Dhariwalcorp coming with IPO to raise Rs 25.15 crore

Dhariwalcorp

• Dhariwalcorp is coming out with initial public offering (IPO) of 23,72,400 shares in a price band Rs 102-106 per equity share.
• The issue will open on August 1, 2024 and will close on August 5, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 10.20 times of its face value on the lower side and 10.60 times on the higher side.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Saloni Kachhawaha.

Profile of the company

The company is engaged in the business of trading of comprehensive range of waxes, industrial chemicals, and petroleum jelly. The company is involved in processing, purchasing, selling, importing, and trading various types of wax, including Paraffin Wax, Micro Wax, Slack Wax, Carnauba Wax, Microcrystalline Waxes, Semi Refined Paraffin Wax, Yellow Beeswax, Hydrocarbon Wax, Montan Wax, Polyethylene Wax, Vegetable Wax, Residue Wax, Palm Wax, BN Micro Wax, Hydrogenated Palm Wax, Micro Slack Wax, PE Wax, Soya Wax, etc. 

Additionally, the company trade in industrial chemicals such as Rubber Process Oil, Light Liquid Paraffin (LLP), Citric Acid Monohydrate, Refined Glycerin, Bitumen, Stearic Acid, and Petroleum Jelly, including Paraffin Petroleum Jelly and White Petroleum Jelly. Its product range encompasses all types of heavy and light chemicals, chemical elements and compounds, petrochemicals, industrial chemicals, mixtures, derivatives, articles, compounds, by-products, and activities of a similar nature.

The company serves various industries including Plywood and Board, Paper Coating, Crayon Manufacturing, Candle Production, Textiles, Pharmaceuticals, Petroleum Jelly & Cosmetics, Tube & Tire Manufacturing, Match Production, Food Processing, and Adhesive Manufacturing. With its diverse range of products, it plays a significant role in the supply chain of these sectors, ensuring quality products and timely delivery. The company is engaged in wax trading business, sourcing, processing, and distribution of various types of waxes for a wide range of applications. With its focus on quality, sustainability, and customer satisfaction, it is committed to delivering products of relevant quality that meet its industry standards, ensuring customer satisfaction and trust. It continuously seeks new ways to improve its products, processes, and services, staying ahead of market trends and customer demands.

Proceed is being used for:

• Funding capital expenditure towards construction of warehouse 
• Funding working capital requirements of the company 
• General corporate purposes.

Industry Overview

India wax market size is projected to exhibit a growth rate (CAGR) of 4.5% during 2024-2032. The widespread product adoption across the industrial sector, the growing product utilization in the manufacturing of vehicle polish and the extensive product use in fruit coatings to extend shelf life represent some of the key factors driving the market. The market in India is majorly driven by widespread product adoption across the industrial sector. Waxes are widely used in industries such as packaging, cosmetics, pharmaceuticals, and textiles. The growth of these industries in India has a direct impact on the demand for waxes. For instance, the expanding packaging sector requires waxes for coatings and laminations, while the cosmetics industry utilizes waxes in lipsticks, lotions, and creams.

Moreover, the automotive sector in India is witnessing significant growth, and waxes play a crucial role in applications, such as car waxing and polish. As the automotive industry expands, so does the demand for automotive-grade waxes. Also, the construction industry in India is booming, leading to increased demand for building materials, including waxes for coatings and adhesives used in construction. Furthermore, in the agricultural sector, waxes find use in fruit coatings to extend shelf life and maintain freshness. Additionally, the demand for food-grade waxes is rising due to the growing focus on food safety and hygiene, thereby acting as a growth-inducing factor. Apart from this, ongoing research and development activities aimed at improving wax properties, developing new applications, and finding innovative uses of waxes contribute to market growth further.

Pros and strengths

Wide range of products: Its product mix has evolved over the past several years as it entered new product categories. It has consistently expanded its product portfolio by adding new types of Wax, Industrial Chemicals, and Petroleum Jelly which is suitable for various industries for further processing. Its intention is to explore opportunities to expand its operations by processing, purchasing, selling, importing, and trading new type of within its existing lines of business. Further expanding its service offerings will help it builds on the existing diversification of its business.

Location advantages: As a cost-effective measure, it procures goods and stocks them in its respective warehouses, supplying them locally. This strategy reduces transportation costs without compromising the quality of the materials procured, while also ensuring a continuous supply of products. To meet its PAN India presence and ensure timely supply of its products, it has one processing unit and three warehouses situated at Jodhpur, Rajasthan, one warehouse situated at Bhiwandi, Maharashtra, one warehouse situated at Ahmedabad, Gujarat, and one warehouse at Mundra, Dist. Kachchh, Gujarat, respectively.

Well established relationship with clients: The company generates revenue from both domestic and international operations. It has trusted buyers who place repeated orders at frequent intervals. The repetition of orders is primarily due to the quality of the products it provides and the healthy relationships it maintains. It regularly visits its customers to understand their needs and concerns and address them personally. It understands that the Chemical and Wax industry is highly competitive, and maintaining healthy relationships with its customers is essential to staying competitive. By consistently delivering quality products and personalized service, it builds trust with its buyers, distinguishing its selves from competitors.

Risks and concerns

Depend on top ten customers: Its revenue from operations for the financial year ended March 31, 2024, 2023 and 2022 its top 10 customers contributed around 34.81%, 34.74% and 32.23%, respectively. Given the nature of its business, there can be no assurance that it would be able to attract new customers or reduce its dependence on any of its top customers. It expects that it will continue to be reliant on its major customers for the foreseeable future. Accordingly, any failure to retain these customers or to remain suppliers to these customers and/or negotiate and execute contracts on terms that are commercially viable, with these select customers, could adversely affect its business, financial condition and results of operations.

Change in prices of raw material: The company faces the risk of fluctuating prices of imported raw materials from foreign countries, which could potentially lead to financial losses. These price changes can impact the cost structure of production, affecting profitability and margins. Factors such as currency exchange rates, geopolitical events, global supply and demand dynamics, and trade policies can all influence the cost of imported raw materials. Managing this risk involves strategies like hedging, diversifying suppliers, negotiating favorable contracts, and closely monitoring market trends to mitigate potential losses.

Geographical concentration: It has presence in 21 states and three 3 union territories. In the global markets, it has presence in only one country names Nepal and it intends to widen its reach in other global markets. Such geographical concentration of its business in these regions heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions which may adversely affect its business prospects, financial conditions and results of operations. It may not be able to leverage its experience in such regions to expand its operations in other parts of India, due to factors such as competition, culture, regulatory regimes, business practices and customs, industry needs, transportation, in other markets where it may expand its operations may differ from those in such regions, and its experience in these regions may not be applicable to other markets.

Outlook

Dhariwalcorp is a trading entity engaged in a comprehensive waxes, industrial chemicals, and petroleum jelly. With expertise in processing, purchasing, and trading, the company offers a diverse range of products, including Paraffin Wax, Rubber Process Oil, and White Petroleum Jelly. Its commitment to quality and compliance ensures reliability across heavy and light chemicals, catering to various industries. Logistics and supply chain management underscore their efficiency in meeting customer demands. Positioned for growth, Dhariwalcorp continues to explore new markets, innovate product formulations, and enhance sustainability practices, exemplifying adaptability and excellence in the trading landscape. On the concern side, it operates in a competitive market. Many Indian and foreign players are operating in the same market as it’s. There are several strategies adopted by its competitors to increase their market share through pricing, service, new product introductions and distribution reach among others. Due to inherent risks in the marketplace associated with new product introductions, including uncertainties about user industry’s response, increased expenditure may not prove successful in maintaining or enhancing its market share and could result in lower profitability.

The company is coming out with a maiden IPO of 23,72,400 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 102-106 per equity share. The aggregate size of the offer is around Rs 24.20 crore to Rs 25.15 crore based on lower and upper price band respectively. On performance front, revenue from operations increased by 17.98% from Rs 19,392.76 lakh in Fiscal 2023 to Rs 22,880.29 lakh in Fiscal 2024. It recorded over 7-fold jump in profit after tax from Rs 59.84 lakh in Fiscal 2023 to Rs 450.63 lakh in Fiscal 2024. Meanwhile, it intends to focus on increasing sales volume and expanding its product portfolio. As a trading company, it aims is to achieve larger sales volumes and incorporate new products into its portfolio to meet its targeted sales goals. It cultivating and sustaining long-term, mutually beneficial relationships with its suppliers, customers, and employees will be instrumental in achieving its organizational objectives, driving sales growth, and penetrating new markets.