Yash Highvoltage coming with IPO to raise Rs 110 crore

Yash Highvoltage

• Yash Highvoltage is coming out with an initial public offering (IPO) of 75,35,000 equity shares in a price band Rs 138-146 per equity share.
• The issue will open on December 12, 2024 and will close on December 16, 2024.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 5 and is priced 27.60 times of its face value on the lower side and 29.20 times on the higher side.
• Book running lead manager to the issue is Indorient Financial Services.
• Compliance Officer for the issue is Tushar Janardan Lakhmapurkar.

Profile of the company

Yash Highvoltage is engaged in the manufacturing and distribution of wide range of transformer bushings - Oil Impregnated Paper (OIP) condenser bushing, Resin Impregnated Paper (RIP) / Resin Impregnated Synthetic (RIS) condenser bushing, High Voltage and High Current bushing, OIP Wall bushing and Oil to Oil bushing. The company also undertakes repairing, retrofitting and replacement services of old bushings. Through its team of experienced engineers, it provides on-site/off-site bushings technical testing, analysis and repairing services.

The company’s corporate office is in Vadodara, Gujarat and it conducts its manufacturing operations in its factory located at Vadodara, Gujarat. Its manufacturing facility has an annual installed capacity to produce 7,000 bushings bifurcated into 3,700 units of OIP Bushings, 3,000 units of RIP Bushings and 300 units of High Current Bushings. The factory is fully equipped with in-house quality testing facilities. The company is on the approved vendor list of various Indian Government Enterprises and large private companies engaged in Power sector. 

Proceed is being used for:

• Setting up a new factory to manufacture RIP/RIS transformer condenser graded bushings
• General corporate purposes

Industry Overview

The Indian power sector is marked by a diverse mix of energy sources, with a total installed capacity of 441.97 GW in FY24, comprising 57% from fossil fuels and 43% from non-fossil fuels. The electricity generation target for the year 2023-24 was set at 1,734.4 billion units (BU), representing a growth of around 7.2% in 2022-23. The electricity generation target for FY24 by different sources type includes 1,294.85 BU from Coal, 31.70 BU from Oil & Gas, 134.05 BU from Large Hydro, 47.94 BU from nuclear, and 225.83 BU from Total Renewable Energy Sources of which (83.39 BU from Wind, 115.98 BU from Solar and 26.47 BU from other RE sources). The Plant Load Factor (PLF) for FY24 is 66.3%, with sector-wise PLFs of 70.3% for the central sector, 77.1% for the state sector, and 67.6% for the private sector. The sector's robust growth and increased contribution of renewable energy sources, reflecting India's commitment to a more sustainable and diversified energy mix.

The Indian transformer bushing market has witnessed steady growth, with the market size increasing from Rs 1020.4 crore in FY19 to Rs 1,528.2 crore by FY24. This growth is driven by several key factors. Firstly, the government's aggressive push towards electrification and renewable energy integration has significantly boosted demand. Initiatives like the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and the Integrated Power Development Scheme (IPDS) have enhanced the transmission and distribution network, necessitating more transformer bushings. Additionally, the modernization of aging power systems and the increasing demand for electricity due to urbanization and industrialization have contributed to market growth. The market also benefits from technological advancements, with smart transformers and advanced monitoring systems becoming more prevalent.

The transformer bushing market in India is poised for significant growth, with projections indicating a market size of Rs 2,993 crore by FY34, achieving a CAGR of 7.0% from FY24 to FY34. This growth is driven by the rapid expansion of India's power infrastructure and the adoption of renewable energy. As the country integrates solar and wind energy, the need for advanced bushings capable of handling variable loads and harsh conditions will become essential. Government initiatives focused on grid modernization and the commissioning of new transformers to reduce transmission and distribution losses will also generate fresh demand for bushings. The bushing market would benefit from vertical players that could offer integrated solutions. Such players would gain from cost efficiencies, streamlined production processes, and the ability to quickly adapt to new technologies, making them well-positioned to meet the increasing demands and advancements in the transformer bushing sector. 

Pros and strengths

Unique positioning in the Indian transformer bushing market: The company is a dominant market player in manufacturing OIP condenser bushings up to 245kV and high current bushings up to 25,000 Amperes. It has pioneered the localization of explosion-proof and advanced RIP/RIS bushings through a technology partnership with a Switzerland company who pioneers in the field of solid insulation. It imports RIP/RIS bushing cores from Switzerland and uses them to produce similar branded bushings for regional markets. The company has developed and supplied transformer bushings that meet IEEE standards for the US market. This showcases its first-mover advantage and strong market position.

Strong industry tailwinds will augment demand for bushings product: The domestic as well as the international market for bushings is experiencing strong tailwinds. The demand for power in India is influenced by population growth, rapid urbanisation, industrialisation through the “Make in India” initiative of the government, electrification of railways etc. Additionally, India’s commitment to renewable energy necessitates a robust grid infrastructure capable of integrating intermittent sources like solar and wind, driving the demand for both traditional and smart transformers. The Indian transformer industry is also witnessing significant technological advancements. The integration of digital solutions enables enhanced monitoring and maintenance capabilities, improving the reliability and efficiency of power distribution.

Advanced infrastructure, manufacturing facility and R&D capabilities: The company’s factory has state-of-art manufacturing and testing equipment sourced overseas. This includes automatic winding machines, SCADA-controlled autoclave systems, handling and storage systems, and state-of-the-art testing equipment. Its in-house EHV test laboratory conducts all routine tests and several type tests per IEC 60137:2017 and IEEE standards, ensuring 100% testing of each product before it leaves the factory. The facility is further supported by integrated ERP systems and advanced 2D-3D design software. It is also developing indigenous dry RIP/RIS bushings. Its R&D division is constantly engaged in developing and launching new products which help it to gain competitive advantage in the industry.

Risks and concerns  

Maximum revenue comes from limited customers: For the three months ended June 30, 2024 and for the financial years ended 2024, 2023 and 2022, it derived revenue from operations of Rs 2,321.61 lakh, Rs 8,729.10 lakh, Rs 7,846.34 lakh and Rs 5,580.60 lakh, respectively, from its top ten clients, representing approximately 84.03%, 80.47%, 86.83% and 85.78%, respectively, of its total revenue from operations. Any downsizing by these clients may reduce their spending on the services provided by it. Further, there are a number of factors outside its control that might result in the loss of a client, including financial difficulties for a client; change in strategic priorities; and a demand for price reductions. The loss of any one or more of large clients could have an adverse effect on its business, profits and results of operations.

Majority of revenue comes from single business segment i.e. transformer bushings: Majority of its revenue is dependent on single business segment i.e. transformer bushings. Its continued reliance on single business segment for a significant portion of its revenue exposes it to risks, including but not limited to, reduction in the demand in the future; increased competition from domestic and international manufacturers; the invention of superior and cost- effective technology; fluctuations in the price and availability of the raw materials; changes in regulations and import duties; and the cyclical nature of its customers’ businesses. Any occurrences of such event could significantly reduce its revenues, thereby materially adversely affecting its results of operations and financial condition.

Geographical constrain: The company’s manufacturing facility is located at Taluka Savli, Vadodara, Gujarat. This concentration in a single region presents a potential risk. Any significant localized social unrest, natural disasters, production delays, or shutdowns - alongside political instability, workforce productivity challenges, regulatory compliance issues, rising production costs, or quality assurance problems - could adversely affect its operations. Additionally, unforeseen events such as pandemics or other disruptions in or around Vadodara or in the State of Gujarat could have a considerable impact on its business and financial health. This geographic concentration and concentration of manufacturing facility also increases its vulnerability to competitive pressures and economic, political, and demographic changes within Gujarat, which could materially affect its business, financial condition, and operational results.

Outlook

Yash Highvoltage specializes in the manufacturing and distributing a wide range of transformer bushings. The company's manufacturing unit is situated in Vadodara, Gujarat, and has an annual production capacity of 7,000 bushings. This capacity is divided into 3,700 units of OIP Bushings, 3,000 units of RIP Bushings, and 300 units of High Current Bushings. The factory is fully equipped with in-house quality testing facilities. On the concern side, the company’s business is dependent on the sale of its products to certain key customers. The loss of any such customers or a significant reduction in the sales made to such customers, could materially adversely affect its business, results of operations and financial condition. It depends on limited suppliers for its raw material requirements. The loss of one or more such suppliers could adversely affect its business, results of operations, financial condition and cash flows.

The company is coming out with a maiden IPO of 75,35,000 equity shares of Rs 5 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 103.98 crore to Rs 110.01 crore based on lower and upper price band respectively. On performance front, the revenue from operations had increased by 20.05% from Rs 9,036.21 lakh in Fiscal 2023 to Rs 10,848.08 lakh in Fiscal 2024. The main reason for the same is increase in Domestic sales of goods and Export Sales. The profit after tax increased by 5.61% from Rs 1,142.22 lakh in Fiscal 2023 to Rs 1,206.27 lakh in Fiscal 2024 which is largely in line with the Profit Before Tax. 

The company plans to launch new indigenous dry RIP bushings of up to a 245kV. The manufacturing process for this innovative technology will utilize a combination of state-of-the-art imported machinery and domestically sourced equipments, ensuring a robust and efficient production setup, such as winding machines, autoclaves, resin handling and impregnation equipment, CNC Machining centres to name a few of them. The company expects that the introduction of these indigenous dry RIP bushings will positively impact its order book and enhance its market positioning and its global market share for such products.