De Neers Tools coming with an IPO to raise upto Rs 23 crore

De Neers Tools

• De Neers Tools is coming out with a 100% book building; initial public offering (IPO) of 22,76,400 shares of Rs 10 each in a price band Rs 95-101 per equity share.
  
• The issue will open on April 28, 2023 and will close on May 3, 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 10.10 times on the higher side.
  
• Book running lead managers to the issue are Khambatta Securities and Share India Capital Services.
  
• Compliance Officer for the issue is Nisha Shaw.
  

Profile of the company

De Neers Tools is an ISO 9001:2015, ISO 14001:2015 and 45001:2018 accredited company. Today, the company has over 3200 SKUs and it is the fourth-generation serving the hand tools industry since 1952 i.e. over seven decades. Generation on generations, it has learned and adopted new and improved systems to increase its dealership network, customer reach and the best practices to satisfy its customers’ needs to the fullest.

De Neers is among the few key players in the hand tool industry. The company provides a very broad range of hand tools in India with approximately two-third of its revenue geographically concentrated in the states of Delhi NCR, Gujarat, Telangana, Bihar & Uttar Pradesh (UP). Its extensive range of products includes spanners, wrenches, pliers, cutters, allen keys, hammers, socketry, screw drivers, tool kits, tool cabinets, trolleys, etc. It is also specialized in providing safety tools like non- sparking tools, insulated steel tools, non-sparking insulated tools, stainless steel & magnetic tools, titanium tools along with multiple other hand tools. It has experienced and dedicated personnel that keeps a regular check on the latest trends and opportunities in the market and focuses on improving the design and structure of the products. Its focus is on producing tools that can stand up to the demands of the professionals who use them every day. De Neers is widely accepted by the dealers / distributors, hardware suppliers throughout India.

Proceed is being used for:

• Meeting the working capital requirements of the Company.
  
• General Corporate Purpose.
  
• Meeting the Issue Expenses.
  

Industry overview

The tools and hardware industry comprises of tools that are used by both households for daily activities and by manufacturing industries. Tools are extensively used in the manufacturing sector of an economy. The more sophisticated the tools, the better their performance in the production of high-quality precision machinery used in every industrial activity. The tools and hardware industry churns out basic machinery for all major industries and determines competitiveness in other sectors such as defense, heavy electricals, construction and automobiles. The DIY segment has also increased the demand of hand tools. Due to the increase in labor costs more users are inclined to DIY culture, increasing the demand for household hand tools, and more and more consumers are adopting self-service methods for assembly and maintenance at home. Given the importance of the industry, the Government of India has initiated several measures to boost the industry by upgrading technology and supporting technological collaborations for the production of high-end tools.

Hand tools are tools such as spanners, pipe cutters, wrenches, pliers that are not powered by electricity. Hand Tools industry is majorly present in micro and small scale sector and is one of the oldest industries in the country. The skilled labor for this industry are primarily present in the states like Punjab, Rajasthan and Maharashtra making them a hub of production of hand tools. Due to industrialization nationally and globally in recent years, hand tool market grew manifold. Industries like defense, railways, agriculture, automobiles, and aerospace are expecting good quality products for ease of operation due to which demand for hand tools has seen a sharp rise. Government initiatives such as ‘Make in India’ with focus on improving domestic manufacturing capabilities are also expected to support future growth in the sector. The hand tool industry is highly fragmented with 80% of sector being unorganized.

Pros and strengths

Distribution system: The company’s end-to-end business approach makes it the most unique and successful hardware tools business. It is counted among the leading hand tool distributors and it is one of the few key players in this industry, due to its consistent hard work to deliver quality products. It aims to provide professional hand tools of the utmost quality. Its focus is on selling handtools that can stand up to the demands of the professionals who use them every day. Among its distributors it is famous for providing the broadest range of products in India.

Quality and safety of products: The company comes to increasing workplace safety in different industrial environments, its tools act as support. These tools find their applications in automotive, infra-construction, aerospace, marine, petrochemical, medical, defence industries where anti-magnetic, anti-corrosive tools are mandatory for ensuring users’ safety. Conventional steel tools can generate spark and cause an explosion or fire. Thus, it non-sparking hand tools, also sometimes referred to as anti-spark, safety tools, or sparkless tools, are used to ensure safety.

Strong supply chain: The company sources its products from fully equipped manufacturing units in Punjab having good infrastructure and production capabilities, providing it with the highest quality hand tools. They have latest & modern spectro machines to check raw material quality, life-cycle test machines, frictional drop forged hammers, and automatic chrome plating plants. Every product manufactured in these production units has to go through the Quality Assurance Department which ensures the quality of the tools before they are delivered to its final customers.

Risks and concerns

Rely substantially on third parties: The company’s sales depend substantially upon distributor/ dealer network. It cannot assure that such third parties will be able to establish or maintain adequate sales capabilities or will be successful in ensuring sale of its products. Further, it does not enter into exclusive agreements with these parties and it cannot assure that such third parties will be able to fulfil their obligations under such agreements entirely, in a manner acceptable to it, or at all. Authorized distributors, as independent business operators, may, from time to time, disagree with it and its strategies regarding the business or its interpretation of its respective rights and obligations under applicable agreements.

Dependent on third party transportation providers: The company does not have an in-house transportation facility and it rely on third party transportation and other logistic facilities at every stage of its business activity including for procurement of products and raw material, as the case may be, from its vendors and suppliers and for transportation of its products. For this purpose, it hires services of transportation companies. Additionally, availability of transportation solutions in the markets it operate in is typically fragmented. It does not enter into written documentation in relation to the transportation services it hires. It could be faced with transportation risks due to any loss or pilferage, which it may not be able to recover from its insurance coverage.

Face competition: The company competes directly against old and established brands in organized space and others in unorganized space of handtools industry. Some of the organized players have strong brand recognition. It competes primarily on the basis of brand image, performance and quality. In order to compete effectively, it must continue to maintain and develop its brand image and reputation, be flexible and innovative in responding to rapidly changing market demands and customer preferences and offer customers a wide variety of good quality products at competitive prices.

Outlook

Incorporated in 1952, De Neers Tools supplies industrial tools. The company offers spanners, wrenches, pliers, cutters, allen keys, hammers, socketry, screwdrivers, tool kits, tool cabinets, trolleys, etc. The company's brand name is 'De Neers'. At present, company has approximately 250 dealers throughout India. The company also specializes in providing safety tools like non-sparking tools, insulated steel tools, non-sparking insulated tools, stainless steel & magnetic tools, titanium tools along with multiple other hand tools. The company has made efforts to ensure customer satisfaction by taking steps for meeting customer specific requirements, timely delivery of orders to its customers as well as maintaining consistency in quality and this has yielded results in the form of repeat orders from its customers. On the concern side, the company faces competition to recruit and retain skilled staff. Due to the limited availability of skilled personnel, competition for the talent in its industry is intense. It may experience difficulties in attracting, recruiting and retaining an appropriate number of skilled staff for its business needs.

The issue has been offered in a price band of Rs 95-101 per equity share. The aggregate size of the offer is Rs 21.63 crore to Rs 22.99 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 28.93% to Rs 8,008.68 lakh in Fiscal 2022 from Rs 6211.77 lakh in Fiscal 2021. The company’s profit for the year increased by 666.94% to Rs 504.42 lakh in Fiscal 2022 from Rs 65.77 lakh in Fiscal 2021. Meanwhile, the company intends to expand its business more with its organized dealers/distributors. Currently it has a network of over 250 dealers/distributors. It is exploring more dealers/distributors that have the desired spread and reach. It can benefit from their distribution network which will give a significant strength to its business as it will allow it to market and sell its products across India. It plans to appoint a dealer or sub dealer at a stretch of 40 km each throughout major cities across India.