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Marco Cables & Conductors

• Marco Cables & Conductors is coming out with an initial public offering (IPO) of 52,02,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share. 
• The issue will open for subscription on September 21, 2023 and will close on September 25, 2023.
• The shares will be listed on NSE Emerge.
• The share is priced 3.60 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Priyanka Vinod Patil.

Profile of the company

The company is engaged in the business of manufacturing and selling of wires, cables wires and conductors in India, with an operating history of over 34 years in power cable industry in India. It commenced its operations with manufacturing of wires (with aluminium / copper conductor), XLPE /PVC cables, Aerial Bunched Cables, subsequently it included AAAC (All Aluminium Alloy Conductor) and ACSR (Aluminium Conductor Steel Reinforced) Conductors and had made its presence in the industry. It has been manufacturing XLPE, PVC & Aerial Bunched Cables for last 3 decades. Recently, it has started ACSR - Aluminium Conductor Steel Reinforced, AAAC - All Aluminium Alloy Conductor, ABC - (Aerial Bunched Cable) for distribution & transmission power lines. 

Majority of its products are supplied to electricity boards of different states like Maharashtra, Gujarat, Tamil Nadu, Telangana, Haryana, Chhattisgarh, Madhya Pradesh etc. and turnkey contractors of India. Its products cover entire range of voltage & transmission lines suitable up to 1.1 KV. Its products are also certified as compliant with various quality standards including Bureau of Indian Standards (BIS) and International Organization for Standardization (ISO). Its manufacturing facilities are equipped with in-house testing laboratory to ensure that the finished products match the quality standards and certifications as specified. 

It sells its products through a diversified sales & distribution mix, majorly by 1) securing government tenders for supply to government projects 2) supply to EPC contractors for turnkey projects and 3) direct sales to few private companies. Over the years, it has made continuous investments in its manufacturing infrastructure to support its product portfolio requirements and reach. Its capabilities as a company includes strict quality assurance system, in-depth production designing experience and established marketing and distribution relationships. It strives to deliver customized products and provide quality services.

Proceed is being used for:

• Funding of capital expenditure requirements of the company towards purchase of: (i) Solar Power System and (ii) 1 + 12 Rigid Stranding Machine.
• Funding incremental working capital requirements
• General corporate purposes

Industry overview

The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors. The last two to three decades are probably the fastest infrastructure growing years of India, and so it is for the Wire & Cable industry. The rapid urbanization and industrial development have contributed to the exponential growth of the electrical cable industry in the country. According to a study - the global wire and cable market is growing at a CAGR of 6.45%. It predicts that the global market size of this industry is expected to reach USD 332.65 bn by 2026 from USD 201.76 bn in 2018. The Indian wire and cable market is growing at an even faster pace. With a whopping CAGR 15% growth rate, the rising Indian market reflects the rapid developments in the power and infrastructure sector. And it’s not going to slow down any time soon. 

India’s manufacturing exports for FY22 reached an unprecedented $418 billion, an overall growth of more than 40% compared to the $290 billion from the previous year. By 2030, Indian middle class is expected to have the second largest share in global consumption at 17%. India’s gross domestic product (GDP) at current prices stood at Rs 51.23 lakh crore ($694.93 billion) in the first quarter of FY22, as per the provisional estimates of gross domestic product for the first quarter of 2021-22. The manufacturing GVA at current prices was estimated at $77.47 billion in the third quarter of FY22 and has contributed around 16.3% to the nominal GVA of during the past ten years. India has potential to become a global manufacturing hub and by 2030, it can add more than $500 billion annually to the global economy.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of $2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors. The Indian Cellular and Electronics Association (ICEA) predicts that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to $100 billion by 2025 through policy interventions. 

Pros and strengths

Qualifying in BQR of Government tenders: It is qualified to tender for Government Projects, every electricity board has their own bid qualification requirements (BQR) due to its past track record, performance and experience of more than 34 years in the industry and its ability to meet the eligibility criteria. The majority of its revenue is generated from subscribing and fulfilling of tenders invited by state electrical boards.

Customized product development: Its customers prefer to have tailor-made product as per their particular requirement. Its manufacturing team focuses on the precise desires of customers and with the help of individual support, customized products are developed.

Strong Financial Management: It has a disciplined financial management to ensure that proper records are maintained and follow up is conducted with regard to the day-to-day activities and receivables of the company and to ensure that the receivables are consistent with the financial appetite of the company. Its internal control systems ensure periodic audits to ensure continuous monitoring of the status of the financial resources of the company and ensure that proper balance is maintained between the receivables and payables.

Risks and concerns

Working capital requirements: Its business demands working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

Highly competitive: The market for cables and wires manufacturers is highly competitive and it expects competition to intensify and increase from a number of sources. It competes in wires & cables industry on the basis of the range of its products, quality of its products, price, securing government tenders and distribution network. The industry and markets for its products are characterized by factors such as technological change, the development of new end products and their rapid obsolescence, evolving industry standards and significant price erosion over the life of a product. Factors affecting its competitive success include, amongst other things, price, demand for its products, availability of raw materials, brand recognition and reliability. 

Dependent on third party transportation: It uses third party transportation providers for the delivery of its raw material and products. Transportation strikes could have an adverse effect on its receipt of raw materials and its ability to deliver its products to its customers. In addition, transportation costs in India have been steadily increasing over the past several years. Continuing increases in transportation costs or unavailability of transportation services for its products may have an adverse effect on its business, financial condition, results of operations and prospects.

Outlook

Marco Cables & Conductors is engaged in the business of manufacturing and selling of wires, cables wires and conductors in India, with an operating history of over 34 years in power cable industry in India. On the concern side, the market for cables and wires manufacturers is highly competitive and it expects competition to intensify and increase from a number of sources. It competes in wires & cables industry on the basis of the range of its products, quality of its products, price, securing government tenders and distribution network. 

The company is coming out with an IPO of 52,02,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share to mobilize Rs 18.73 crore. On performance front, the company’s total revenue increased by 0.50% to Rs 5,693.72 lakh for the FY 2023 from Rs 5,665.31 lakh for the FY 2022.  The Profit after Tax increased by 738.08% to Rs 280.71 lakh in FY 2023 from Rs 33.49 lakh in FY 2022. Going forward, the company plans to continue to focus on customers with whom it has long-standing relationships in order to develop and supply more sophisticated, higher margin products. For example, it has started manufacturing AAA Conductors and will be supplied to most of its existing customers.