Kataria Industries coming with IPO to raise Rs 54.58 crore

Kataria Industries

• Kataria Industries is coming out with initial public offering (IPO) of 56,85,000 shares in a price band Rs 91-96 per equity share.
• The issue will open on July 16, 2024 and will close on July 19, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.10 times of its face value on the lower side and 9.60 times on the higher side.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Priyanka Bakhtyarpuri.

Profile of the company

The company is engaged in the manufacturing and supply of Low Relaxation Pre-stressed Concrete (LRPC) Strands and Steel Wires, Post-tensioning (PT) Anchorage System (Anchor Cone, Anchor Head and Wedges), HDPE Single Wall Corrugated (SWC) Sheathing Ducts, Couplers and Aluminium Conductors. Its wide variety of products are utilized in various sectors including Infrastructure, Roads - Bridges & Flyovers, Metros, Railways, High Rise Buildings, Atomic Reactors, LNG Tanks, Power Transmission & Distribution Lines etc. Its products are certified by ISO 9001:2015 for quality management systems.

The company was incorporated in 2004 with an object to engage in the manufacturing and supply of all kinds of ingots, including those made of iron, steel, copper, bronze, aluminum and other ferrous and non-ferrous materials, as well as drawing of wires, pipes and tubes made from them, along with various plastic products. Initially, it also had two separate division, namely the Plastic Division and the Wind Mill Division. However, in order to focus on its core business competencies and explore strategic options to grow such business and to rationalize its management, business and finances, these divisions were transferred with effect from October 1, 2013 to Kataria Plastics and Shree Hanuman Mining Corporation 

It is constantly improving and expanding its processes and technologies. Its top management always emphasises core strength and policies that focus on technology and excellent service delivery. With a passion for setting high standards of service, the management always takes measures to scale up as needed to deliver the best. It works diligently and has a wide range of equipment to meet every need and ensure client satisfaction. It has two manufacturing plants, both are situated at Ratlam, Madhya Pradesh. Its plants are well equipped with essential machinery, infrastructure, and an in-house testing facility, which ensures that its product conforms to the requisite standards.

Proceed is being used for:

• Capital expenditure for purchase of machineries
• Repayment of debt 
• General corporate purpose 
• Meeting public issue expenses

Industry Overview

India’s high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress. Infrastructure is a key enabler in helping India become a $26 trillion economy. Investments in building and upgrading physical infrastructure, especially in synergy with the ease of doing business initiatives, remain pivotal to increase efficiency and costs. The government’s focus on building infrastructure of the future has been evident given the slew of initiatives launched recently. The $1.3 trillion national master plan for infrastructure, Gati Shakti, has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway.

In Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to Rs.10 lakh crore ($122 billion), which would be 3.3 per cent of GDP. As per the Union Budget 2023-24, a capital outlay of Rs. 2.40 lakh crore ($29 billion) has been provided for the Railways, which is the highest ever outlay and about 9 times the outlay made in 2013-14. India plans to spend $1.4 trillion on infrastructure through ‘National Infrastructure Pipeline’ in the next five years. In FY21, infrastructure activities accounted for 13% share of the total FDI inflows of $81.72 billion. India will need to construct 43,000 houses every day until 2022 to achieve the vision of Housing for All by 2022.

India must enhance its infrastructure to reach its 2025 economic growth target of $5 trillion. India's population growth and economic development requires improved transport infrastructure, including through investments in roads, railways, and aviation, shipping and inland waterways.  The government has also suggested an investment of $750 billion to strengthen railway infrastructure and envisioned the Maritime India Vision 2030 which estimates massive investments in world-class infrastructure development at Indian ports.  Global investment and partnerships in infrastructure, such as the India-Japan forum for development in the Northeast are also indicative of more investments. These initiatives come at a momentous juncture as the country aims for self-reliance in future-ready and sustainable critical infrastructure.

Pros and strengths

Approved supplier in various Government projects and other commercial projects: The company is an approved supplier for various Government projects and other commercial projects across sectors like Infrastructure, Roads - Bridges & Flyovers, Metro, Railways, High Rise Buildings, Atomic Reactors, LNG Tanks, Power Transmission & Distribution Line etc. Its efforts include continually improving product quality and delivering quality products that meet the stringent requirements of infrastructure development. Its Group’s vast experience further underscores its credibility and positions it for future projects, thereby improving its competitive position.

Wide geographical reach: Its long-standing relationship with its major customers has played a pivotal role in its sustained growth over the years. Its commitments to quality and customer service practices have been instrumental in lasting customer relationship. Despite not having long-term supply agreements with customer, it has continually received repeat business from many of its customers. This trust has enabled it to cultivate diverse client base and secure orders across various industries. It is catering Domestic customers as well as International customers. Out of the total revenue for the FY 2023-24, FY 2022-23 and FY 2021-22, it has achieved export revenue of 4.45%, 2.63% and 5.68% respectively of the total revenue. It has exported goods in Dubai, Qatar, Nepal, Iran, Oman, Bahrain and Brazil.

In-house manufacturing facility with stringent quality control mechanism: It has an in-house manufacturing facility through which it ensures seamless production from raw material to final product dispatch. Delivering Quality products is one of its core beliefs, and it allocates resources for quality assurance to ensure that quality standards are consistently met. Its manufacturing facility is ISO 9001:2015 certified for quality management systems. It conducts testing at each step of the manufacturing process, ensuring adherence to its quality standards at its in-house testing facility.

Risks and concerns

Revenues from limited number of customers: IT derives a significant portion of its revenues from a limited number of customers. While it has been receiving consistent orders from certain customers without formal written agreements in place, there's no guarantee of continued regular purchases from them in the future. The absence of formal contracts leaves the company vulnerable to potential loss or reduction in orders from these customers, which could significantly impact its business operations and financial stability, leading to adverse effects on profitability and overall financial standing.  

Dependent on third party transportation service providers: It is significantly dependent on third party transportation service providers for the delivery of raw material to it from its suppliers and delivery of its finished products to the customers. Uncertainties and risks such as transportation strikes, failure to book parcel/vehicle or delay in supply of raw materials due to non-availability of transport services or vehicle breakdown could have an adverse effect on its supplies and deliveries to and from its customers and suppliers. Additionally, raw material may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. Any failure to procure or transport the raw material or to deliver the finished products to its customers in a timely, efficient and reliable manner could adversely affect its business, results of operations, financial condition and operation.  

labour-intensive industry: Its manufacturing processes heavily depend on labor, and during festive and marriage seasons, substantial portions of its labor force tend to take extended leaves. Managing these leave vacancies or negotiating with labor and their subcontractors poses challenges, and failure to do so may lead to work stoppages or increased operating costs due to escalated wages and benefits. The potential for strikes or work stoppages in the future cannot be guaranteed. Any work stoppage, whether initiated by the company, its customers, or key suppliers, could significantly impact its business, financial health, cash flows, and operational results.

Outlook

Kataria Industries is engaged in the manufacturing and supply of Low Relaxation Pre-Stressed Concrete (LRPC) Strands and Steel Wires, Post-tensioning (PT) Anchorage System (Anchor Cone, Anchor Head and Wedges), HDPE Single Wall Corrugated (SWC) Sheathing Ducts, Couplers and Aluminium Conductors. Its wide variety of products are utilized in various sectors including Infrastructure, Roads - Bridges & Flyovers, Metros, Railways, High Rise Buildings, Atomic Reactors, LNG Tanks, Power Transmission & Distribution Lines etc. its products are certified by ISO 9001:2015 for quality management systems. On the concern side, it faces significant competition in its business from other manufacturers and suppliers of cables and wires products. It operates in a highly competitive business environment. Growing competition in the domestic market from domestic organized and unorganized players and/or the international players, it is subject to pricing pressures and requires it to reduce the prices of its products in order to retain the existing customers and/or attract new customers, which may have a material adverse effect on its revenues and margins. 

The company is coming out with a maiden IPO of 5,685,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 91-96 per equity share. The aggregate size of the offer is around Rs 51.73 crore to Rs 54.58 crore based on lower and upper price band respectively. On performance front, In the F.Y. 2023-24, the company’s total revenue was Rs 33,912.72 lakh, which is increased by 2.20% in compare to Rs 33,182.94 lakh in F.Y. 2022-23. Profit after tax is Rs 1,002.11 lakh for the F.Y. 2023-24 in compared to Rs 777.83 lakh in F.Y. 2022-23. Meanwhile, it is committed to enhancing operational efficiency within the company to drive cost reductions and maintain a competitive edge in the market. Through continuous process improvements, rigorous quality checks and investment in technology, it aims to boost operational output while maintaining high standards of quality. Its efforts also include empowering its employees, leveraging their technical expertise to enhance overall efficiency.