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Published on 30/03/2021 2:07:52 PM | Source: Accord Fintech

Rajeshwari Cans coming with an IPO to raise upto Rs 4 crore

Posted in IPO Analysis| #IPO

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Rajeshwari Cans

  • Rajeshwari Cans is coming out with an initial public offering (IPO) of 20,16,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 20 per equity share.

  • The issue will open on March 31, 2021 and will close on April 6, 2021.

  • The shares will be listed on SME Platform of BSE.

  • The share is priced 2 times higher to its face value of Rs 10.

  • Book running lead manager to the issue is Fedex Securities.

  • Compliance Officer for the issue is Vishakha Gujrati.

Profile of the company

The company is engaged in the business of manufacturing round printed tin containers of various sizes which are used as packing material. It supplies the tin containers to its customers engaged in the business of tobacco manufacturing and paint manufacturing. The company also performs printing work on tin sheets supplied by its customers.

Proceed is being used for:

  • Meeting incremental working capital requirements.

  • General corporate purposes.

Industry overview

Organised manufacturing is the biggest private sector employer in India. Overall, more than 30 million people are employed by the sector (organised and unorganised) and will become the engine of growth as it tries to incorporate the huge available workforce in India, most of who are semi-skilled. The sector will push growth in the rural areas where more than 5 million manufacturing establishments are running already. This will be an alternative available to the new generation of farmers. The government aims to achieve 25 percent GDP share and 100 million new jobs in the sector by 2022. India’s manufacturing industry is already moving in the direction of industry 4.0 where everything will be connected, and every data point will be analysed. Indian companies are at the forefront of R&D and have already become global leaders in areas such as pharmaceuticals and textiles. Areas such as automation and robotics also receiving the required attention from the industry. Large international industrial producers such as Cummins and Abbott already have manufacturing bases in the country.

India’s manufacturing sector has witnessed strong growth over the past few years. The sector’s Gross Value Added (GVA) at current prices was estimated $397.14 billion in FY20PE. GVA at current prices for FY20 grew 0.3 percent y-o-y. Gross Capital Formation simply means capital accumulation over a time period through additions in physical assets such as equipment, transportation assets and electricity. This serves as an indicator of the investment activity in a sector. At current prices, Gross Capital Formation of the sector increased to Rs 9.84 trillion ($140.83 billion) in FY19^ from Rs 6.15 trillion ($128.26 billion) in FY12. With the rise of IoT in consumer tech, manufacturing sector has also started implementing this new network of sensors and actuators for data collection, monitoring, decision making and process optimisation over internet infrastructure. Data is a huge component of this whole setup and Indian companies have a lot of potential in this area with many large companies already betting on big data and analytics.

Pros and strengths

Expanded product range and total production capacity: At present the company is manufacturing the printed round tin containers of different capacity ranging from 50 gm to 500 gm for single customer to be used for packing tobacco. For Expansion, the company purchased the premises at Shree Ganesh Industrial Estate for manufacturing printed round tin containers of 50 gm which is used by snuff manufacturers. The company is enhancing product range as well as client base so the dependency on single customer for sale can be avoided.

Location of manufacturing unit: The company carry on all of its manufacturing activities at factory situated at Mahagujarat Industrial Estate and Shree Ganesh Industrial Estate and there are no substantial dependence external sources for manufacturing of printed round tin containers. Further, all other utilities like fuel, power and human resources have posed no hurdle till date.

Increasing operation efficiency: The company has adopted labour friendly approach by providing residential accommodation in the factory premises and production linked remuneration policy apart from fixed salary to increase the operational efficiency. This has provided boost to the employee to work hard to get more output of the product which ultimately provide more remuneration to them and also due of the residential accommodation in the factory premises the absenteeism of labour is minimized and resulted into increased productions.

Risks and concerns

Approximately 80% revenues generated from single customer: At present the company generate approximately 80% of its revenue from the orders received from a single customer. In the FY 2019-20 and FY 2018-19, the turnover from the single customer was 80.41% and 77.70% of the total turnover (including tax). The loss of this single customer or a decrease in the volume of orders may severely affect its revenues and profitability, if the company is unable to develop and maintain a continuing relationship with its key customer or develop and maintain relationships with other new customers. The loss of a significant customer or a number of significant customers due to any reason whether internal or external related to their business may have a material adverse effect on its business and results of operations. Any decline in company’s Quality standards, growing competition and any change in the demand for its services by these customers may adversely affect its ability to retain them.

Generate major portion of sales from certain geographical regions: In the FY 2019-20, the company had started manufacturing at Shree Ganesh Industrial Estate for a customer located in the State of Rajasthan for supplying small tin containers of 50 gm. Such geographical concentration of its business in limited area and any disturbance in these areas will hamper its production and affect its financial performance and profitability. Due to the recent pandemic, the restrictions on movement and lack of transport facilities, the company has faced challenges in manufacturing and supplying products to the customers. It needs to provide safe working conditions to employees and laborers that may involve extra cost for the company. COVID-19 may impact the wellbeing of its employees and there may be even loss of life, this could have an adverse effect on its business, results of operations, cash flows and financial conditions.

Dependent upon few suppliers for purchase of major portion of raw material: The company operate in the manufacturing of tin containers, where the major raw material consists of CR sheets (basic raw material). It has no control on the prices of these CR sheets. The prices of these CR sheets may fluctuate depending upon availability and demand, such fluctuations in the prices of the raw material and its inability to negotiate at optimum rates may affect its profitability. It may be unable to control the factors affecting the price of raw material and may also face the risks associated with compensating for or passing on such increase in its cost of production on account of such fluctuations in prices to its customers. Upward fluctuations in the prices of raw material may thereby affect its margins and profitability, resulting in a material adverse effect on its business, financial condition and results of operations.

Outlook

Incorporated in 2013, Rajeshwari Cans is primarily engaged in the business of manufacturing round-printed tin containers of different sizes for packing material and also performs printing work on it. The company supplies its tin containers to tobacco manufacturers and paint companies. It manufactures 50 gm to 500 gm containers for the packing of tobacco material and up to 5 liters of containers for the paint industry. The Promoters of the company have industry experience and have been contributing in the growth of company’s performance. It focuses on the quality of raw materials and finished products at its manufacturing units to ensure that the desired quality is attained. It takes utmost care of the quality of the raw materials purchased to maintain the quality of finished products. On the concern side, the company’s Business is working capital intensive and the growth of business depends upon the Inventory maintained by the company. Its success depends heavily upon the continuing services of Bharatkumar Vora and Harshadkumar Vora who are the persons in control of the company. The market for company’s products is competitive on account of both the organized and unorganized players. 

The company is coming out with an IPO of 20,16,000 equity shares of Rs 10 each at a fixed price of Rs 20 per equity share to mobilize Rs 4.03 crore. On the performance front, the total income from operations for the FY20 was Rs 2208.94 lakh as compared to Rs 2131.97 lakh during the FY19 showing increase by 3.61%. Profit after Tax (PAT) increased from Rs 15.75 lakh for the FY19 to Rs 18.69 lakh in FY20. The PAT was increased by 18.67% as compared to FY19 on account of increase in total revenue. The company intends to expand the capacity of manufacturing tin and for that purpose had already purchased Plot No 233, Village Moraiya, Tal. sanand, Dist Ahmedabad. It constantly endeavors to improve its production process, skill up-gradation of workers, modernization of machineries to optimize the utilization of resources. It looks to further strengthen its relationship with its existing customers and meet their requirements.

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