Storage Technologies and Automation coming with IPO to raise upto Rs 29.95 crore

Storage Technologies and Automation

• Storage Technologies and Automation is coming out with initial public offering (IPO) of 38,40,000 shares of Rs 10 each in a price band Rs 73-78 per equity share. 
• The issue will open for subscription on April 30, 2024 and will close on May 3, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 7.30 times of its face value on the lower side and 7.80 times on the higher side.
• Book running lead manager to the issue is Oneview Corporate Advisors.
• Compliance Officer for the issue is Theja Raju. 

Profile of the company

The company was incorporated in the year 2010 and is engaged into storage racking system. It specialises in design, manufacturing, installation services of metal storage racks, automated warehouses and other storage solutions. Its range of products and services demonstrates their commitment to providing innovative, efficient solutions for diverse warehousing needs, catering to a wide range of industries each with its own specific storage and logistical requirements, which includes oil & gas, automotive components & aerospace, food & beverages and cold storage, pharmaceutical, textile, retail, FMCG and others.

The company is a customer-centric business driven by a focus on continuing innovation and operational efficiency. It offers its clients with a wide variety of display and storage racks for commercial as well as industrial purposes. These are manufactured using qualitative raw materials. This helps in ensuring the durability and optimum strength of the finished products. It also use different grades of Mild steel (Hot rolled coils, cold rolled coils, Galvanised steel coils, PPGI coils, pipes and structural sections), powder for powder coating, Epoxy, Enamel paints and plastic for packaging as raw material. As an ISO 9001:2015 certified storage solution manufacturing company, its commitment to quality is evident. Its expansive infrastructure, spanning approximately 56,250 square feet in Singanayakanahalli, Yelahanka Hobli, Bangalore, Karnataka and approximately 56,250 square feet of storage facility supports a streamlined manufacturing process.

The company carry out product designing, manufacturing, quality checking, packaging, storing and delivery processes in various specialized segments of its infrastructure. All procedures are strictly monitored by its experienced team of quality controllers. Its manufacturing process, combined with its competitive strengths and strategic business approaches, positions it to meet the evolving needs of its clients effectively. It is dedicated to innovation, quality, and providing economically feasible solutions that don't just meet but exceed its clients' expectations.

Proceed is being used for:

• Meeting Working Capital requirements.
• General Corporate Purpose.

Industry overview

The global industrial racking systems market stood at $9 billion in 2018 and grew with 6.7% CAGR to reach $12.5 billion in 2023. India holds about 4.4% of this market and stands at $545.6 million in 2023. The Middle East & Africa region holds 5.5% of the overall market with a market size of $ 680.1 million in 2023. Thus, the India and Middle East & Africa (MEA) industrial racking systems market is evaluated to stand at $1,225.5 million in 2023 and projected to grow with significant CAGR of 8.5% during the forecast period. The market will reach $2,768.9 million by the end of 2033. Booming e-commerce sector in this region is one of the key driving factors for this impressive market growth. India holds around 45% of the overall market and expected to show high growth for industrial racking systems in coming decade.

According to the data, the number of warehouses in India is anticipated to double by the end of this decade. This will bring significant prospers to the demand for industrial racking systems in the country. During the historical period of 2018 to 2022, the market witnessed significant variations in the growth rate due to the impact of COVID-19 on the global economy. The industrial racking systems market witnessed a Y-o-Y fall of 9% in 2020 due to the shutdown in industries, disruptions in supply chains and uncertain demand from the end-use sectors. However, in 2021, the demand for industrial racking systems gained momentum showing strong recovery in post-covid market.

The India industrial racking system market is dominated by the regional players due to the presence of large number of small to medium manufacturers and their extensive network of dealers and distributors. Large players in India are Godrej & Boyce, Nilkamal, Silver Lining Storage, Storage Technologies & Automation (Racks and Rollers), Jugenheinrich AG and SSI Schaefer. Rack supported warehouse is the fasted growing product segment in India industrial racking system market. In 2022, the India market of rack supported warehouse stood at $ 2.5 million which is expected to grow to $ 9.8 million by 2033 at a CAGR of 13.2%. The market is considered to be consolidated with a few market participants accounting for more than 90% of the market share. Storage Technologies & Automation (Racks and Rollers) is by far the leading provider of rack supported warehouse solutions in the country. The company holds about 2/3rd of the market share in 2022. Godrej Group, Metafold Engineering, Jay Storage Solutions, Steefur, etc. are some of the other players operating in India rack supported warehouse market. 

Pros and strengths

Wide range of products: The company’s design process prioritizes ergonomics and economic feasibility, ensuring it deliver the best solution to its clients, not just a profitable business. Its wide range of products and ability to develop new ones based on client requirements, coupled with its extensive resources of engineers, positions it uniquely in the market.

Consistent focus on quality: The quality is a pre-requisite for a positive consumer experience and long-term brand loyalty. This philosophy has formed the foundation of the expansion and diversification of its product portfolio. Its focus on quality is maintained at all stages right from the sourcing of raw materials to the product manufacturing and assembly stage, which is subject to a rigorous review and monitoring process undertaken at its manufacturing facilities. For products which are sourced by it from third party suppliers, it has a dedicated sourcing team and quality assurance team, which closely monitors the quality of such products.

Product development and design optimisation capabilities: The company relies on its integrated location-focussed manufacturing operations, product development and design capabilities, and its focus on quality and cost-efficient manufacturing processes to achieve customer satisfaction, foster customer loyalty and accordingly, generate repeat business. The evolution of its product portfolio and its ability to provide customised manufacturing solutions to its customers have been driven by its product development and design capabilities.

Risks and concerns

Dependent on few numbers of customers: 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. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.

Depend on availability of labour: The company’s project operations require deployment and its ability to retain labour. In case such labour workforce is unavailable, or it is unable to identify and retain such labour its business could be adversely affected. It cannot guarantee that it may be able to continue with the same on favourable terms or at all. Any such failure may impact the operations, business process and profitability. Additionally, there have been amendments in the labour and Employment related laws, which may have a direct impact on its employee costs and consequently, on its margins. Further, latest amendments in labour laws in India may be leads to increasing cost of compliance, wages, social security, Occupational Safety, Health and Working Conditions. It cannot assure that it will continue to comply with all these labour related laws and that as it continues to grow its business in the future, its labour and employee costs coupled with operating compliances and expenses will not significantly increase. Its employees are not unionized currently. However, there is no assurance that its employees will not seek unionization in the future. In the event that employees at its project sites take any steps to unionise, it may become difficult for it to maintain flexible labour policies, and may increase its costs and adversely affect its business.

Face significant competition: As the company is operating in a highly competitive industry with minimal entry barriers exposes the company to the constant threat of new entrants, fostering a landscape characterized by numerous players, both organized and unorganized. The absence of entry barriers intensifies competition, requiring it to navigate challenges from both established and emerging competitors. Its strategic focus centers on delivering standardized, uniformly high-quality products at competitive prices to its consumers. The competitive arena is regionally and product-line segmented, with the added complexity of contending with competitors boasting significantly larger capital bases and resources, offering a broader range of products. Key determinants of its competitiveness include client relationships, reputation, employee capabilities, market focus, and the perceived quality and pricing of its products. Recognizing these factors, it prioritizes consistent product quality and timely delivery at competitive prices to fortify its brand over time. Its competitive edge stems from cost-effective and integrated offerings, a dedicated focus on customer satisfaction, and a reputation for reliability coupled with a commitment to quality assurance.

Outlook

Founded in October 2010, Storage Technologies and Automation is engaged in storage racking systems. The company manufactures and installs metal storage racks, automated warehouses, and other storage solutions. The company provides storage solutions for various industries, including oil & gas, automotive, aerospace, food & beverages, pharmaceuticals, textiles, retail, and FMCG. The company is an ISO 9001:2015 certified storage solution manufacturing company. Its competent team enable it to deliver projects with precision, adhere to strict safety standards, and maintain exceptional quality, making it a reliable and trusted partner for its clients. Its services are consistent round the year. It is a quality conscious company. It constantly striving to expand its service portfolio and it always look forward to complementing projects of its clients. On the concern side, to remain competitive and efficient, modernization and technology upgradation are crucial for reducing costs and increasing output. Its business heavily relies on technology and machinery to deliver quality services. However, there is a risk of its technology and machinery becoming obsolete over time or not being upgraded timely, which can adversely impact its operations and financial condition, leading to a loss of competitive edge in the market.

The company is coming out with an IPO of 38,40,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 73-78 per equity share. The aggregate size of the offer is around Rs 28.03 crore to Rs 29.95 crore based on lower and upper price band respectively. On performance front, total income for the Fiscal year March 31, 2023 stood at Rs 8,137.12 lakh. Total income for the financial year 2021-22 stood at RS 6,989.72 lakh, representing an increase of 16.42%. The company reported Restated profit after tax for the Fiscal year 2023 stood at Rs 48.30 lakhs in comparison to loss after tax of Rs 20.49. Meanwhile, the company intends to strengthen its relationships with its existing customers and explore opportunities to grow along the value chain by expanding the array of its existing products and solutions that it supplies to its customers and to win new customer order by developing products and solutions aligned with their needs. It intends to continue enhancing its operational efficiencies, to increase economies of scale, better absorb its fixed costs, reduce its other operating costs and strengthen its competitive position. It intends to continue using other manufacturing strategies and cost reduction strategies to continue to improve its operational efficiencies.