Anlon Technology Solutions coming with an IPO to raise upto Rs 15 crore

Anlon Technology Solutions

• Anlon Technology Solutions is coming out with a 100% book building; initial public offering (IPO) of 15,00,000 shares of Rs 10 each in a price band Rs 95-100 per equity share.
• The issue will open for subscription on December 29, 2022 and will close on January 02, 2023.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.50 times of its face value on the lower side and 10.00 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Jyoti Gaur.

Profile of the company

The company is primarily engaged in the business of providing engineering services for engineering systems, built on automotive chassis and allied areas, majorly for airports, high rise buildings and refineries. The company also sells spare parts for performing engineering services which is ancillary part of the engineering services. In FY22, the company has entered into a contract for fabrication and installation of airport interior equipment where it did sourcing, supervising & quality control of the manufacturing process, and did safe transportation & installation of the end product to the installation site, overseeing safe installation, and have supplied conveyer belt systems in airports for air cargo handling companies and have also been providing equipment and services for runway maintenance.

Simply, the company identifies requirements in aviation infrastructure and mobile fire-fighting, and coordinate for imports high performance equipment from world class suppliers. Part of the mission of the company is to understanding the need of the market and translate the same onto specialist manufacturers for working out and offer appropriate solutions. In case of overseas manufacturers, which most often is the case, the company provides end to end techno-commercial support which include specifying the solution, facilitate techno-commercial interaction between the manufacturer and the end user, and assist in order processing, and support in successful implementation by providing all logistic support in India such as custom clearance, inland transportation, etc. The company further offers its help in installation, commissioning, training, warranty and post-warranty services and thus looking after the equipment for its whole lifetime. It also supports in spare parts distribution.

Proceed is being used for:

• Funding the working capital requirements of the company
• General Corporate Purposes

Industry overview

In May 2021, the Indian government investigated several fire cases taking place in Delhi and saw that most of them had arrived due to illegal housing factories in the city, lack of safety equipment in commercial establishments remained vital factors, which derived fire cases in Delhi. Furthermore, the government said that the tragic death of 27 people in the Mundka fire incident has again exposed the city’s fire and safety standards. This came after a noncompliance action pulled by hundreds of commercial and institutional buildings, including, hospitals, factories, and even schools, which are operating without a fire and safety certificate in Delhi. These things further make thousands of people vulnerable and help raise the fire incidents in the capital. In May 2022, London reported large high-rise fires from its Grenfell Tower, which is considered a large high-rise building. Soon after the fire took place, London’s fire brigades were sent to the site immediately.

An increasing number of high-rise buildings are also leading local municipalities to upgrade their existing fleet of firefighting equipment, including trucks. In April 2021, the Kerala Fire and Rescue Services Department included the purchase of a Turn Table Ladder (TTL) in their new modernization process. The department announced to procure TTL with a height of 65m that can be used for rescue and firefighting missions on high-rise buildings.

India has witnessed a key increase in the demand for fire trucks over the past years, owing to the high industrialization the country is undergoing. Industries from segments like oil refineries, steel plants, industrial corporations, and thermal power generation plants have been demanding industrial grade fire trucks with special emphasis on foam trucks. The demand is primarily noticeable from tier 1 and tier 2 cities of the country, which has been scrutinized by the fire truck manufacturers and further collaborated and partnered to capitalize on this pain point; moreover, with increasing urbanization, further demand is expected to drive the market.

Pros and strengths

Good relations with its suppliers: The company has very good relation with its suppliers, especially with Rosenbauer International AG, Austria. Being the top supplier, it has procured 11.41%, 10.00%, 45.92% and 74.85% of total Cost of raw material consumed and direct expenses, for FY20, FY21 , FY22 and HY23 respectively. The Rosenbauer Group is one of the world’s three largest manufacturers of fire-service vehicles and firefighting equipment, building the brand name and establishing itself as leader in the market with over 150 years of experience in the industry. Rosenbauer supplies the firefighting sector in over 100 countries with a wide range of custom fire and rescue apparatus and services.

Regular technological upgradation: The company not only sells products but also sells safety. It aligns itself with best practice around the world which serves its purpose of building trust worthy brand. It takes care of technological advancements and safety measures. It ensures that the best services are catered and latest technology is brought in for the customers to have world class experience.

24x7 Availability for customer service: The company is always available to handle the issues at the earliest. Whenever there is an issue regarding the sale of trucks and equipments then the company is available to tackle that issue then and there. The company also takes care of the after sale services required by the customers and prevents delay in maintenance. It also deals in trading of spare parts of the products to ensure availability of required parts at the earliest.

Risks and concerns

Limited number of suppliers for business operations: The percentage of Total Cost materials consumed and Direct Expenses, from its top 5 suppliers were 28.03%, 23.08%, 62.84% and 55.49%, in FY20, FY21, FY22 and period ended September 30, 2022 respectively. The company relies on a few manufacturers for supplies of the equipment that it sells because of its trust in their quality standards and because of its established business relationship. One of the key elements of its business is that it is the Project Support Partner for the Trucks sold to Airports in India that are manufactured by Rosenbauer International AG, Austria. They are its largest supplier, forming 11.41%, 10.00%, 45.92% and 74.85% of its Total Cost materials consumed and Direct Expenses in FY20, FY21, FY22 and period ended September 30, 2022 respectively. The company’s business operations are highly dependent on its suppliers and the loss of any of its suppliers may adversely affect its procurement ability and ultimately affect its sales and consequently on its business and results of operations.

Significant revenue comes from few customers: The percentage of Total Revenue from its top 5 customers were 69.85%, 58.15%, 39.33% and 53.75% in FY20, FY21, FY22 and period ended September 30, 2022 respectively. The company is primarily engaged in the business of providing engineering services for engineering systems, built on automotive chassis and allied areas, majorly for airports, high rise buildings and refineries. The company also sells spare parts for performing engineering services which is ancillary part of the engineering services. The company’s business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations.

Stiff competition: The company operates in a competitive atmosphere. The company’s competition varies by market, geographic areas and type of products. Currently, the company’s business model is such that it has strong control over its product portfolio and procurement from its suppliers, and it has all the necessary permits and licenses for its business operations. But the company may face stiff competition from domestic as well as global market. Some of its competitors may have greater resources than those available to the company. While service quality, technical ability, performance records, etc. are key factors in client decisions among competitors, however, price is the deciding factor in most cases. The competition is expected to intensify as technological advances and consolidations continues. These competitive factors may force the company to reduce rates, and to pursue new market opportunities.

Outlook

Anlon Technology Solutions is primarily engaged in the business of providing engineering services. The company provides engineering services for engineering systems, built on automotive chassis and allied areas, majorly for airports, high-rise buildings, and refineries. The company has been pioneer in introducing latest technology in firefighting segment or other services since its inception. On the concern side, the company is dependent on a few customers for its products and services, for a significant portion of its revenue, and any decrease in revenues or sales from any one of its key customers may adversely affect its business and results of operations.

The company is coming out with an IPO of 15,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 95-100 per equity share. The aggregate size of the offer is around Rs 14.25 crore to Rs 15 crore based on lower and upper price band respectively. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. On performance front, the company has reported a rise of 35.64% in its total income at Rs 1,958.60 lakh in FY22 as compared to Rs 1,444.00 lakh in FY21. The rise was due to addition of new business channel of Designing, Fabrication and Installation Services as well, and increase in more spare part sales and services. Moreover, Profit after tax for the Fiscal 2022 was at Rs 242.94 lakh against profit after tax of Rs 73.51 lakh in fiscal 2021, a 230.49% increase.

Going forward, the company’s business unique selling point is that it is the exclusive service providers for providing maintenance and service for the products sold through it. Services obtained from these products are essential for operational license of airports and refineries, they are of high value, high performance, and because of the complex and extreme performance necessity of these equipment, they require equally specialized services and training. This is the company’s specialization. The company enables its clients to maintain the quality standards. Moreover, good relations with its suppliers, focusing on human resource, introducing latest technology and entrepreneurship mindset provide the company a competitive advantages over its peers.