Bharat Wire Ropes is going to hit capital markets with an initial public offering (IPO) of 1,75,00,000 shares of Rs 10 each in a price band Rs 40-45 per equity share. Not more than 75 per cent of the issue will be allocated to qualified institutional buyers (QIBs), including 5 per cent to the mutual funds. Further, not less than 15 per cent of the issue will be available for the non-institutional bidders and the remaining 10 per cent for the retail investors.
Here are 9 things you should know about Bharat Wire Ropes before subscribing the IPO.
About the company: The company is a wire rope and wires manufacturing company. It is engaged in manufacturing and sales of wire ropes, structural strands, slings and wires which find its application in general engineering, fishing, elevators, cranes, material handling, power transmission, suspension bridges, onshore/offshore oil exploration, ports and shipping, mining, defence, railways etc. It is also engaged in the business of trading of the steel related products.
Promoters: The company was originally promoted by the Shah Group and in 2010. One of its current promoters – Gaji Mercantile Private Limited purchased 1,06,75,490 shares on June 30, 2010. Other promoters in the company are Murarilal Mittal, Usha Mittal and Manan Mittal.
About the issue: The issue will open for subscription from March 18-22, 2016. The shares will be listed on BSE and NSE. The face value of the share is Rs 10 and is priced 4 times its face value on the lower side and 4.50 times on the higher side.
Lead managers: Book running lead managers to the issue are Intensive Fiscal Services and BOB Capital Markets.
Objective of the offer: Proceeds from the IPO will be used by the company to set up a proposed project of 66,000 MTPA wire ropes at MIDC Zone, at Chalisgaon in Maharashtra and to meet general corporate and issue expenses.
Strengths: The company’s ability to cater to a wider customer base on account of its diversified product offering has enabled it to provide customisation options to its customers. To further strengthen its product mix, the company has made efforts to focus on niche sectors for providing wire ropes such as non-rotating ropes, suspension bridge ropes. It also has around 29 years experience in wire rope business with an established client base which helps in continued business. The company also has a diversified client base of more than 600 large and medium-size customers all over India including Original Equipment Manufacturers covering various types of industries. The experience of the management have been instrumental in building a sustainable business model and in supporting the company’s operations.
Risks and concerns: The company derives a significant portion of its revenues from its top ten customers. In the financial years 2013, 2014 and 2015 and for the period ended November 30, 2015, the company’s top ten customers accounted for 47.86 per cent, 45.07 per cent, 49.56 per cent and 64.27 per cent respectively, of its revenue from operations. In the financial year 2015, its largest customer accounted for 12.47 per cent of revenues. The loss of business derived from these customers or a significant reduction in the revenues it receive from, one or more of these customers may adversely affect the company’s business. The company’s business requires a significant amount of working capital for smooth functioning. It meets its requirement for working capital majorly through banking facilities or internal accruals. In future, the company’s inability, if any to meet its working capital requirements or inability to renew its existing working capital requirements through banking arrangements can adversely impact its business operations and financial position. The company also faces competition in the industry. While in a few instances, the company operates on a rate-contract basis, it does not have long term arrangements with all of its customers for purchase of its products in the future, at fixed prices.
Cash Flows: The company has experienced negative cash flows in previous years.