Mandeep Auto Industries coming with IPO to raise Rs 25.25 crore

Mandeep Auto Industries

• Mandeep Auto Industries is coming out with an initial public offering (IPO) of 37,68,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 67 per equity share. 
• The issue will open for subscription on May 13, 2024 and will close on May 15, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 6.70 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Jawa Capital Services.
• Compliance Officer for the issue is Ritu Rani.

Profile of the company

Mandeep Auto Industries is engaged in the business of manufacturing and supplying sheet metal components, auto parts, and all types of sprocket gears and machined components, that finds its application in a diverse industry, such as tractor, automobiles, material handling & earth moving equipment, railways, defense, machine tools, DIY industry etc. Its manufacturing facilities have advanced technologies to develop and manufacture the products that adhere to the stringent quality control requirements of its customer. It also manufactures customized components as per customer specific requirements and use, with high degree of precision both in quality and time with personalized services to its strong customer base in India. 

Its focus is to consistently expand its product portfolio by developing new designs. It shares a longstanding relationship with its customer and it receives majority of its business from repetitive clients. It constantly engages with its customers through marketing via personal interactions and updating them on its capabilities and strengths. Its sales team works closely with its customers to obtain their insights and feedback about the upcoming trends in the industry which enables the company to develop and improve its products to fulfil the requirements of the market. The Company is backed by skilled professionals with years of experience in Press and Machining Components and has ISO 9001:2015 and ISO 14001:2015 certifications.

It is led by a highly experienced board of directors, and a professional and experienced management team with extensive experience in the automotive industry and a proven track record of performance. The Company is mentored by Gurpal Singh Bedi, who owns and controls the Company along with his family members.

Proceed is being used for:

• Expansion of the existing Manufacturing Facility located at Plot No 26, Nangla, Faridabad Haryana by construction of the building on the land adjacent to its existing manufacturing unit, purchase of equipment/machineries, etc. 
• Repayment/prepayment of certain borrowings availed by the company
• Funding working capital requirements
• General corporate purpose

Industry overview

The automobile industry is one of the key drivers of the Indian economy. Since the liberalization of the sector in 1991 and allowing 100% FDI through automatic route, Indian automobile sector has come a long way. Currently, there is a presence of major global auto manufacturer in the country. All categories of vehicles like two-wheeler, three wheelers, passenger cars, light commercial vehicles, Trucks, Buses, Tractors, heavy Commercial vehicles etc. are produced in India. India is the second largest manufacturer of 2W, the largest manufacturer of 3W and 3rd largest manufacturers of passenger cars in the world. The manufacturing of automobiles including truck, buses, cars, three wheeler/ two wheelers etc. in India has risen at a very high pace. The industry produced about 22.9 million vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in financial year 2021-22 and about 19.8 million vehicles have been produced during the April 2022 to December 2022. 

The industry’s domestic automobile sales for Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in financial year 2021-22 was 17.5 million and 16 million for April 2022 to December 2023. The Indian auto component industry, with a well evolved manufacturing ecosystem, produces a wide variety of products including engine parts, drive transmission and steering parts, body and chassis, suspension and braking parts, equipment and electrical parts, besides others to service the dynamic automobile industry. The sector has also come under tremendous pressure due to lacklustre performance of the vehicle industry. According to the National Skill Development Corporation (NSDC), the auto industry provides direct employment to over 42 lakh people and indirect employment to 2.65 crore people. The automotive industry contributes 6 per cent to India’s GDP and 35% to Manufacturing GDP.

Pros and strengths

Wide range of products: The Company aims to play a vital role in providing a supply of precision sheet metal & machinery components, auto parts & all types of sprocket gears. The company manufactures a wide range of machine components like Ring Sproket 42T, Activa Self Gear, CNG Cover Plate, Sparg Clutch RE, Sparg Clutch, Honda Gear Kick, Yahama Gear Kick B7J, Yamaha Gear Kick, Discover 14 teeth, and a variety of press components etc. Its variety of product offerings has enabled it to cater to a large customer base in the domestic market. 

Long-standing relationship with clients and suppliers: It continually invests in strengthening its relationships with its clients and suppliers. Its sales and marketing operations are led by its Promoter Gurpal Singh Bedi who has got rich experience in the business of the company. 

Quality standards: Quality plays one of the most vital roles in the success of any organization. It is focused on providing quality products. It constantly strives to improve its industrial processes at every step in the production chain. Its focus on quality is evidenced by the quality certification from ISO 9001:2015 for maintaining quality standards and ISO 14001:2015 for meeting safe environmental standards and policies. It is ensuring global standard products will attract domestic and international customers to the company.

Risks and concerns

Depend on top five clients/distributors: Its top five clients/distributors accounted for approximately 82.47% of its revenue from operations. It cannot assures that it can maintains the historical levels of business from these clients/distributors or that it will be able to replace these clients/distributors in case it loses any of them. Furthermore, major events affecting its clients/distributors, such as bankruptcy, change of management, mergers and acquisitions in other cases could impact its business. If any of its major clients/distributors becomes bankrupt or insolvent, it may lose some or all of its business from that client/distributor and its receivable from that client/distributor would increase and may have to be written off, impacting its income and financial condition.

Delays or defaults in customer payments: It often commits resources to orders prior to receiving advances or other payments from customers in amounts sufficient to cover expenditures on orders as they are incurred. It may be subject to working capital shortages due to delays in customer payments. If the customer defaults in their payments on an order, or cancels their orders for which it has devoted significant resources or incurred expenditure, it could have a material adverse effect on its business, financial condition, results of operations and cash flows and could cause the price of its equity shares to decline. Hence, any last minute cancellations would also run the risk of not being able to sell those products to another customer. These events could have a material adverse effect on its revenues, results of operations and cash flows.

Dependent on suppliers for raw material: Its business is dependent on its suppliers for procuring raw material required for manufacturing its products. Typically, it does not enter into long term contracts with its suppliers and prices for raw materials are normally based on the quotes it receives from various suppliers on an ongoing basis. Therefore, there are no fixed terms and conditions on which it purchases its raw materials. Discontinuation of production by these suppliers or a failure of these suppliers to adhere to the delivery schedule or the required quality could hamper its production schedule and the quality of its products. There can be no assurance that strong demand, capacity limitations or other problems experienced by its suppliers will not result in occasional shortages or delays in their supply of raw materials to the company.

Outlook

Mandeep Auto Industries is engaged in the business of manufacturing and supplying sheet metal components, auto parts, and all types of sprocket gears and machined components, that finds its application in a diverse industry, such as tractor, automobiles, material handling & earth moving equipment, railways, defense, machine tools, DIY industry, etc. It also manufactures customized components as per customer specific requirements and use, with high degree of precision both in quality and time with personalized services to its strong customer base in India. On the concern side, it may has 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. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players.

The company is coming out with an IPO of 37,68,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 67 per equity share to mobilize Rs 25.25 crore. On performance front, the company’s total revenue during the year ended March 31, 2023 was Rs 2,978.74 lakh. The restated net profit during the year ended March 31, 2023 was Rs 104.91 lakh representing 3.52% of the total revenue of the Company. Going forward, it intends to diversify its product portfolio using advanced electronic integration technology and add more products to its portfolio based on its own assessment of market, demand, and supply position. The company’s strategy is focused towards introducing new product designs to cater to the requirements of its customers as well as garnering the attention of more customers. This helps in strengthening the relationship with the existing customer network through a wide range of products while also onboarding new customers from untapped geographies.