The Indian auto-components industry has experienced healthy growth over the last few years. The auto components industry expanded by a CAGR of 3.28% over FY16 to FY20 to reach $ 45.90 billion in FY21. The industry is expected to reach $200 billion by FY26. Due to high development prospects in all segments of the vehicle industry, the auto component sector is expected to rise by double digits in FY22. Auto-components industry accounts for 7.1% of India’s Gross Domestic Product (GDP) and employs as many as 5 million people directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.

The industry can be broadly classified into organised and unorganised sectors. The organised sector caters to original equipment manufacturers (OEMs) and consist of high-value precision instruments while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category. The automobile component industry turnover stood at Rs. 1.96 lakh crore ($26.6 billion) between April-September 2021 and is expected to witness revenue growth of 15-17% during the fiscal year. In first half of FY22, exports of auto components grew by 76% to Rs. 68,746 crore ($9.3 billion). As per the Automobile Component Manufacturers Association (ACMA) forecast, automobile component exports from India are expected to reach $80 billion by 2026. The Indian auto components industry is expected to reach $200 billion in revenue by 2026. Strong international demand and resurgence in the local original equipment and aftermarket segments are predicted to help the Indian auto component industry grow by 20-23% in FY22.

Pros and strengths

Rich management experience and skilled team: The company’s group has an established track record of around 14 years which indicates the company’s ability to weather economic and business cycles and competent promoters have over a decade of relevant experience. This indicates its ability to maintain business viability and steer the business though operational hurdles. Its promoters are the guiding force behind the operational and financial decision of the company. Its promoters are responsible for the entire business operations of the company along with an experienced team of professional who assist them. This indicates its ability to maintain business viability and steer the business though operational hurdles. It has a strong management team and workforce of skilled, trained, well equipped and expertise employee that has led the organization on the path to success. Their industry knowledge and understanding also gives it the key competitive advantage.

Well-defined organizational structure: The company has a qualified and experienced management team empowered to take timely decision which makes the operations of its business smoother and ensures efficiency in all aspects of its operations. Its senior management has pioneered its growth and fostered a culture of innovation, entrepreneurship and teamwork within its organization. Its Human Resources Policies are aimed towards recruiting talented employees, facilitating their integration into its organization culture and encouraging the development of their skills and expertise for becoming the next generation leaders. Its experience, knowledge and human resources will enable it to drive the business in a successful and profitable manner.

Existing supplier relationship: The company’s existing supplier relationship protects the business with terms of supply and pricing of the products and services, the quality of the products and services offered etc. The company, being a small and medium size organization, relies on personal relationships with its suppliers. Further it also leverage the past experience of its management in maintaining effective supplier relationship ensuring uninterrupted supply chain management.

Risks and concerns

Dependent on external suppliers/distributors: The company is into manufacturing of Speed Limiting Device, Vehicle Tracking Device and CTPL E-SIMs. It procures various components which are required in its product manufacturing, from various external suppliers both from foreign and domestic. Any delay or failure on the part of its suppliers/distributors to deliver components in a timely manner may materially and adversely affect its business, profitability and reputation. Further, any deterioration in the financial condition or business prospects of these suppliers could reduce their ability to meet its requirements and accordingly result in a significant decrease in its revenues. Certain factors affecting supplies and thereby impeding its access to products are political and economic instability in India or political instability in certain parts of the world in which its suppliers/distributors are located, the financial instability of the suppliers, labour problems experienced by its suppliers, transport availability and cost, transport security, inflation, and other factors.

Product development is long, expensive and uncertain process: The development of the company’s products is a costly, complex and time-consuming process, and the investment in their development often involves a long wait until a return is achieved on such an investment. It has made, and will continue to make, significant investments in product development and related product opportunities. Investments in new technology and processes are inherently speculative. Commercial success depends on many factors, including the degree of innovation of the software products and services developed and effective distribution and marketing. Such expenditure may adversely affect its operating results if they are not offset by corresponding and timely revenue increases. It must continue to dedicate a significant amount of resources to its research and development efforts in order to maintain its competitive position. However, significant revenues from new product and service investments may not be achieved for a number of years, or at all.

Depends on various government interventions: The company’s business is subject to various laws and regulations. If the company is deemed to be not in compliance with any of these laws and regulations, its business, reputation, financial condition, cash flows and results of operations may be materially and adversely impacted. Its business is subject to regulation by the relevant governmental authorities, including preinspection and approval of its products from ICAT (International Centre for Automatic Technology) and ARAI (Automotive Research Association of India). The governmental authorities promulgate and enforce regulations that cover many aspects of its day-to-day operations, such as the Motor Vehicles Act, 1988, Central Motor Vehicles Rules, 1989, Carriage by Road Act, 2007, and various state-wise shops and establishments legislations and Contract Labour (Regulation and Abolition) Act, 1970. The laws and regulations governing its businesses are evolving and may be amended, supplemented or changed at any time. The GoI may implement new laws or other regulations and policies that could affect its industry in general, including requiring additional approvals or licenses, imposing additional restrictions on its operations or tightening the enforcement of existing or new laws or regulations.

Outlook

Containe Technologies (CTPL) is engaged in the business of Automobile Safety and GPS solutions in the Automobile Sector. The company manufactures a wide range of technology-intensive electronic and mechanical automotive products. It is an ISO 9001:2015 certified organization engaged in the business of Design, Development, Manufacturing, Supply & Service of Electronic Speed Limiting Devices and GSM/GPRS/GPS/IRNSS based Communication & Controlling Vehicle Location Tracking Devices, Marketing & Sales of IoT Devices & Lithium Ion Battery Operated 2- wheeler & 3-wheeler Auto Rickshaw. The company is manufacturing electronic Speed Limiting Device (SLD), 'MOTOREYE & LIMITS' Brand Electronic Fuel Regulator & Pedal Interface, suitable for the latest Vehicle of BS-IV Standards to the Oldest Vehicles. Its R&D Team is working continuously in advancing the SLD technology centered on the latest generation of ECM (Electronic Control Module) of BSVI Vehicles Models and new IOT Revolutionary Specialty of Variable Speed Limiting Devices Development, and Intelligent Transport Management Systems (ITMS) which has tremendous demand due to mandatory installation by State Governments. On the concern side, the company’s business requires a significant amount of working capital which depends upon timely realization of its debtors and availability of cash. Its inability to meet its working capital requirements can adversely impact its business. The capital which will be raised from the present Issue will be utilised for meeting the requirement of working capital of the company.

The company is coming out with a maiden IPO of 1744000 equity shares of Rs 10 each at a fixed price of Rs 15 per share to mobilize around Rs 2.62 crore. On performance front, During the FY 2021-22 the revenue from operation and other income of the company has been increased to Rs 206.95 lakh as against Rs 58.91 lakh in the FY 2020-21. The restated Profit after Tax for FY 2021-22 has been increased to Rs 4.34 lakh as against Rs 0.66 lakh in the FY 2020-21. Meanwhile, as a part of the company’s growth strategy its focus is on increasing sales volume through expansion, diversification and spread in geographical outreach. Apart from expanding business and revenues it has to look for areas to reduce costs and achieve efficiencies in order to remain a cost competitive company. It intends to leverage this goodwill that it enjoy while it is in constant pursuit towards newer avenues for sustainable growth. It plans to increase its customers by meeting contracts in hand on time, maintaining its customer relationship and renewing its relationship with existing clients.