Jay Bee Laminations coming with IPO to raise Rs 88.96 crore

Jay Bee Laminations

• Jay Bee Laminations is coming out with an initial public offering (IPO) of 60,93,000 equity shares in a price band Rs 138-146 per equity share.
• The issue will open on August 27, 2024 and will close on August 29, 2024.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 13.80 times of its face value on the lower side and 14.60 times on the higher side.
• Book running lead manager to the issue is Swaraj Shares and Securities.
• Compliance Officer for the issue is Arti Chauhan.

Profile of the company

Jay Bee Laminations currently manufactures and supplies range of products such as electrical laminations, slit coils, and assembled cores made of Cold Rolled Grain Oriented Silicon steel and Cold-Rolled Non-Grain-Oriented Steel for applications in transformers, UPS, and inverters, for end-use in power industry. The company’s manufacturing units are equipped with all in-house facilities for slitting, cutting, assembling, and testing of CRGO and CRNGO electrical steel cores spread across total area of 10,878 sq mt. It also has its in-house laboratory for raw material and finished goods sample testing and in-house tooling division for blade sharpening. Its production facilities emphasize on processing and manufacturing electrical steel cores to meet the quality standards of power and distribution transformers. Its current facilities are well equipped to serve customer manufacturing transformers up to 220 kV class. Further, it has used 83% of its installed capacity as on March 31, 2024.

Presently, the company’s main focus is on supplying CRGO electrical steel cores to transformer manufacturers. These materials necessitate a high level of expertise in manufacturing, handling, and processing due to their sensitivity to physical stresses and jerks, which is vital for ensuring the safety and quality of transformers. Adhering to strict quality requirements, all transformer core-related raw materials imported, purchased, and sold in India must conform to the standards set by the Bureau of Indian Standards (BIS). 

The company’s clientele encompasses manufacturers producing transformers in the range of 11kV to 220 kV class, spanning Power and Distribution transformers. The quality of these transformers relies significantly on the raw materials used in their manufacturing, with the CRGO steel core accounting for 25-30% of the transformer’s total cost depending on the size of the transformer. Additionally, the core plays a crucial role in reducing transmission and distribution (T&D) losses within the electricity supply infrastructure, highlighting its pivotal significance in the realm of power distribution.

Proceed is being used for:

• Funding working capital requirements
• General corporate expense

Industry Overview

Distribution Transformers play a very important and vital role in delivering electricity to the last mile. It can be rightly said that the Distribution industry is bringing light in the life of the people. The thrust by the Indian Government to provide quality power to each village and every household through various schemes of electrification like DDUGJY/ IPDS/ RAPDRP/ Saubhagya has given a huge fillip to the demand of distribution transformers all over India. The demand of Distribution transformers is catered majorly by the domestic Industry and the import of transformers is very marginal/ project specific. The Industry is dominated by unorganized MSME units which are spread all over India and are mainly supplying to their state utilities. There are large scale units also which apart from having Pan India presence are also engaged in export of transformers.

The transformers produced in India have been brought under mandatory BIS certification, resulting in standardization of the product, which has resulted in improvement of quality and reduction of failure of transformers. The distribution transformers have also been brought under mandatory BEE star labelling scheme which has resulted in the use of modern technology in manufacturing energy efficient transformers. The demand of distribution transformers will keep on increasing due to increase in generation capacity of both conventional and non-renewable sources due to increase in per capita consumption of electricity and new avenues like electric vehicle charging stations etc.

The demand will also increase due to replacement of old transformers with energy efficient transformers. The challenges faced by the industry is the lack of mandatory guidelines for installation and maintenance of transformers, bad earthing practices, overloading of transformers, tampering/ bypassing the protection equipment, theft of material/ oil which leads to fire and failure of transformers. The payment position by the utilities, though has improved due to UDAY scheme and MSMED act, needs to be further streamlined.

Pros and strengths

Well established brand with targeted sales and marketing initiatives: The experience of certain of its promoters in the CRGO and CNRGO steel core manufacturing provides it to endeavor to promptly address any concerns of its clienteles through significant senior management engagement. To keep increasing its reach and network it consistently participates in industry exhibitions. It helps the company to create new business relations as well as gives the company industry feedback first hand which it uses to upgrade and tune up customer experience and engage in further business expansion.

Strong operational and financial performance: The company has witnessed growth in its financial performance in the last three Financial Years ended March 31, 2024, March 31, 2023, and March 31, 2022. The company’s revenues from operations increased from Rs 14,125.12 lakh in Financial Year ended March 31, 2022, to Rs 24,666.47 lakh in Financial Year ended March 31, 2023, and Rs 30,290.97 lakh in the Financial Year ended March 31, 2024. The company’s continued focus on higher sales, efficiency and productivity improvements and capital allocation and management also enabled the company to deliver consistent financial performance.

Long-standing client relationships: The company provides services with expertise to its clients and this helps it in customer retention and repeat business. It provides services on a customer-goal based approach and its solutions are targeted towards consistently delivering efficiencies, accuracy meeting and achieving customers’ performance indicators. This approach has helped its customers meet their objectives, which has led to customer retention and development of customer relationships. The company has a history of customer retention. In Financial Year ending March 31, 2023, it derived more than 35% of its restated revenues from operations from key customers. In Financial Year ending March 31, 2022, the company derived more than 40% of its revenues from operations from repeat customers. These long-standing relationships have also contributed to the growth of its revenues from its existing customers and the expansion of its customer base.

Risks and concerns 

Significant portion of domestic sales is derived from the northern and southern region: The company has historically derived a significant portion of its revenue from sales in the Northern and Southern Region of India. For FY24, FY23 and FY22, the revenue generated from sales in Northern and Southern region cumulatively represented 75.56%, 69.16%, and 72.55% of its revenue from Domestic Sales of Product, respectively. Accordingly, any materially adverse social, political or economic development, natural calamities, civil disruptions, regulatory developments or changes in the policies of the state or local government in these region could adversely affect its manufacturing and distribution activities, result in modification of its business strategy or require it to incur significant capital expenditure, which will in turn have a material adverse effect on its business, financial condition, results of operations, and cash flows.

Geographical constrain: The company currently operates two manufacturing facilities located at Noida & Greater Noida with commercial production of CRGO & CRNGO steel cores with applications in transformers, UPS & inverters. Any disruption in its manufacturing operations involving the shutdown of its plant in any of its manufacturing facilities resulting from any factors beyond its control, including socio-economic, regulatory, policy or political developments, force majeure, natural calamities, or civil disruption, could result in a material adverse impact on its business operations and financial performance, particularly due to the long period of time required for rebuilding to resume production. Further, there can be no assurance that equipment in its manufacturing facilities will not malfunction, resulting in discontinuation of production. Any malfunction or shutdown of any of the plant would adversely impact production and could result in the company incurring significant losses from shutdown of operations, capital expenditure to replace any malfunctioning furnace or other equipment, and thereby materially and adversely affecting its business, results of operations, financial condition, and cash flows.

Intense working capital requirement: The company’s business requires significant amount of working capital primarily as a considerable amount of time passes between purchase of raw materials and collection of receivables post sales to customers. As a result, the company is required to maintain sufficient stock at all times in order to meet manufacturing requirements as well as extend credit period to customers as per the industry practice, thus increasing its storage and working capital requirements. The company’s net working capital requirements for the Financial Years ended March 31, 2024, March 31, 2023, and March 31, 2022, were Rs 5,335.50 lakh, Rs 4067.64 lakh, and Rs 2,590.25 lakh, respectively. If the company experiences insufficient cash flows from its operations or are unable to borrow to meet its working capital requirements, it may materially and adversely affect its business and results of operations.

Outlook

Jay Bee Laminations was established in 1988 and is active in the supply of Cold Rolled Grain Oriented Silicon Steel (CRGO) Cores and Cold-Rolled Non-Grain-Oriented (CRNGO) Steel Cores. The company manufactures and supplies a range of products including electrical laminations, slotted coils and assembled cores in cold rolled grain oriented silicon steel and cold rolled non-grain oriented steel for applications in transformers, UPS and inverters for end use in the power industry. The company’s production facilities are equipped with all proprietary equipment for cutting, slitting, assembling and testing CRGO and CRNGO electrical steel cores and cover a total area of 10,878 square metres. The company also has its own laboratory for testing raw materials and finished products, as well as its own tooling department for sharpening blades. On the concern side, nearly majorly of the company’s revenues from operations are derived on sales made within India. Its business is therefore significantly affected by fluctuations in general economic activity in India. Moreover, a significant portion of its domestic sales (including supply to SEZ) is derived from the northern and southern region, and any adverse developments in this market could adversely affect its business. 

The company is coming out with a maiden IPO of 60,93,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 138-146 per equity share. The aggregate size of the offer is around Rs 84.08 crore to Rs 88.96 crore based on lower and upper price band respectively. On performance front, the company’s total revenue increased by 22.63% to Rs 30,349.561 lakh for the Financial Year ended 2024 from Rs 24,748.86 lakh for the Financial Year ended 2023. Moreover, the company’s profit after tax increased by 42.29% to Rs 1,935.27 lakh in Financial Year ended 2024 from Rs 1,360.00 lakh in Financial Year ended 2023.

The company intends to continue to focus on expanding manufacturing capacity at its Unit-II facility at Greater Noida which has a total area of 8,066 sq. m. In line with its expansion plans, the company has completed the construction of a new shed spanning 2,000 sq. m within the same premises. This expansion will accommodate for new machinery, enabling the company to diversify into untapped customer segments, explore new geographical markets, and introduce a new product line. In addition to the intended expansion, the company’s Unit-II facility has adequate vacant land allowing it to further expand its capacity to meet the expected increase in demand. It has already established the necessary infrastructure, including offices, administrative buildings and supply chain linkage and any further expansion will incur limited cost increase to its existing infrastructure setup.