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Readymix Construction Machinery

• Readymix Construction Machinery is coming out with an initial public offering (IPO) of 30,62,000 equity shares in a price band Rs 121-123 per equity share.
• The issue will open on February 6, 2025 and will close on February 10, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 12.10 times of its face value on the lower side and 12.30 times on the higher side.
• Book running lead manager to the issue is HEM Securities.
• Compliance Officer for the issue is Pragya Abhay Mishra. 

Profile of the company

Readymix Construction Machinery is an engineering-led company, offering engineering solutions for design, development, fabrication and installation of various plant & machineries along with related equipments like Dry Mix Mortar Plant, Support equipment for Readymix Concrete Plant, Highcapacity Silos, Artificial Sand Plants (Crusher), Wall Putty Plants, Other Customized Projects etc., catering to industrial requirements of various industries like cement, concrete, crushing, construction and building materials etc. It also provides complete end-to-end turnkey solutions from conceptualization, development, fabrication, assembling, testing, logistic support, final erection and installation of various plant & machineries along with related equipments at customer’s site and other incidental and allied activities related therewith along with after sales services which includes repair & maintenance services.

Further, it also provides Annual Maintenance Service to its customers to close any possible wear and tear, providing updates and upgrades for plant operational software along with scheduled inspection & maintenance visits. Additionally, it provides Business Consultancy Services which includes innovative design, engineering, technology, and operational challenges. From initial concept to final fabrication and commissioning, its solutions help reduce capital costs, improve efficiency, enhance plant performance, and increase automation. It also offers online support for equipment installation at customer sites and Recipe Consultancy Services to evaluate ingredient feasibility and optimize recipes.  

The company had initiated the activity of Research & Development in the Financial Year 2022-23 and continued the same in the Financial Year 2023-24 as well. The aim was to develop the components of the machines in house in replacement of the ones being bought from outside suppliers. The Management had envisaged that this would substantially add to the Margins of the company and would also leave them with more scope for customization. Owing to the same, in the span of two years, the company could develop more than 35 products in house and the same has resulted in substantial savings in its costs. This has substantially impacted the Gross Margins of the company.

Proceed is being used for:

• Repayment and/or pre-payment, in full or part, of borrowing availed by the company
• Meeting working capital requirement
• General corporate purpose

Industry Overview

Heavy Engineering and Machine Tools Sector consists of Capital Goods Industry. Prominent sub-sectors of Capital Goods Industry are Machine Tools, Textile Machinery, Construction and Earthmoving, Construction and Mining Machinery and other heavy industrial machinery such as Cement Machinery, Rubber Machinery, Metallurgical Machinery, Chemical and Fertilizer Machinery, Printing Machinery, Dairy Machinery, Material Handling Equipment, Oil Field Equipment, Paper Machinery etc. These industries are delicensed and foreign direct investment (FDI) up to 100 percent under automatic route as well as technology collaboration is allowed freely. Import of old and new machineries is allowed freely. The maximum basic customs duty rate is generally 7.5%. India has entered many FTAs, in which the duty rates are even lower. Lower duty rates are also available under the Project Imports facility. Exports are promoted by allowing duty free imports of raw materials, consumables, components and sub-assemblies through various schemes of DGFT.  

The engineering sector is the largest of the industrial sectors in India. It accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Demand for engineering sector services is being driven by capacity expansion in industries like infrastructure, electricity, mining, oil and gas, refinery, steel, automobiles, and consumer durables. India has a competitive advantage in terms of manufacturing costs, market knowledge, technology, and innovation in various engineering subsectors. India’s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of huge strategic importance to India’s economy. The development of the engineering sector of the economy is also significantly aided by the policies and initiatives of the Indian government. The engineering industry has been de-licensed and allows 100% FDI. Additionally, it has grown to be the biggest contributor to the nation's overall merchandise exports.

Investment in engineering R&D sector is expected to reach $63 billion by 2025. Market size for the Indian Construction Equipment Market stood at $7.2 billion in FY23 and is forecasted to grow at a CAGR of 15% for next five years. The construction equipment industry is expected to sell 165,097 units by 2028. The machine tools market is expected to reach $2.5 billion by 2028, exhibiting a growth rate (CAGR) of 9.4% during 2023-28. India’s earthmoving and construction equipment (ECE) industry has enjoyed strong growth over the last seven years due to rapid economic development, and it has become the third largest construction equipment market in the world. Construction Equipment sales grew by 26% YoY to 135,650 units in FY24. With development of infrastructure, demand for construction equipment and other machinery is expected to rise significantly.

Pros and strengths

Offers diversified range of Products: The company has diverse product portfolio across various categories which includes plant & machineries along with related equipments used in various industries such as cement, concrete, crushing, construction and building materials etc. It deals in a wide range of products, which enables it to cater widespread customer base across various states in India. With its experience and expanded engineering capabilities, it designed and developed new equipments that required engineering capabilities, strength, precision and durability. Its continuous efforts to develop new equipments, have allowed it to serve a wide range of industries and customers, which has led it to attract new customers.

Catering to wide range of industries: The company enjoys a wide range of products with diverse applications across various industries such as cement, concrete, crushing, construction and building materials etc. It possesses fabrication unit with the ability to address customization as per customer requirements. Its diversification of revenue across multiple verticals allow it to prevent any possible industry concentration in any of its product categories. It also ensures that its revenues are consistent across periods on account of its customers serving different industry verticals with different business or industry cycles.   

Dedicated after-sales network: It has a dedicated after-sales network of 25 Employees as on December 31, 2024, which comprises of service technicians and engineers, for providing customer support and ensuring the satisfaction of its customers. It has a Customer Support Team addressing onsite training, installation and working of machine, address plant operational software issues, and manage the replacement of necessary spare parts along with Annual Maintenance services for repair and maintenance of machines. It offers after sales through various channels, including phone, email, onsite visit etc. It attempts to hold spare parts for almost all type of machines and equipments such that its inventory of spare parts facilitates quick replacements.

Risks and concerns

Maximum revenue comes from limited customers: The company is dependent on certain key customers for sale of its products. For instance, its top ten customers for the period ending December 31, 2024 and financial year ended March 31, 2024, 2023 and 2022, accounted for 55.97%, 59.90%, 59.73% and 65.91% of its revenue from operations for the said period respectively. The company’s reliance on a selected group 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 customers, failure to negotiate favourable terms or the loss of these customers, all of which could affect financial position and future prospects of the company.

Geographical constrain: The company generates its major turnover from the State of Maharashtra. For the period ending December 31, 2024 and financial year ended March 31, 2024, March 31, 2023 & March 31, 2022, it derived major portion of its revenue from the state of Maharashtra i.e. 51.07%, 40.17%, 40.76% and 23.75% of total revenue from operations, respectively. It carries its entire operations from its fabrication unit and registered office located at Pune, Maharashtra. Due to the geographical concentration of its fabrication and registered office at Maharashtra, its operations are prone to local, regional and environmental factors. Any materially adverse social, political or economic development, civil disruptions, or changes in the policies of the state government or state or local governments, may require a modification of its business strategy, or requires it to incur significant capital expenditure or suspend its operations.

Business is working capital intensive: The company requires a significant amount towards working capital requirements which is based on certain assumptions, and accordingly, any change of such assumptions would result in changes to its working capital requirements. A significant amount of working capital is required to finance the purchase of equipment, stores and spares, mobilization of resources and other work on fabricating and installation activities as service provider, before payment is received from customers. As a result, it will continue to avail debt in the future to satisfy its working capital requirements. The company’s working capital requirements may increase if it undertakes larger or additional projects or if payment terms do not include advance payments or such contracts have payment schedules that shift payments toward the end of a project or otherwise increase its working capital burden. Its lenders may implement new credit policies, adopt new pre-qualification criteria or procedures, raise interest rates or add restrictive covenants in loan agreements, some or all of which may significantly increase its financing costs, or prevent it from obtaining financings totally. As a result, its business, financial condition and results of operations may be materially and adversely affected. 

Outlook

Readymix Construction Machinery is a multidisciplinary manufacturer and supplier in the construction equipment sector. The company offers engineering solutions for designing, developing, fabricating, and installing plant machinery and equipment, including Dry Mix Mortar Plants, concrete plant support, silos, and customized projects. The company has established relationships with customers across various geographical locations. On the concern side, the company’s business is dependent on the sale of its products to certain key customers. The loss of any of these customers or loss of revenue from sales to these customers could have a material adverse effect on its business, financial condition, results of operations and cash flows. Moreover, it generates its major portion of turnover from its operations in certain geographical regions and any adverse developments affecting its operations in these regions could have an adverse impact on its revenue and results of operations.

The company is coming out with a maiden IPO of 30,62,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 121-123 per equity share. The aggregate size of the offer is around Rs 37.05 crore to Rs 37.66 crore based on lower and upper price band respectively.  On performance front, during the financial year 2023-24, the net revenue from operation of the company increased to Rs 6979.36 lakh as against Rs 5499.51 lakh in the Financial Year 2022-23 representing an increase of 26.91%. The main reason for the increase in revenue is due to increase in sale of Dry Mix Mortar Plant & Customized Projects along with increase in income from consultancy & service income and increase in income from sale of spares & scrap items. The company has reported over three-fold rise in its net profit at Rs 928.48 lakh in FY24 as compared to Rs 277.95 lakh in FY23.

The company’s product portfolio consists of various plant & machineries along with related equipments like Dry Mix Mortar Plant, Wall Putty Plants, Artificial Sand Plants (Crusher), Support Equipments for Readymix Concrete Plant, high-capacity Silos, Engineering Business Consultancy, Other Customized Projects etc. catering to industrial requirements for various sectors such as cement industry, concrete industry, crushing industry, construction and building materials industry etc. It has consistently focused on expanding and optimizing its range of plant & machineries and seek to offer new products to cater to the evolving requirements of a large customer base and cover newer customer segments across various regions of the country. In addition to the existing plant & machineries, the company is stepping into supplying of various new plant & machineries such as Load Cell trading, Tank Weighing Systems and Advanced Liquid Construction Chemical. It aims to increase the product offerings to achieve the growth in its business while maintaining the quality for existing products and services.