Mangal Compusolution coming with IPO to raise Rs 16.23 crore

Mangal Compusolution

• Mangal Compusolution is coming out with an initial public offering (IPO) of 36,06,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 45 per equity share.
• The issue will open on November 12, 2024 and will close on November 14, 2024.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Jawa Capital Services.
• Compliance Officer for the issue is Foram Rakeshkumar Shah.

Profile of the company

Mangal Compusolution is engaged in delivering comprehensive IT hardware solutions designed to meet the ever-evolving technology needs of businesses across various industries. With a major focus on the rental of IT hardware, it strives to provide top-tier equipment and services that empower organizations to thrive in the digital age. It is actively involved in the business of renting and selling IT hardware equipment, offering comprehensive end-to-end IT equipment. Although it is servicing clients across India, however, Maharashtra region accounts for its major source of revenue, for the quarter ended June 30, 2024, Maharashtra region accounted for 96.87% of the total revenue. Its services encompass the rental of a diverse range of IT equipment, including servers, laptops, desktops, projectors, router-switches, workstations, Plasma/LCD TVs, PA Systems, and various accessories. Additionally, it specializes in creating customized IT configurations tailored to its clients’ specific specifications and needs, available for both rental and purchase.

The company’s rental services offer businesses the flexibility to scale their IT infrastructure as needed. It caters to both small as well as large enterprises, its IT hardware products, including laptops, desktops, servers, and other IT equipment, can be tailored to meet specific requirements of the clients. This scalability allows the clients to adapt to changing workloads, seasonal demands, or project-specific needs without the burden of long-term hardware ownership. Its IT rental services provide its customers with valuable flexibility and advantages, enabling them to conserve capital expenditure (CAPEX), realize tax benefits through the adjustment of rental expenses from gross profit, and significantly, avoid technological obsolescence. Furthermore, it also offers new and pre-owned IT equipment to clients based on their requirements. It understands that the process of setting up and deploying IT hardware can be time-consuming and complex. To simplify this process, it provides on-site setup and deployment services. Its experienced technicians will ensure that the rented equipment is installed, configured, and integrated seamlessly into existing infrastructure, saving client’s valuable time and resources.

In addition to offering IT equipment for rental, it also provides on-site support and maintenance services. It has on board team of 8 personnels who have average experience of around 10 years in computer hardware field, which enables it to execute projects with precision, adhering closely to its clients’ specifications and requirements. This dedication to excellence has established it as a dependable and trusted partner for its clients, driving it to continuously broaden its service offerings. Its Products includes a wide array of desktops, laptops, and presentation equipment for short- and long-term business needs. It exclusively rent top-tier IT equipment brands such as IBM, Dell, HP, Lenovo, Sony, Apple, Compaq, and Toshiba, ensuring seamless compatibility of software with the rented machines and a seamless integration with its clients’ existing branded equipment. 

Proceed is being used for:

• Capital expenditure
• General corporate purposes

Industry Overview

The networking equipment market refers to the industry involved in the manufacturing, sales, and distribution of hardware and software components used to establish and manage computer networks. This market encompasses a wide range of products and technologies, including routers, switches, hubs, modems, network cables, wireless access points, network adapters, network security devices, network management software, and more. These components are designed to facilitate data transmission, routing, switching, and network management to ensure efficient and reliable communication between devices and systems. The networking equipment market caters to diverse sectors, including telecommunications, IT and data centers healthcare, government, education, financial services, manufacturing, and various other industries. With the increasing demand for high-speed data transfer, reliable connectivity, and secure network infrastructure, the market continues to evolve and innovate to meet the ever-growing networking needs of organizations and individuals.

The Indian government is taking several initiatives to promote the growth of the IT hardware industry in the country. These initiatives include the Production-Linked Incentive (PLI) scheme, the National Manufacturing Policy, and the Startup India initiative. These initiatives are expected to provide a boost to the growth of the Indian IT hardware industry by attracting investments, creating jobs, and boosting exports. The PLI scheme has led to significant increase in investment in the sector, with many global companies announcing plans to set up manufacturing plants in India. The PLI scheme encourages companies to source components and subassemblies locally. This will help to develop the domestic supply chain for IT hardware and reduce India’s reliance on imports.

The IT hardware market in India is on a positive trajectory. IT is crucial in various sectors, including business, healthcare, education, finance, entertainment, and government. As the industry continues to expand and evolve, the demand for IT hardware increases correspondingly. The increasing digitization of the public sector is a significant driver for the IT hardware market. Local governments recognize the benefits of digital technologies and are implementing various initiatives to enhance their service delivery, improve efficiency, and provide better citizen-centric solutions. Hardware for servers and data centers is in greater demand as companies strive to improve their digital capabilities. India offers a favorable business environment for the IT hardware industry. The country has a large pool of skilled and low-cost labor, a robust manufacturing sector, and a strategic location. These factors make India an attractive destination for IT hardware manufacturing. 

Pros and strengths

Diverse product range: The company boasts a comprehensive product range, including offerings from leading brands such as HP, Dell, Lenovo, and more. This ensures its clients have access to a wide selection of high-quality IT hardware options tailored to their specific needs.

Timely turnaround: The company’s strength lies in aiding companies to fill their turnaround time effectively. By providing quick and efficient solutions, it becomes the stop-gap bridge that fulfills their timely IT hardware requirements, contributing to the seamless flow of their operations.

Customer-centric approach: Understanding the unique needs of its customers is at the core of its operations. It takes pride in its ability to tailor its offerings to meet the specific requirements of each client. This customer-centric approach allows it to provide personalized solutions that align with their business objectives.

Risks and concerns  

Maximum revenue comes from limited customers: The company is dependent on certain customers who have contributed a substantial portion of its total revenues. The company garnered 69.25%, 83.72% and 65.45% revenue from top 10 customers in FY24, FY23 and FY22 respectively. There is no guarantee that it will retain the business of its existing key customers or maintain the current level of business with each of these customers. Maintaining strong relationships with its key customers is, therefore, essential to sustain the growth of its business. The loss of any key customer may significantly affect its revenues, and it may have difficulty securing comparable levels of business from other customers to offset any consequent loss.

Geographical constrain: The company generates major domestic sales through its customers situated in Maharashtra. For 3 months’ period ended June 30, 2024 and for the financial year ended March 31, 2024, its revenue from Maharashtra region represented 96.87% and 95.26%, respectively, of the revenue from operation for such period. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region, which may adversely affect its business prospects, financial conditions and results of operations.

Business relies heavily on capital investments: The company requires a substantial amount of capital for the procurement of IT equipment, such as laptops, desktops, printers, servers, and various peripherals, including projectors and storage devices. Failing to secure additional financing on commercially acceptable terms could have a negative impact on its ability to expand its business and enhance or sustain future profitability. As of June 30, 2024, March 31, 2024, March 31, 2023 and March 31, 2022, its net fixed assets amounted to Rs 920.41 lakh, Rs 960.53 lakh, Rs 989.78 lakh and Rs 1,205.38 lakh, respectively, with gross asset values of Rs 4,492.01 lakh, Rs 4,552.12 lakh, Rs 4,715.71 lakh and Rs 5,267.09 lakh, respectively. There is no guarantee that it will be able to access additional financing in a timely manner or at all. If it is unable to obtain the necessary funds when required or on terms it finds acceptable, it may be compelled to downsize or even abandon its expansion and growth plans, or reduce capital expenditure and the scope of its operations. Any of these outcomes could have a significant and detrimental impact on its business, financial position, and operational results.

Outlook

Mangal Compusolution provides hardware rental solutions to fulfill the needs of businesses across various industries. The company rents IT hardware and offers comprehensive end-to-end IT equipment. It recognizes the critical nature of IT infrastructure in today’s business landscape. To ensure uninterrupted operations, it offers 24/7 service availability. Its dedicated support team is ready to assist clients at any time, providing peace of mind and swift resolutions to any concerns. On the concern side, the company is highly dependent on certain key customers for a substantial portion of its revenues. Loss of relationship with any of these customers may have a material adverse effect on its profitability and results of operations. Moreover, its top ten suppliers contribute majority of its purchases. Any loss of business with one or more of them may adversely affect its business operations and profitability.

The company is coming out with an IPO of 36,06,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 45 per equity share to mobilize Rs 16.23 crore. On performance front, the company’s total income decreased by 32.69% from Rs 3,483.18 lakh for the Financial Year ended March 31, 2023 to Rs 2,344.42 lakh for the Financial Year ended March 31, 2024. This decrease was primarily due to a decrease in other income. Moreover, the company recorded a profit after tax of Rs 385.80 lakh for the Financial Year ended March 31, 2024 from a profit of Rs 704.09 lakh for the Financial Year ended March 31, 2023.

The company intends to improve functional efficiencies to achieve cost reductions to have a competitive edge over the peers. Its employees are regularly motivated to increase efficiency through error-free practices. This can be done through a continuous process improvement. Further this can be done through domestic presence and economies of scale. Increasing its penetration in existing regions with a new range of products, will enable it to penetrate new catchment areas within these regions and optimize its infrastructure. Going forward, the company constantly endeavours to improve its services, skill up-gradation of technicians, using latest technology to optimize the utilization of resources. It regularly assesses its existing material procurement to identify the areas of bottlenecks and correct them. This helps it in improving efficiency and putting resources to optimal use.