Rajputana Industries coming with IPO to raise Rs 23.88 crore

Rajputana Industries

• Rajputana Industries is coming out with initial public offering (IPO) of 62,85,000 shares in a price band Rs 36-38 per equity share.
• The issue will open on July 30, 2024 and will close on August 1, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 3.60 times of its face value on the lower side and 3.80 times on the higher side.
• Book running lead manager to the issue is Holani Consultants.
• Compliance Officer for the issue is Sonal Jain.

Profile of the company

The company is primarily engaged in the business of manufacturing of diverse range of non-ferrous metal products from primarily Copper, Aluminium, Brass and various alloys from recycling of scrap metal. It procures scrap metal from open markets and convert them into billets made of metals like aluminium, copper or brass etc. through recycling in its in-house manufacturing. Once these billets are manufactured from recycled scrap metal, it either sells them to different manufacturing companies or it uses them to produce products like Copper rods, Aluminium rods, Copper mother tube, brass wires, super enameled copper conductor and many more products. These wires, tubes, bars, billets and rods are manufactured in various shapes and sizes as per the requirement of the customers and / or demand in the market.

Over the past couple of years, the company has outgrown itself into a distinguished large-scale organization specializing in wires, tubes, bus, bars and rods of various shapes, sizes and in various nonferrous metals having plentiful applications. With a view to enhancing the product portfolio, the company is entering into the business of manufacturing of cables which shall be primarily used in the construction industry, mainly residential and submersible cables for motors. Its experience of more than a decade has enabled it to build an effective business model that gives it controls over its processes from raw material procurement, manufacturing, and marketing to sales through its network.

Proceed is being used for:

• Funding the working capital requirements of the company
• Purchase of Grid Solar Power Generating System
• General corporate purposes.

Industry Overview

The world Copper Mine production from April 2022 to March 2023 was about 22,052 thousand metric tonnes (TMT). The share of India in the world production was 24.77 TMT i.e. 0.11% during April 2022 to March 2023. The world Refined Copper Production from April 2022 to March 2023 was about 26,108 TMT against world consumption of 26,239 TMT. As per International Copper Study Group forecast dated April 28, 2023 for the Calendar Year 2023, world Refined Copper production and consumption are projected as 26,419 and 26,431 TMT respectively.

The size of Indian copper industry (consumption of refined copper per annum) is around 6.6 lakh tonnes, which as percentage of world copper market is only three percent.  Sterlite Industries, Hindalco Industries and Hindustan Copper are major producers of refined copper in India. Production in India has declined significantly due to the permanent closure of Vedanta’s smelter/ refinery plant of Tamil Nadu in May, 2018.

The world production of Primary Aluminium Metal during 2022-23 (April-March) was about 69.49 million tonnes against world consumption of 68.25 million tones, resulting in a market surplus of 1.24 million tonnes. It is estimated that during April-June, 2023, the world consumption of Primary Aluminium Metal would be 17.27 million tonnes against world production of around 17.69 million tonnes, implying a surplus of 0.42 million tonnes. The share of India in the world primary Aluminium production was around 5.8% during 2022-23 (April-March).

Pros and strengths

Long standing relationships with existing clientele: It prioritizes establishing enduring client relationships, consistently meeting their needs with sought-after products. Its top ten customers contributed significant percentages to its total revenue over recent fiscal years. The average duration of its relationships with the top five customer groups spans more than a decade, reflecting its commitment to quality and robust designing and tooling capabilities. Its expertise in automated production, emphasis on research and development, and technologically advanced, quality-consistent, timely, and cost-competitive manufacturing processes has garnered repeat orders.

Focus on quality: The company prioritizes qualitative manufacturing, following industry standards throughout production. Stringent quality checks at various stages swiftly address any defects. An in-house laboratory conducts necessary tests to ensure consistent quality. This commitment leads to repeat orders, affirming its capability to meet buyer standards and strengthening its market presence.

Innovative Ideas: Leveraging its engineering expertise, it actively pursues innovation. The company consistently works on expanding and diversifying its product range, introducing new business ideas that incorporate technology and utilize its installed plant and machinery. The company recently commenced manufacturing special grade brass rods through Cold Extrusion process suitable to make bullet shells for defense applications. This product has been recently developed by the company and expanded its product range.

Risks and concerns

Fluctuations in the prices of raw material: The major raw material used are copper scrap, brass scrap, aluminium scrap and raw material consumption contribution is 82.38%, 96.17% and 97.07% of revenue from operations for the financial year ended March 31, 2024, 2023 and 2022 respectively based on restated financial statements. The industry in which it operates is highly fluctuating specially the prices of copper, brass and aluminium. Further, factors affecting the price, directly or indirectly are beyond the control of the company. 

Dependent on third party transportation providers: The company is engaged in manufacturing of copper, aluminium and brass products and its manufacturing facilities are situated at Reengus, Rajasthan. It procures raw materials from domestic suppliers. Also, its finished goods are sold and delivered to various locations across the country and also exported to international markets. Most of the raw material and finished products are transported to and from its manufacturing unit by third party transportation providers. Transportation strikes could have an adverse effect on its receipt of goods and its ability to deliver its products to its customers. Any such disruptions could materially and adversely affect its business, financial condition and results of operations.

Dependent on continuing relationships with customers: Its business is dependent on its continuing relationships with its customers. The company neither has any long-term contract with any of customers nor has any marketing tie up for its products. Further, the company has not appointed any exclusive agents for handling its operations. Any change in the buying pattern of its end users or disassociation of major customers can adversely affect the business of the company. The loss of or interruption of work by a significant customer or a number of significant customers or the inability to procure new orders on a regular basis or at all may have an adverse effect on its revenues, cash flows and operations.

Outlook

Rajputana Industries is primarily engaged in the business of manufacturing of diverse range of non-ferrous metal products from primarily Copper, Aluminium, Brass and various alloys from recycling of scrap metal. It procures scrap metal from open markets and converts them into billets made of metals like aluminium, copper or brass etc. through recycling in its in-house manufacturing unit. On the concern side, the market for its products is competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes such as technical competence, quality of products, various products line, customer base, pricing and timely delivery. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

The company is coming out with a maiden IPO of 62,85,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 36-38 per equity share. The aggregate size of the offer is around Rs 22.63 crore to Rs 23.88 crore based on lower and upper price band respectively. On performance front, its total revenue has increased by 28.11% to Rs 32,701.29 lakh for financial year 2023-24 from Rs 25,524.98 lakh for financial year 2022-23 bifurcated into revenue from operations and other income. Net profit for FY 2023-24 increased to Rs 512.64 lakhs from Rs 309.67 lakh for FY 2022-23. Going forward, its primary focus is on enhancing its existing product base and maintaining high-quality, safety compliant offerings. This strategy aims to secure customer retention and drive repeat orders. It prioritizes close interactions with customers to strengthen relationships, comprehend market perceptions, and meet the evolving demand for its products.