Parmeshwar Metal coming with IPO to raise Rs 24.74 crore

Parmeshwar Metal

• Parmeshwar Metal is coming out with an initial public offering (IPO) of 40,56,000 equity shares in a price band Rs 57-61 per equity share.
• The issue will open on January 2, 2025 and will close on January 6, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 5.70 times of its face value on the lower side and 6.10 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Dhara Motka.

Profile of the company

The company is ISO 9001:2015 certified company, engaged in the business of manufacturing of copper wire and copper wire rods by recycling of copper scrap. Its manufacturing facility is situated at Gandhinagar, Dehgam, Gujarat. It manufactures copper wire and copper wire rods that are ideally suited for a wide array of applications. These applications include power cables, building wires, transformers, the automotive industry, household cables as well as bare and enameled wires. Its object is to create consistent value for its customer by delivering good quality products and best services at optimum cost through continue improvement, maintaining integrity and excellence in all the aspects of its operations.

The company’s product portfolio offers 1.6 MM copper wire and 8 MM & 12.5 MM copper wire rods and each available tailored made to meet customer specifications. At its manufacturing facility, it has an in-house testing lab, for testing its raw materials and finished products to match the quality standards as specified and required by its customers. It strives to meet the health and safety standards in its manufacturing process by providing safety tools like fire safety helmets, shoes, hand gloves, face visor, welding black goggles etc. Copper is one of the most recycled metals of all the metals. The recycling of copper scrap is gaining importance worldwide simply because of the fact that recovery of copper metal from scrap requires much less energy than its recovery made from primary source. Besides, it enables conservation of natural resources.

These industries require usage of various machines such as Chimney, Compressed Air Dryer, Baling Press, Melting Furnace, Weighbridge and Scale, Oxygen Analyzers, DG Set, and Rolling Mill etc. The company is managed by its Promoters, having combined experience of more than 30 years in metal industry and they are responsible for quality control, process improvement, Operations & Management, Human Resource & administration. Also, its promoters are responsible for financial aspects of the company along with marketing, vendor management, business planning and development. Their understanding of the consumer difficulty, intuitive entrepreneurship and involvement in key aspects of its business has helped accelerate and drive its profitable growth. The sector-specific experience and expertise of the company’s promoters has contributed significantly in the growth of the company. The vision of the company is to manufacture and supply quality products and meet the customers need. 

Proceed is being used for:

• Setting up a new manufacturing facility at Gandhinagar, Dehgam, Gujarat for manufacturing of Bunched copper wire and 1.6 MM Copper Wire (Proposed project)
• Funding of capital expenditure for Furnace renovation
• Meeting working capital requirements
• General corporate purpose

Industry Overview

Copper is a malleable and ductile metallic element that is an excellent conductor of heat and electricity as well as being corrosion resistant and antimicrobial. Copper occurs naturally in the Earth’s crust in a variety of forms. It can be found in sulfide deposits (as chalcopyrite, bornite, chalcocite, covellite), in carbonate deposits (as azurite and malachite), in silicate deposits (as chrysycolla and dioptase) and as pure 'native' copper. Copper is the second largest non-ferrous metal by usage, with global demand of refined copper was about 25.04 million tonnes in 2020. Most commercial copper ore deposits contain average grade of 0.8% copper, while copper ore in India has an average copper content of around 1%. There are two methods of mining copper minerals open pit and underground. Open- pit mining accounts for 80% of all copper mining operations in the world.

India is not self-sufficient on Copper mineral because of its low reserve/resource base. Custom Smelters in Private sector, imports copper concentrate as raw material to convert it into Refined copper. Currently the refined copper produced in India meets the Country’s demand to a certain extent and balance requirement is fulfilled by import. Electrical/Electronic Industry is by far the largest consumer of copper, where it is used in the form of cables, winding wires as it is the best non-precious metal conductor of electricity as it encounters much less resistance and is safe for electrical distribution system from high voltage transmission cables to micro-circuits.

Copper demand in electrical segment is growing due to demand in infra sector as a result of affordable housing schemes, rural electrification and more urbanization. Copper demand in India is expected to grow due to increased thrust of Govt. of India towards 'make in India' and 'Smart City' programme, Atmanirbhar Bharat in Defense, 100 GW target for Renewable Energy by 2022, PLI schemes for Consumer electronics industry, Accelerated growth for Electric Vehicles and which will drive the demand of copper in the country. Copper is essential to EV technology and its supporting infrastructure, and the increase in the electric vehicles in the market will have a substantial impact on copper demand. The projected demand for copper due to electric vehicles is expected to increase by 1.7 million tonnes by 2027.

Pros and strengths

Strong relationship with customer: The company offers copper wire and rods catering needs of various industries like power cables, building wires, transformers, the automotive industry, bare and enamelled wires household cables. Maintaining strong relationships with its key customers is essential to its business strategy and to the growth of its business. Owing to its strong customer relationships and service, it has been able to retain a number of its customers for a long period of time ensuring uninterrupted supplies of its products to them.

Quality assurance: The company’s products are ISO 9001:2015 certified. From the procurement of raw material till the dispatch of final products, it ensures quality inspection thus assuring the customers with quality products. Output of each stage is sent to in-house lab for inspection, if the same is not upto the standards, the same is subject to rejection. The company conducts inspections on suppliers to ensure the quality of the raw materials procured. Once the raw materials are arrived, it thoroughly inspect before entry into the factory premises. The Supervisor ensures that the quality and quantity of materials align with the Purchase Order. In case of any discrepancies are immediately communicated to the supplier.

Customized product offering: The company tailors its product portfolio to meet customer specifications, offering 1.6 MM copper wire and 8 MM & 12.5 MM copper wire rods. This customization capability ensures that resources are allocated efficiently to produce products that are in demand, maximizing profitability and minimizing waste.

Risks and concerns  

Significant revenue comes from limited customers: The company’s reliance on a limited number of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, a failure to negotiate favourable terms with its key customers or the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of the company. The company has garnered 43.29%, 46.78% and 40.78% of its topline from top 10 customers in FY24, FY23 and FY22 respectively. Loss of any of this large customer may affect its revenues and profitability.

Geographical constrain: The company’s operations are concentrated in the state of Gujarat. The company has garnered 63.50%, 69.70% and 62.94% of its total revenue from Gujarat in FY24, FY23 and FY22 respectively. Consequently, any significant social, political or economic disruption, or natural calamities or civil disruptions in the state of Gujarat or any changes in the policies of the state or local governments of this state or in the Government of India could require it to incur significant capital expenditure and change its entire business strategy in parts or in entirety. The occurrence of its inability to effectively respond to any such event or adapt to the changes in such policies could have an adverse effect on its business, results of operations, financial condition and cash flows.

Dependent on few suppliers for purchase of product: The company is dependent on few suppliers for purchase of product. It has purchased 46.07%, 44.47% and 43.75% of its products from top 10 suppliers in FY24, FY23 and FY22 respectively. The company cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. 

Outlook

Parmeshwar Metal manufactures copper wire and rods by recycling copper scrap. The company's manufacturing unit is situated in Dehgam, Gujarat. The company has strong and diversified supplier base for sourcing raw materials and it provides customized product offering. On the concern side, the company’s operations are concentrated in the state of Gujarat and any adverse developments affecting Gujarat could have an adverse effect on its business, results of operations and financial condition. Moreover, the company is dependent on few numbers of customers for sales. Loss of any of this large customer may affect its revenues and profitability.

The company is coming out with a maiden IPO of 40,56,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 57-61 per equity share. The aggregate size of the offer is around Rs 23.12 crore to Rs 24.74 crore based on lower and upper price band respectively. On performance front, the total revenue from operations increased by 13.20% in FY24, totaling Rs 1,10,022.81 lakh as compared to Rs 97,194.01 lakh in FY23. This growth was primarily attributable to higher sales volume and improved market conditions. Moreover, the company’s profit after tax decreased by 18.84% from Rs 889.54 lakh in FY23 to Rs 721.93 lakh in FY24.

The company, an ISO 9001:2015 certified company, specializes in producing copper wire rods from recycled copper scrap. It offers tailored products (1.6 MM copper wire and 8 MM & 12.5 MM copper wire rods) to meet customer specifications. Its production process, from procurement to dispatch, ensures quality and efficiency. It leverages skilled labour, and quality materials to maintain a competitive edge. Its experienced management team, with more than 30 years of combined experience, drives its growth and profitability. It is committed to delivering quality products that meet its customers’ needs, building relationships based on trust, quality, and customer satisfaction. It intends to continue to enhance & scale in existing executional capabilities to provide best quality products to its customers. By enhancing its executional capabilities, it intends to maintain edge over its competitors. In order to maintain its competitive edge, it will continue to add technology, skilled labours and good quality materials.