Saakshi Medtech and Panels
- Saakshi Medtech and Panels is coming out with an initial public offering (IPO) of 46,56,000 shares of Rs 10 each in a price band Rs 92-97 per equity share.
- The issue will open for subscription on September 25, 2023 and will close on September 27, 2023.
- The shares will be listed on NSE Emerge.
- The face value of the share is Rs 10 and is priced 9.20 times of its face value on the lower side and 9.70 times on the higher side.
- Book running lead manager to the issue is HEM Securities.
- Compliance Officer for the issue is Shweta Pursnani.
Profile of the company
Saakshi Medtech and Panels is a diversified company engaged in manufacturing of: i) Electrical Control Panels and Cabinets used in elevators, air compressors, renewal energy industry, oil & gas exploration industry, electrical vehicle charging stations etc, ii) Medical X Ray System used in healthcare industry iii) Fabrication works for locomotives and (iv) wire harness division for its captive consumption in electrical control panels and for supply to air compressor industry. The company’s in-house engineering and design capabilities help it to offer diversified products and solutions to its customers in each of the product categories in which it operates. The company’s comprehensive solutions include design, process engineering and manufacturing including fabrication, assembly and testing facilities. The hardware components are imported or sourced from local suppliers which are then programmed and assembled at its manufacturing facilities.
The company designs, program and assemble Electrical Control Panels and Cabinets comprising of micro controller, programmable logic controllers and SCADA system. These Electrical control panels are essential for industrial automation. They provide higher-level monitoring and control various functions of machines to define, organize, and meet production objectives. The end users for its products in this category include OEMs producing elevators, wind turbines, air compressors, oil & gas exploration equipment, electrical vehicle charging stations or diesel generators. These panels direct input and output of equipment in which they are installed like: monitoring directional movement of wind turbines, bi-lateral movement of elevators, set automatic load and unload of pressure in air compressors used in CNG petrol pumps, metal industry, forging industry, chemical industry, aviation industry and allied industries, vibration and temperature monitoring in oil and gas exploration equipment, for charging of EV batteries and alarming of DG sets.
Proceed is being used for:
- Repayment in full or in part of certain of its outstanding borrowings
- Funding to meet working capital requirements
- General Corporate Purpose
Industry overview
India’s Capital Goods manufacturing industry serves as a strong base for its engagement across sectors such as Engineering, Construction, Infrastructure and Consumer goods, amongst others. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Capital Goods sector contributes to 12% of India’s manufacturing output and 1.8% to GDP. Market valuation of the capital goods industry was $43.2 billion in FY22. Moreover, Indian Electrical equipment is the largest sub-sector followed by Plant equipment & Earth moving/ mining machinery. The electrical equipment market share in India is expected to increase by $33.74 billion from 2021 to 2025, and the market's growth momentum will accelerate at a CAGR of 9%. Investment in engineering R&D sector is expected to reach $63 billion by 2025.
Meanwhile, the electric vehicle (EV) market is estimated to reach Rs 50,000 crore ($7.09 billion) in India by 2025. In the year 2021, India’s spending on electrical architecture development, such as battery development, electrification, emotors, and power electronics, came up to Rs 48,215 crore ($6.39 billion). In December 2021, Hyundai announced plans to invest Rs 4,000 crore ($530.25 million) in R&D in India, with the goal of launching six EVs by 2028. In February 2022, a memorandum of understanding (MoU) was signed between electric two-wheeler company Ather Energy and Electric Supply Companies (ESCOMs) of Karnataka for setting up 1,000 fast charging stations across the state.
Further, The Indian market for medical equipment is predicted to increase to $50 billion by 2025. As of 2020, the medical devices market is estimated to be at $12 billion in India.
India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally. India has an overall 75-80% import dependency on medical devices. Export of medical devices from India stood at US$ 2.53 billion in FY21. The US, Germany, China, Brazil, Iran, etc. are a few key countries that import Indian medical devices. Gujarat, Maharashtra, Karnataka, Haryana, Andhra Pradesh, Telangana and Tamil Nadu are the manufacturing hubs for medical devices in India.In Bio Asia 2021, key stakeholders in the panel discussion on medical technologies stated that India would become self - sufficient in domestic medical devices manufacturing by 2025-26. The panel observed that the government is taking supportive measures such as promoting indigenous manufacturing of high-tech medical devices, production-linked incentive schemes (PLIs) on medical devices, boosting new medical devices park, etc. to boost overall growth of the domestic medical devices market in India.
Pros and strengths
Diversified range of products: The company is strategically well placed to run various business verticals under one umbrella. Its diversified range of products cater to Healthcare industry and to the Industrial and Engineering segment of Renewable Energy, locomotives, elevators, air compressors, Diesel Generators electrical vehicle charging stations etc. The company’s core competencies include product prototype design and development, functional testing, validation and verification. The company’s focus on maintaining quality across its product verticals and on continuous technological upgradation of its electric control panels, together with its extensive sales and marketing efforts have enabled it to expand its operations over the years.
Engineering expertise with complex product manufacturing capability: The company has comprehensive in-house capabilities of designing and manufacturing precision engineering products. The company manufactures and assembles a wide range of critical assemblies and precision components with close tolerances through its precision machining, assembly, and specialized fabrication facilities, for onward usage by its customers in the relevant industry. All raw materials procured for manufacturing its products are sourced from trusted vendors and its quality control team applies stringent quality measurements at every manufacturing stage to ensure low rejection rate such that its finished product confirms to the exact requirement of its customers and successfully passes all test, validations and quality checks.
Long term and well-established relationships with OEM customers: The company has long term relationships with several original equipment manufacturers (OEMs) and component manufacturers across its various product categories. Most of its business comprises direct supply to its OEM customers, for few of which it has entered into long term agreements, which are renewed from time to time. With its track record and wide product portfolio, it has been able to retain its existing customers and also been able to attract new customers.
Risks and concerns
Maximum revenue comes from few key customers: The company is dependent on certain key customers for sale of its products. For the fiscals 2023, 2022 and 2021, its top five customers contributed to 93.08%, 90.45% and 90.57% of its revenue from operations. The loss of these customers or a loss of revenue from sales to these customers may materially affect its business, financial condition, results of operations and cash flows. As a result, the volume of sales to its customers may vary due to changes in its customers’ sourcing strategies. The company cannot assure that it will be able to significantly reduce customer concentration in the future. Most of its business comprises direct supply to its OEM customers, for which it does not have long term agreements.
Significantly dependent on sale of Electrical Control Panels and Cabinet: The company’s financial performance in last three financial years are significantly dependent on its revenue from sales of Electrical Control Panels and Cabinets, which represented 69.75%, 63.57% and 53.44% of its revenue from operations. The company cannot assure that it will increase its market share in the future for these products. Demand for these products depends primarily on its Top 5 customers. Further, the products may be substituted by product up gradation and the company may be unable to upgrade these products. It may not be able to introduce new product that are in faster-growing and more profitable categories. Any of these factors could have a material adverse impact on its financial condition and the results of operations.
Geographical constrain: The company manufactures and supplies its products to customers in different geographies within and outside India from its three manufacturing facilities located in Pune. Since, its entire revenue is currently from products manufactured at the said manufacturing facilities, any disruption to its manufacturing facilities may result in production shutdowns. Further, any communal agitations in any parts of Pune causing significant loss to infrastructure, shutdown of business and industry or damage to property may affect its operations. This geographical concentration of its manufacturing facilities may adversely affect its operations, business and financial condition
Outlook
Saakshi Medtech and Panels Private Limited is engaged in the designing, programing, and assembling of Electrical Control Panels and Cabinets comprising microcontrollers, programmable logic controllers, and SCADA systems. The company has three manufacturing units in Pune, Maharashtra, with a total built-up area of approx. 9600 sq mtr. On the concern side, the company’s business is dependent on the sale of its products to certain key customers. The loss of any of these customers or loss of revenue from sales to these customers could have a material adverse effect on the business, financial condition, results of operations and cash flows. Moreover, the company is significantly dependent on the sale of Electrical Control Panels and Cabinets. An inability to anticipate or adapt to evolving up gradation of the required products or inability to ensure product quality or reduction in the demand of these products may adversely impact its revenue from operations and growth prospects.
The issue has been offered in a price band of Rs 92-97 per equity share. The aggregate size of the offer is Rs 42.84 crore to Rs 45.16 crore based on lower and upper price band respectively. On performance front, the company’s total income for the financial year 2022-23 stood at Rs 122.20 crore whereas in Financial Year 2021-22 the same stood at Rs 91.69 crore representing an increase of 33.28%. The main reason of increase was increase in the volume of business operations of the company. Net profit before tax for the FY23 surged 31.01% to Rs 16.56 crore as compared to Rs 12.64 crore in the financial year 2021-22. Meanwhile, the company’s manufacturing and engineering capabilities enable it to capitalize on the growing opportunities and emerging trends in its industry, particularly in manufacturing Medical X-Ray System, where the Production Linked Incentive Scheme (PLI) Promoting Domestic Manufacturing of Medical Devices and Production Linked Incentive Scheme for Pharmaceuticals (PLI 2.0) have been introduced to provide an impetus to India’s vision of becoming a global manufacturing hub for medical devices. In this context, the company has received CDSCO Approval and it is well-poised to capitalize on these opportunities and initiatives by the Government of India, creating value for all of the stakeholders involved, in the process. Going forward, a significant demand for its products is generated in India owing to its government’s objective to enhance domestic sourcing as well as self-reliance, and that its ability to supply technologically advanced products enables it to tap growth opportunities.
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