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Published on 4/04/2019 9:52:14 AM | Source: Religare Securities Ltd

IPO Note - Polycab India Ltd By Religare Securities

Posted in IPO Reports| #IPO #Religare Securities Ltd

 

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About the Company

Incorporated in 1996, Polycab India Ltd. (Polycab) is engaged in manufacturing and selling of wires and cables and fast moving electrical goods (FMEG) under the ‘Polycab’ brand. Its key products in the wires and cables segment include power cables, control cables, instrumentation cables, solar cables, building wires, flexible cables, flexible/single multi core cables, communication cables etc. Apart from wires and cables, it also manufactures FMEG such as electric fans, LED lighting and luminaires, switches and switchgears, solar products and conduits and accessories. In 2009, it diversified into the EPC business which includes the design, engineering, supply, execution and commissioning of power distribution and rural electrification projects. Polycab has a wide distribution network comprising of >2,800 authorized dealers and distributors and 30 warehouses. It has a market share of ~18% in the organized wires and cables industry and ~12% in the total wires and cables industry in India. It has 24 manufacturing facilities in Gujarat, Maharashtra, Uttarakhand and Daman and Diu. 

 

Objects of the Issue

* Scheduled repayment of all or a portion of certain borrowings availed by the Company

* To fund incremental working capital requirements

* General corporate purposes.

 

Valuation

The domestic wires and cables industry registered a strong CAGR of 23% over FY14-18 (CRISIL Estimate) in terms of volumes led by increased government focus on electrification of rural villages and households and increased investment in transmission and distribution. Further, initiatives like Smart Cities mission and housing for all also aided growth for the industry. Going forward, according to CRISIL, the domestic wires and cables industry is expected to grow at 12% CAGR by volume and 15% CAGR by value terms over FY18-23.

Polycab’s fundamental track record has been sound over FY14-18 with revenue and PAT CAGR of 14.2% and 42.8% respectively led by margin improvement (+150bps), higher other income and lower interest rate. We believe the strong performance of the company would continue on the back of positive industry growth prospects largely due to government initiatives in power and infrastructure, an increase in industrial investment, a rise in consumer spending and an increase in exports of wires and cables. Further, the company’s plan to enhance its leadership position by expanding its distribution network, higher focus on exports and expansion of its FMEG portfolio bodes well for its growth prospects. On the operational front, the company plans to improve working capital management by reducing debtor days, rationalize inventory levels, and reduce finance costs on trade payables. At upper price band, Polycab is valued at 16.7x FY19E Annualized EPS. 

 

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