Wires and cables manufacturer Polycab IPO for Rs 1,345 crore opens for subscription today. We take a closer look at key things to know about the issue.
Wires and cables manufacturer Polycab IPO for Rs 1,345 crore opens for subscription today. At the upper end of the price band, Polycab’s public offer consists of a fresh issue as well as an offer-for-sale (OFS). As part of the issue, Polycab will issue fresh equity shares aggregating upto Rs 400 crore and sell upto 17,582,000 shares as a part of its OFS. We take a closer look at Polycab’s issue.
About Polycab’s issue
Polycab’s IPO will remain open till April 9th 2019. The firm has set a price band of Rs 533- 538 for the issue. Investors can bid in lots of 27 shares and in multiples of 27 shares thereafter. Polycab aims to raise Rs 1,346 crore through the IPO, which includes Rs 400 crore fresh issue and offer for sale of Rs 945.91 crore at the upper end of the price band.
According to Polycab’s prospectus, the proceeds of the issue is used for scheduled repayment of all or a portion of certain borrowings availed by the company. Further, it will also be used for funding incremental working capital requirements of the company and general corporate purposes.
Polycab India manufactures and sells wires and cables, as well as fast moving electrical goods (FMEG) such as electric fans, LED lighting and luminaires, switches and switchgears, solar products and conduits and accessories. Notably, Polycab is the largest wires and cables manufacturer in India, in terms of segment revenues, with a market share of approximately 18% of the organized wires and cables industry and approximately 12% of the total wires and cables industry in FY 2018, according to a report by Sana Securities.
Strengths of the issue
Taking stock of the strengths of the issue, HEM Securities said in a report that Polycab is the market leader in wires and cables in India; it has a diverse suite of electrical products with varied applications across a diverse customer base and a strong distribution network. Notably, Polycab’s distribution network in India comprises over 2,873 authorized dealers and distributors and 30 warehouses as at December 31, 2018. Polycab supplies their products directly to their authorized dealers and distributors who in turn supply their products to over 100,000 retail outlets in India.
Significant increases or fluctuations in prices of, or shortages of, or delay or disruption in supply of primary raw materials could affect company’s estimated costs, noted HEM Securities in its report. Further, the expenditures and timelines which may have a material adverse effect on its business, financial condition, results of operations and cash flows also pose a risk.
According to brokerages, the issue comes at a discount relative to its peers from the space, and can be attractive from a long-term point of view. “The company is bringing the issue at p/e multiple of approx. 20 on FY18 eps basis at price band of Rs 533-538/share. Looking after strong fundamentals of the company along with the healthy growth prospects of sector, we recommend “Subscribe” on issue,” HEM Securities said. On similar lines, Sana Securities said that the Company’s IPO is available at a discount as compared to its peers.