Magenta Lifecare coming with IPO to raise Rs 7 crore

Magenta Lifecare 

• Magenta Lifecare is coming out with an initial public offering (IPO) of 2000000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 35 per equity share.  
• The issue will open for subscription on June 5, 2024 and will close on June 7, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 3.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Anita Kumawat.  

Profile of the company

The company is manufacturer of foam-based product such as mattresses and pillows which is marketed under its brand “Magenta” in India. Its Product offerings include wide range of mattresses such as memory foam, latex based, bonded mattresses, pocketed spring etc. and pillows such as memory foam pillow, molded memory foam pillow, molded contour foam pillow etc. Its success is attributable to the quality of products that it offers to its customers, spread across retail, hotels and institutions. Driven by innovation, it strives to introduce new and innovative products on a continuous basis with the help of its team. Further, it is also supplying processed raw foam and adjustable bed frame (hydraulic bed) which it imports under its brand Magenta.

The company’s product offering is across the section of the society from value-added product to premium segment. Its thoughtfully-designed products provide comfort, with ergonomic design, thermal comfort, pressure relief, motion isolation, easy position realignment, and long-term durability. Its products are designed to support, comfort, and cool the body, leading to better-quality sleep. It offers mattresses with the diverse customization options in terms of fabric, shape, firmness, material, height, foam type & density, personalization, utility and structure. It has developed distributor and dealer/retailer network across multiple states in India. It sells its products through offline channel of multi brand outlet and through a network of dealers and also through online e-commerce platform. 

Proceed is being used for:

• Funding working capital requirements.
• General corporate purposes.

Industry overview

Indian Mattress market is fragmented with a large number of branded and non-branded players present in the market selling a variety of mattresses with local distribution channels. The Indian mattress market is dominated by the unorganized sector. However, the organized sector is now growing with the rising demand for good quality mattresses among Indian consumers. The mattress industry in India is positioned at an interesting juncture, where growth is spurred by changing customer dynamics and technological innovations. The COVID19 pandemic has been a major factor to bring about this transformational shift as consumers have become increasingly aware and conscious about the health benefits of using the right mattress and the functionality of the overall product. Companies today are offering mattresses that have anti-microbial properties. Some are made using sandalwood infused latex, and then there are products built around Orthopedic Memory; truly a revolutionary time for the mattress industry in India. In a bid to meet increasing demands and offer customers a seamless experience, mattress manufacturers today are relying on technology and digital initiatives to enhance the entire production and buying.  

The Indian mattress industry has a long and interesting history that is driven largely by changing consumer needs and technological advancements. In India, mattresses have been in use for centuries, with early mattresses being made from natural materials such as cotton, wool, and reed. However, with the advent of new technologies and modern materials, the mattress industry in India has undergone significant changes in recent years. Currently, the mattress industry is worth Rs 12,000 to Rs 13,000 crore. The primary concern is, getting people to sleep on a surface. The demand for mattresses began in the 1950s and 1960s. This period laid the foundation of the Indian mattress industry. A vague analysis of the evolution of the Indian mattress industry gives the impression that the industry has come a long way and is on a growth spree. Several deliberate initiatives by the organized market players are contributing tremendously towards minimizing the dominance of unorganized players in the mattress industry for the right bed.

Pros and strengths

Diversified customer base and long-standing relationship with customers: The company has a well-diversified customer base all over India, wherein it provides the products and the services as per their requirements. This reduces the intensity of any significant single customer’s contribution in its revenues. Its products it offers to its customers are spread across retail, hotels and institutions. Its continuous focus on providing quality products and services consistently to its customers has helped it nurture long-term relationships with them. Its track record of delivering timely services and demonstrated industry expertise has helped in strong relationships with them. It has a history of high customer retention and derive a significant proportion of its revenue from repeated business.

Extensive and well-developed pan-India sales and distribution network: The company’s distribution network provides key support to its business operations and its well-developed sales and distribution network are the key for its business success. It deployed sales personnel who actively engage with key distributors. It has long-term relationships with its distributors and many of its distributors have been associated with it for more than 5 years. It has 26 distributors and its distributor dealer network is spread across over 15 states. It leverages the strength and presence of its distributors in territories they operate, thus expanding into such territories. Further, its products are also available across various e-commerce platforms.

Diversified Product portfolio: The company is manufacturer of foam-based product such as mattresses and pillows which is marketed under its brand “Magenta” in India. Its product offerings include wide range of mattresses such as memory foam, latex based, bonded mattresses etc. and pillows such as memory foam pillow, molded memory foam pillow, molded contour foam pillow etc. Its success is attributable to the quality of products that it offers to its customers, spread across retail, hotels and institutions. Driven by innovation, it strives to introduce new and innovative products on a continuous basis with the help of its team. It has introduced green tea and bamboo charcoal based herbal mattress and pet bed mattresses in its range of products. Further, it is also supplying processed raw foam and adjustable bed frame (hydraulic bed) which it imports under its brand Magenta. 

Risks and concerns

Rely on third parties to transport: The company’s finished product is required to be transported. A delay in the delivery of its product to its distributors may adversely affect its business, results of operations and financial condition. It relies on third party logistic providers, with whom it has formal arrangements, to transport its finished products to distributors. It has entered formal arrangement with logistic providers for transport its finished products to distributors. It may also be affected by transport strikes, which may affect its delivery schedules. If it is unable to secure alternate transport arrangements in a timely manner and at an acceptable cost, or at all, its business, results of operations and financial condition may be adversely affected.

Operate in competitive environment: The markets in which the company and its customers compete are characterized by rapidly changing preferences, evolving industry standards and continuous improvements in products and services and is characterized by frequent introductions of its products. It expects competition to persist and intensify in the future as the market wherein it operates is constantly evolving and growing with new and existing competitors devote considerable resources to introducing and enhancing products. Accordingly, its ability to grow its business in accordance with its strategy will depend on its ability to introduce new products, adapt to new technologies, respond to pricing strategies by competitors and improve its manufacturing capabilities. 

Do not hold any patents or other form of intellectual property protection: The company’s team efforts are primarily directed towards developing new and more innovative product lines as well as new and more efficient production processes that are typically applicable to the current range of products it manufactures. Its know-how may not be adequately protected by intellectual property rights such as patent registration. It also relies in part on mutual trust for protection of its trade secrets and confidential information relating to its manufacturing processes. It is its policy to take precautions to protect its trade secrets and confidential information against breach of trust by its employees, consultants, customers, dealer, distributor and suppliers and incorporate confidentiality provisions. However, it is possible that unauthorized disclosure of its trade secrets or confidential information may occur. It cannot assure that it will be successful in the protection of its trade secrets and confidential information.

Outlook

Magenta Lifecare is manufacturer of foam-based product such as mattresses and pillows which is marketed under its brand ‘Magenta’ in India. Its Product offerings include wide range of mattresses such as memory foam, latex based, bonded mattresses, pocketed spring etc. and pillows such as memory foam pillow, molded memory foam pillow, molded contour foam pillow etc. Driven by innovation, it strives to introduce new and innovative products on a continuous basis with the help of its team. The company has necessary instruments for checking of its raw materials and finished goods for measuring the sizes and shapes in order to match the standards based on the standardized dimensions as well as customer specifications. If the raw materials purchased through the purchase orders fail to confirm to the required standards for manufacturing the products, the same are liable to be rejected and are returned to the suppliers/vendors. On the concern side, the company continuously seeks to increase the penetration of its products by appointing new distributors and dealers targeted at different markets and geographies. It cannot assure that it will be able to successfully identify and appoint new distributors or effectively manage its existing distribution network. If the terms offered to such distributors by its competitors are more favourable than those offered by it, distributors may decline to distribute its products and terminate their arrangements with it. 

The company is coming out with an IPO of 2000000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 35 per equity share to mobilize Rs 7 crore. On performance front, the company’s total revenue increased by Rs 16.24 lakh to Rs 955.29 lakh for Fiscal 2023 from Rs 938.47 lakh for Fiscal 2022. The company’s profit after tax increased by 29.96% to Rs 24.55 lakh for Fiscal 2023 from Rs 18.89 lakh for Fiscal 2022. Meanwhile, the company aims to manufacture higher volumes of its current portfolio of customized products, as well as develop newer lines of personalized home-comfort products to further improve its operating margins. It plans to expand and consolidate its Magenta brand, and develop Magenta to ensure that they can be made to match the shape and proportions of a consumer’s bed, while providing, among other features, differing levels of comfort for different body zones. It also aims to expand its retail presence by increasing its partnerships with exclusive retail partners and increasing its exclusive Magenta branded outlets.