Excellent Wires and Packaging coming with IPO to raise Rs 12.60 crore

Excellent Wires and Packaging

• Excellent Wires and Packaging is coming out with an initial public offering (IPO) of 14,00,000 equity of face value of Rs 10 each for cash at a fixed price of Rs 90 per equity share.
• The issue will open on September 11, 2024 and will close on September 13, 2024.
• The shares will be listed on SME Platform of NSE.
• The share is priced 9 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Meghna Mahendra Savla.

Profile of the company

The company started its business in April 2012 in the name of Perfect Wire Industries, Partnership Firm, as a manufacturer of various types of wires, such as Spring Steel Wire, High Carbon Wire, Galvanised Wire or GI Wire, Round Stitching Wire, Flat Stitching Wire, Mild Steel (M.S.) & Low Carbon Wire, H.B. & H.H.B. Wire, Annealed Wire, Brass Wire, Copper Wire, Stainless Steel Wire, Spiral Wires, Binding Wires, Bailing Wires and all types & sizes of Wire Ropes made of high carbon or SS Wire With or without PVC Coating for multiple applications under the brand name of Excellent. The company’s other packaging products like PP Strapping Rolls and BOPP Self Adhesive Tapes are purchased from the market and sold to its customers on as and when need basis. These packaging products are sold under the brand name of Excellent.

The company supplies its products to various industries viz. Packaging, Engineering, Stationery, Imitation Jewellry, Wires & Cable etc. The company was incorporated on March 16, 2021 to pursue the business of Perfect Wire Industries in corporate entity and reduced the business in partnership firm over a period of time and is stopped from August 2021 and entire production facility with assets was rented to the company vide agreement dated June 01, 2021 and it sold all machines to the company on March 01, 2024 at Rs 17.75 lakh. 

The company has been awarded ISO 9001:2015 Certification which is an internationally recognized standard that ensures it has an effective quality management system. This certification demonstrates its rigorous quality standards and commitment to continuously improve its business processes. Quality and on-time delivery remain its highest priority and it excels at both.

Proceed is being used for:

• Acquisition of land and construction of building
• Acquisition of plant & machineries
• Funding additional working capital requirements
• General corporate purposes 

Industry Overview

Established in India in 1920s, the Steel Wire Industry has progressed remarkably and has successfully developed and manufactured various types of high carbon, alloy steel and special steel wires in addition to mild steel wires. The industry has become versatile enough to meet the requirements of numerous consuming sectors. This sophistication has been possible due to continuous and well-planned R & D efforts on part of the manufacturers with patronage of SWMAI. The result has been that the industry is in a position to manufacture and supply steel wires, both in the domestic and the international markets, in accordance with Indian (BIS) and international (ASTM, DIN, JIS, BSS) standards. Economic reforms introduced since 1991 aimed at deregulating the productive sectors of the economy and opening the Indian economy to global competition have ushered in far-reaching changes in the growth of the steel wire industry. As a result, the product range of steel wire manufacturers is widening continuously.

Out of the total steel consumed in India wire constitutes only 5%. However, if pace of development picks up the domestic consumption of wires will increase by 2% - 3% to 7% - 8% of the steel consumption. In India, if we closely look at the wire demand, almost 88% of it is for wires in plain carbon steel grades, 5% would be for Stainless Steel grades and the balance would be for Alloy Steel Wires. On further analysis, out of the plain carbon wires almost 75% to 80% of the demand is for black/uncoated wires and the balance 20% to 25% is for wires coated with other base metals e.g. Zinc (Galvanized), Copper, Bronze, and other coating materials.

The cable & wire industry in India is a significant sector which has registered robust growth over decades led by the government’s focus on providing power to all. It plays a crucial role in supporting the infrastructure development and electrical needs of the country. The domestic cables and wires industry has registered robust growth over the last five years led by the government’s focus on providing power to all and gradual pickup from the housing market. The Cables and Wires (C&W) industry is expected to grow at a compound annual growth rate (CAGR) of 12% over FY 2021- 26. Growth is expected to be driven by upbeat construction activity in the housing sector and government initiatives in the power and infrastructure sectors. Further, electrification of rural villages and households, improved transmission and distribution systems along with increased demand from renewable power generation will drive growth of electrical cables.

Pros and strengths

Diversified product portfolio: The company has diversified its product offerings to cater to a broader range of customer needs. Products like Brass Wires is used in packaging, imitation and fastener industry whereas products like steel wires and wire products are used in lifting equipment, construction, etc. This diversification can help mitigate risks associated with fluctuations in demand for specific products or market segments.

Established reputation and strong customer relationships: With experienced promoters and their relations of last many years, its business has built a reputation for reliability, quality, and expertise. This reputation has led to repeat business and referrals from satisfied customers. Over the years, the promoters have developed strong relationships with customers, suppliers, and other stakeholders in the industry, which in turn has helped the Company in developing the business. These relationships can lead to better access to resources, and opportunities for working together and expansion. This has helped the company to create a long-term relationship with its customers and improve its customer retention strategy.

Continuous improvement in operations: Over time, the company’s business has optimized its operations, streamlined processes, reduced wastages, and improving efficiency. This efficiency translates into cost savings, competitive pricing, and enhanced profitability. It presently has 880 MTPA installed capacity and is planning to install further 1,310 MTPA installed capacity by purchasing new plant & machineries out of the IPO proceeds. The company has been continuously investing in latest machineries and equipments to enhance productivity, improve product quality, and maintain a competitive edge in the market.

Risks and concerns  

Substantial portion of raw materials is dependent on limited number of vendors: Purchases from its top 10 vendors constituted 75.01%, 79.89% and 73.94% of its Purchases for the financial years ending March 31, 2024, March 31, 2023 and March 31, 2022, respectively. The company has not entered into any supply agreements with most of its suppliers and loss of any significant vendor would have a material effect on its financial results. It cannot assure that it would be able maintain the historical levels of business from these suppliers or that it will be able to replace them in case it loses any of them. While it is constantly striving to increase its supplier base and reduce dependence on any particular vendor, there is no assurance that it will be able to do so in any future periods or that its business or results of operations will not be adversely affected by cessation of its relationship with any of its major vendors.

Geographical constrain: The company’s present manufacturing facility is located at Palghar, Maharashtra and 100% of its production is from that unit only. This concentration of its production in Maharashtra Region, subjects it to various risks, including but not limited to the risks like; regional natural disasters; vulnerability to change of policies, laws and regulations or the political and economic environment of Western India and mainly Palghar, Maharashtra; and constraints on its ability to diversify across states. Although in the past the company has not experienced instances of operating risks, there is no assurance that such disruption in business operations would not bring any hindrance in the functioning of its facilities. Consequently, its business, results of operations, cash flows and financial condition have been and will continue to be heavily dependent on the performance of, and the prevailing conditions affecting its industry and overall economy in Maharashtra.

All customers are B2B businesses and it requires significant working capital: All the company’s customers are B2B businesses and it requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. The company’s Trade Receivables for the financial years ended March 31, 2024 & 2023 were Rs 233.06 lakh and Rs 162.49 lakh respectively and its inventories for the financial years ended March 31, 2024 & 2023 were Rs 161.02 lakh and Rs 125.58 lakh respectively. The company expects this to grow further in the coming years as it increases its focus on business. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Outlook

Excellent Wires and Packaging manufactures a wide range of wires and wire ropes under the brand name 'Excellent', including various types such as Spring Steel Wire, High Carbon Wire, Galvanised Wire (GI Wire), and others for multiple applications. The company's products are supplied to various industries such as Packaging, Engineering, Stationery, Imitation Jewellry, Wires & Cable etc. The company has recently acquired machinery, which will enable it to manufacture few new sub products within its product lines like Binding Wires, HB & HHB Wires, Soft GI Wires. These products hold good potential in key industries such as construction, automobile, cable and engineering, and it is excited to bring them to market. On the concern side, the company’s customers are B2B businesses and are subject to high working capital requirements. Its inability to maintain an optimal level of working capital required for its business may impact its operations adversely. Moreover, the company’s manufacturing facility is geographically located in one area, Palghar, Maharashtra. Any loss or shutdown of operations at any of its facilities in this area may have an adverse effect on its business and results of operations.

The company is coming out with a maiden IPO of 14,00,000 equity shares of Rs 10 each at a fixed price of Rs 90 per share to mobilize Rs 12.60 crore. On performance front, the revenue from operations of the company for the FY24 is Rs 1,540.82 lakh as compared to Rs 1,448.45 lakh during the FY23 showing an increase of 6.38%. This overall increase in sales was mainly due to increase in sale of Brass Wire & Products, Steel Wire & Products during FY24 compared to FY23. Moreover, profit after tax increased from Rs 10.43 lakh for the FY23 to Rs 82.98 lakh in FY24. This increase was mainly on account of increase in revenue from operations and reduction in cost of material consumed, employee expenses and other expenses. 

The company is planning to acquire certain machineries and bring in certain manufacturing processes in-house and exert greater control over its supply chain. The newly acquired machinery will empower it to produce critical materials like Brass rods/ wires internally, reducing dependency on external suppliers and mitigating potential supply chain risks. This strategic move aligns it with its long-term vision of building a resilient and self-sustaining enterprise capable of delivering value to its customers. Presently, the company procures Brass Scrap externally and engages external manufacturers for converting scraps into Brass Rods / Wires, essential inputs for its manufacturing operations. The integration of new machinery will enable it to internalize this process, bolstering profitability and affording it greater quality control and flexibility in tailoring products to meet the bespoke needs of its clientele.