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• Presstonic Engineering has come out with an initial public offering (IPO) of 32,36,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 72 per equity share.
• The issue has opened for subscription on December 11, 2023 and will close on December 13, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 7.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Finshore management Services.
• Compliance Officer for the issue is Sudha Gajanana Hegde. 

Profile of the company

The company manufactures Metro Rail Rolling Stock Products, Metro Rail Signalling Products, Infrastructure Products and supplies to renowned Global and Domestic OEM’s engaged in the Rail and Metro Rail Rolling stock and Signalling equipments manufacturing and servicing companies. Its manufacturing facility is spread over approximate 28,317.50 sq.ft. situated at Hoysala Main Road, Pillappa Industrial Layout, Srigandhadakavalu, Sunkadakatte, Viswaneedam, Bangalore, North Bangalore, Karnataka, is equipped with latest machineries, equipment and instruments which is capable of manufacturing of diverse products for Railways and Metros.  The company has started its manufacturing operations in the year 2011 in Metro Rail Segment with its manufacturing plant set up in Pillappa Industrial Layout and since then it has consistently grown its presence, enhanced the scope of services, and increased its capabilities and expertise. The company is promoted by Herga Poornachandra Kedilaya and Yermal Giridhar Rao who have been instrumental in the growth of the company and has collective experience of more than 50 years in the said industry. Driven by the passion for building an integrated company for metro and railway sector, backed by their experience have been the pillars of the company’s growth and have built a strong value system for the company.

Over the years, the company has offered cost effective and customized solutions in accordance with the standardized quality requirements of the company’s customers who work in various sectors such as railway and the infrastructure sectors. The company manufactures products which are compliant with the stringent quality requirements prescribed by its customers. Further, its business model provides customised solutions to customers and also manufacture innovate solution-oriented products. Its R&D Division is equipped with the necessary facilities to carry out all necessary trials to develop and devise products suitable to the different types of its customers or for catering to the infrastructure needs of its customers. Its team of experts employed in the R&D Division carry out various tests in its in-house R&D laboratory to innovate additional applications and solutions for its products and to manufacture customizable products for its customers which are also compliant with the customer quality requirements and regulatory standards. Its R&D Division is located in its manufacturing unit with the objective to implement a performance-oriented approach with the help of technologies developed in-house. With R&D Division in place, the company ensures that the needs and demands of its customers suitable to their final products are effectively met.

Proceed is being used for:

• Funding Capital Expenditure towards purchase of additional plant and machinery.
• Prepayment in full of certain borrowings availed by the company.
• Meeting the Working Capital Requirements.
• Meeting the Issue Expenses.
• General Corporate Purposes.

Industry overview

The Indian railway system is regarded as the foundation and lifeblood of the economy. Indian railways span thousands of kilometres practically covering the entire nation, making it the fourth largest in the world after the US, China, and Russia. The Railways Board, which has a monopoly over the provision of rail services in India, oversees overseeing the whole infrastructure. Due to its low cost and effective operations, railways continue to be the most popular means of transportation for most Indians when travelling long distances. India's railway network is recognised as one of the largest railway systems in the world under single management. The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport. Indian Railways is the preferred carrier of automobiles in the country. The government of India has focused on investing in railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.

India's metro rail projects have undergone significant development, reshaping urban transportation. These projects aim to alleviate traffic congestion, reduce pollution, and enhance connectivity within cities. With projects spanning across cities like Delhi, Mumbai, Bangalore, and Chennai, India's metro network continues to expand. The development process involves meticulous planning, strategic funding, and advanced technology integration. These metro systems offer commuters a convenient and efficient mode of transport, facilitating seamless travel across crowded urban landscapes. As cities continue to grow, the expansion of metro rail projects remains a cornerstone of India's urban development strategy, catering to the needs of modern urban life.

Pros and strengths

Smooth flow of operations: The company has maintained good relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help it to get repeat business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

Well-defined organizational structure: The company has a qualified and experienced management that has decision making powers. It is expected to benefit from the management’s ability to ensure smooth flow of operations. The company is managed by a team of competent personnel having knowledge of core aspects of its Business. Its personnel policies are aimed towards recruiting talented employees and facilitating their integration into its organization and encouraging the development of their skills and expertise. Its experience, knowledge and human resource will enable it to drive the business in a successful and profitable manner for decades to come. It is dedicated to the development of expertise and know-how of its employees and continue to invest in them through training and skills.

Existing supplier relationship: The company manufactures Metro Rail Rolling Stock Products, Metro Rail Signalling Products and Infrastructure Products and acquire raw materials from several suppliers and HAS enduring relationship with them for a long time. Its strong relationships with suppliers will enable it to continue to grow its business. Due to its relationships with its suppliers, it gets quality and timely supplies of raw materials. This enables it to manage its inventories and supply quality products on timely basis to its customers. This in turn has enabled it to generate repeat business.

Risks and concerns

Business dependent on few customers: The company manufactures Metro Rail Rolling Stock Products, Railway Signaling Products, Infrastructure Products and supplies to renowned Global and Domestic OEM’s engaged in the Rail and Metro Rail Rolling stock and Signaling equipment. Revenues from any of its particular customers may vary significantly from reporting period to reporting period depending on the nature of ongoing orders and the implementation schedule for such orders. The efficiency of the sales and marketing network is critical to success of the company. Its success lies in the strength of its relationship with the customers who have been associated with the company. Its team through their experience and good rapport with these customers owing to timely and quality delivery of products plays an instrumental role in creating and expanding a work platform for the company. To get repeat orders from its customers, its team having adequate experience and competence, regularly interact with them and focus on gaining an insight into the additional needs of customers. Its long-term relationships with the customers are indicative of its quality consciousness and its designing and tooling capabilities. However, such concentration of its business on a few customers may adversely affect it if it does not achieve its expected margins or suffer losses on one or more of these customer contracts. 

Rely significantly on some suppliers: The company’s Major Raw Material i.e. Stainless Steel, Aluminium or Mild Steel are mainly procured from domestic market. It enjoys a very good relationship with its raw material suppliers, which enables a timely manufacturing and delivery of components. It keeps an array of suppliers with it, to ensure that there is no delay in manufacturing and delivery of the component to the customer due to the delay or failure to supply a critical raw material by any supplier. Presently, it has not entered into any long-term supply agreements for sourcing any of its raw materials, and it source its raw materials by entering into short-term supply agreements / purchase orders with its suppliers. It procures the raw materials required for its business pursuant to the issue of the purchase orders. While it has in the past undertaken its business pursuant to such arrangements and has not faced any disputes in relation to such purchase orders, it cannot assure that there will be no disputes with its suppliers in the future, owing to such arrangements.

Depends on stable and reliable logistics and transportation infrastructure: The company utilizes third party transportation services for procurement and supply of materials and from/ to its suppliers and customers. Transportation by road involves risks, including, collision, grounding, storm, fire, explosion, lightning, political instability, and operating restrictions/ lockdown consequent to outbreak of infectious diseases, such as the COVID-19 pandemic. Any delay or disruption caused to the transportation of materials could adversely impact its ability to procure the materials as well as to meet the delivery schedule of the customers in an economical manner. To ensure timely delivery of materials, it may also be required to maintain relatively high level of inventory of materials and this may also resultantly increase its cost. 

Outlook

Incorporated in 1996, Presstonic Engineering manufactures products for Metro Rail Rolling Stock, Metro Rail Signalling, and Infrastructure. The company offers a wide range of products, including Rolling Stock Interior Products such as Saloon Bucket/Plain Type Seats, Custom Colored Engineered Handles, Grab Pole Systems, Hand Rail Systems, Emergency Evacuation Ramps, and Honeycomb Partition Panels. It also manufactures IP-rated enclosures, beacon mounting brackets, ballastless support brackets, DCS masts, ladder assemblies with DCS mast platforms, Steel Structures, Aluminum Murals, Support Structures for Solar Panels, Wire Forms, and Cable Trays.r Panels, Wire Forms, and Cable Trays. The company focused on providing high quality products and services. It constantly strives to improve its industrial processes at every step in the production chain. Its focus on quality is evidenced by the quality certifications and accreditations that its facility has obtained from various local and international accreditation agencies. On the concern side, the company conducts its business under various contractual arrangements, where costs are estimated in advance. Under these types of contracts, contract prices are established in part on cost and scheduling estimates which are based on a number of assumptions, including assumptions relating to future economic conditions, prices and availability of labor, equipment and materials.

The company has come out with an IPO of 32,36,800 equity shares of Rs 10 each at a fixed price of Rs 72 per share to mobilize Rs 23.30 crore. On performance front, the total revenue for FY 2022-23 was increased to Rs 2113.27 lakh as against RS 1272.21 lakh in the FY 2021-22 primarily due to increase in revenue from operations of the Company. The restated Profit after Tax for FY 2022-23 has been increased to Rs 256.14 lakh as against Rs 14.06 lakh in the FY 2021-22. Meanwhile, as a part of its growth strategy, its focus is on increasing sales volume through expansion, diversification and spread in geographical outreach. Its growth in domestic market as well as international market can fetch it new business expansion and opportunities. It looks to further strengthen its relationship with its existing customers and meet their requirements.