Labelkraft Technologies coming with an IPO to raise upto Rs 4.75 crore

Labelkraft Technologies

• Labelkraft Technologies is coming out with an initial public offering (IPO) of 8,64,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share.
  
• The issue will open for subscription on March 13, 2023 and will close on March 15, 2023.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 5.5 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Hem Securities.
  
• Compliance Officer for the issue is Mritunjay Kumar.
  

Profile of the company

The company is engaged in the business of providing barcode code solutions, catering to many different segments of industries including FMCG, logistics service providers, chemicals, garments etc. It supplies barcode printers, software, scanners, mobile computers etc. and is also engaged in the business of manufacturing the regular consumables required for the barcode printers namely the barcode ribbons, self-adhesive barcode and product labels in roll and sheet forms with help of its machines. The company has the required infrastructure and set up for manufacturing of both plain labels and preprinted barcode labels with the in-house capabilities. It has installed flat-bed machines, flat-bed printing machines, flexo printing machines with 5 color printing capacity, rotary machines and slitting machines which enable it to meet the requirements of its customer in time. It also has a slitting machine to manufacture thermal transfer ribbons required to print the data on to the labels by the barcode printers.

Apart from the above, the company has also installed a self-adhesive tape slicing machine to slit mirror mounting tapes, tissue tapes, masking tapes etc. which are supplied to various industries across the country for their packaging needs. It is also engaged in supply of ID card printers, consumables, patient identification wrist bands, automatic label applicator machines, satin, taffeta rolls for garment companies and self-adhesive tape products. It offers quality products and services at cost effective prices. With its attitude towards quality and service to its customers, it has obtained a long list of reputed clienteles including companies like Wipro GE Healthcare, Titan Company, ITC and Indian Oil Corporation. Further, the company has qualified and experienced service engineers to install, train and repair the barcode machines, this makes the customer to stick to Labelkraft as all their barcoding needs are fulfilled under one roof.

Apart from the above, it has experience in the business of trading of duty credit scrips required to pay customs duty by the importers. These scrips are transferable as per Foreign Trade Policy of Government of India. These are procured from exporters of various products and sold to importers for their customs duty payments. Over the years, it has established cordial relationships with its customers by providing the desired goods and services. Its customer base includes companies in the garment, automobile, retail, jewelry, FMCG, hospitals, electrical, electronic items, warehousing and logistics industry. Further, in order to reduce the cost and capitalize on the future demand, it has purchased a piece of land for setting up its manufacturing facility at No. 14/11, Sudhama Nagar, Jayachamarajendra road cross, Bengaluru, Karnataka. The land purchase has been undertaken through bank financial facilities and internal accruals of the company.

Proceed is being used for:

• Funding Capital Expenditure towards installation of additional plant and machinery.
  
• Funding of Working capital requirements.
  
• General Corporate Purpose.
  
• Issue expenses.
  

Industry overview

Bar codes are machine-readable symbols used to encode information about a product. They comprise a pattern of lines with varying widths (1D bar codes) or rectangles, dots, hexagons, and other geometric patterns in two dimensions (2D bar codes). They are read by special optical scanners. People today can use their mobile devices to scan bar codes to find information of interest, such as features and prices of products they’re considering buying. The technology is mature and widely used in national ID cards, including in Argentina, Costa Rica, and Bosnia and Herzegovina.

Governments are starting to use bar codes that are generated automatically according to information entered by an individual, in the pre-enrollment phase of the Identity Lifecycle. Individuals fill out a form online, which generates a bar code capturing the information on the form. Bar code-enabled voter cards containing biometric data were used in Egypt to authenticate individuals during the last elections. The biometric data can be stored on voter cards in the form of a 2D bar code or in an embedded chip. The voter card is scanned, and the voter’s fingerprint or iris is captured and matched against the biometric reference data stored on the voter card or in a local database. The data encoded in the 2D bar code on the card includes a cryptographic signature used to validate the bar code’s integrity and authenticity.

Under this scheme the Ministry conducts seminars and reimburses registration fees for bar coding in order to encourage MSEs to use bar-codes. The basic objective of this scheme is to enhance the Marketing competitiveness of Micro & Small Enterprises (MSEs) by way of: (1) Providing 75% of one-time registration fee and annual recurring fee (for first three years) paid by MSEs to GS1 India (GS1 India, an autonomous body under Ministry of Commerce & Industry, Government of India is a solution provider for registration for use of Bar Coding. To become a subscriber of GS1 India, all one has to do is fill up the subscription enquiry or registration form and make the necessary payments as registration fee. (2) Popularizing the adoption of bar codes on large scale amongst MSEs (3) Motivating and encouraging MSEs for use of bar codes through conducting seminars on Bar Code, etc.

Pros and strengths

Comprehensive range of offerings: The company provides a comprehensive product range including barcode labels, barcode label printers, barcode ribbons, barcode scanners, adhesive tapes, POS, patient wrist bands, ID cards & barcode software. It is able to provide services to its customers relating to their different needs and requirements. Providing its customers with the complete solution relating to the barcode label printing, printers, scanners and other related products under one roof helps in the satisfaction of their needs at one go. This comprehensive range of solutions, which provides a “one stop shop” for its customer’s barcode solutions, and is an important factor in customer acquisition, retention and sets it apart from its competitors.

Existing relationship with clients: The company focuses on building sustained and long-term relationship with its clients and constantly try to cater customer needs with products in demand. Since it is mainly engaged in B2B business model, its existing clients provide it continuous business due to better services and timely delivery. It trusts that its existing relationship and goodwill serves as a competitive advantage in gaining new clients and increasing its business with existing clients. Over the years, due to its commitment towards its customers, it is successful in building a strong client base for its business. Its existing relationship with its clients represents a competitive advantage in gaining new clients, increasing its business and improve its customer retention strategy.

Cost competitiveness and time bound delivery: The company promotes cost competitiveness and timely execution of client’s orders. The timely fulfilment of the orders is a prerequisite in its industry along with cost competitiveness. Its management has carried out various steps for the purpose which involves identification of quality raw materials, harmonious relations with workforce and the use of latest and highly efficient manufacturing facilities which enhanced its ability to meet large and varied orders on a timely basis. The company has also sustained good relations with its vendors and consequently, it enjoys the benefit of timely supply, which has been one of the major reasons why it has been able to achieve timely fulfilment of client’s orders. The company constantly endeavors to implement an efficient procurement policy, so as to ensure cost efficiency in procurement which in turn results in cost effectiveness.

Risks and concerns

Rely on suppliers for raw materials: The company relies on suppliers for raw materials and traded goods like paper rolls, printing chemicals, scanners etc., with whom it generally do not enter into any long-term supply contact or agreements. The order for the materials is placed on requirement basis. In the event that, there are any delays or disruptions in the supply of these materials from its suppliers, its ability to deliver the products may be affected. Any of its supplier’s failure to adhere to agreed timelines, whether due to their inability to comply with, or obtain, regulatory approvals, or otherwise, may result in delays and disruptions to its sales, increased costs, delayed payments for its products and damage to its reputation leading to an adverse effect on its results of operations. In the event any of its supplier cease to be available to it at terms acceptable to it or its experience problems with, or interruptions in, such supplies, and it is unable to find other suppliers to provide similar materials on comparable terms and on a timely basis, its operations may be disrupted and its results of operations and financial condition may be adversely affected.

Face competition: The company operates in a competitive and fragmented label die cutting & printing industry with major focus towards barcoding and dealing in all barcode and RFID devices. There are no entry barriers in its industry which puts it to the threat of competition from new entrants. There are numerous players operating in the industry. It faces competition in its business from a large number of unorganized and a few organized players. It may have to confront pressures in respect of pricing; product quality etc. from the clients and such pressures may put strain on its profit margins which may consequently affect the financial position of the Company. Its inability to compete with this intense competition; local, national and international will have material adverse impact on the company's financial position.

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards operating expenses, inventories and cash and cash equivalents. As on the date of this Prospectus, its working capital facility stood at Rs 150 lakh from Kotak Mahindra Bank. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high outstanding amount due from its debtors which may result in a high risk in case of non-payment by these debtors. In case of any such defaults from its debtors, may affect its business operations and financials.

Outlook

Incorporated in 2022, Labelkraft Technologies is engaged in the business of providing barcode code solutions. The company offers services to many different segments of industries like FMCG, logistics service providers, chemicals, garments, etc. Prior to the incorporation, the operations were run by the Promoter, Ranjeet Solanki via a proprietorship concern under the name of 'Solanki Enterprises' since 1997. The company has been established to fulfill the mission of offering reasonably priced barcode labels, printing, and solutions, keeping customer satisfaction at the foremost. Labelkraft is committed to offering quality products, giving meticulous attention at each level, and providing ease in services. The company has established itself as a solution provider catering to the customers' needs related to printing barcode ribbons, barcode labels, product labels, barcode printers, scanners, ID card printing products, Patient wrist bands, RFID products, and self-adhesive tape products. On the concern side, the company’s business operations are based and concentrated in one area i.e., Bangalore. As a result, any localized social unrest, natural calamities, distress or breakdown of services and utilities in and around this region, could have material adverse effect on its business, financial position and results of operations.

The company is coming out with a IPO of 8,64,000 equity shares of Rs 10 each at a fixed price of Rs 55 per share to mobilize Rs 4.75 crore. On performance front, for the period October 10, 20222 to November 30, 2022, total income stood at Rs 68.68 lakh. The company reported Restated profit after tax of Rs 4.09 lakh for the period October 10, 20222 to November 30, 2022. Meanwhile, the company plans to expand its existing brands, with the focus to expand its product offering to different geographies and customer in different industry. To expand its business, it intends to aggressively penetrate in the domestic markets and expand its domestic market presence by expanding its sales network. To augment its efforts in increase in sales of its products, it intends to deploy additional field force consisting of sales and marketing representatives who shall meet its customers/ prospective customers to market its product.