Article

Polycab India Ltd - Information Note

04 Apr 2019 Nikita Bhoota

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens- April 05, 2019
Issue Closes- April 09, 2019
Price Band- Rs 533- 538
Issue Size- ~2.50cr equity shares
Issue Size#- ~Rs 1,345 cr (at upper price band)
Bid Lot- 27 equity shares

% Shareholding

Pre IPO

Post IPO

Promoter

78.9

68.7

Public

21.1

31.3

Source: RHP

Company Background

Polycab India Limited manufactures and sells wires & cables and fast moving electrical goods (FMEG, entered in 2014) under the ‘Polycab’ brand. It had also diversified into EPC business in 2009 for power distribution and rural electrification projects. As on December 2018, its distribution network in India comprised over 2,800 authorized dealers and distributors. It has 24 manufacturing facilities including two JVs with Techno Electromech Pvt Ltd and Trafigura Pte Ltd.

Issue Details

The issue consists of Fresh issue of Rs400cr and an offer for sale (OFS) of ~93.7 lakh /~82.1 lakh shares by the Promoters group/selling shareholders; 1.75 lakh shares are reserved for eligible employees with a discount of Rs53/share. Net offer works out to ~Rs1,336cr at the upper end of the price band. The proceeds from the fresh issue will be utilized for (1) Rs80cr towards repayment of borrowings, (2) Rs240cr towards funding incremental working capital requirements and (3) balance towards general corporate purposes.

Financials

Consolidated RsCr

FYF16

FY17

FY18

9MFY19

Revenue less excise duty

5,236

5,576

6,841

5,561

EBITDA Margin %

10.0

10.0

11.7

13.4

PAT

185

233

371

358

EPS

13.0

16.5

26.2

25.3

P/E (x)

41.4

32.6

20.5

--

RONW (%)

10.4

11.7

15.8

--

Source: RHP, 5paisa Research; *EPS & Ratios at higher price band; ^non-annualized 9MFY19 numbers; PAT includes minority interest

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Points

As per Crisil Research, Polycab is the largest wires & cables manufacturer in India in terms of segment revenues. It has a market share of ~18% of the organized wires & cables industry and ~12% of the total wires & cables industry in India in FY18. Polycab is one of the faster growing manufacturers in the organized wires & cables industry over FY14-18. Its extensive range of wires & cables encompasses power cables, control cables, solar cables, etc. and also includes welding cables, railway signaling cables, green wires, etc. catering to needs of retail and institutional customers, respectively, in different industries. As per Crisil, the Indian wires & cables industry is expected to post 15% CAGR to reach an estimated Rs1.03 lakh cr by FY23 and the company intends to capture this opportunity by leveraging on its brand, product quality and strong distribution network.

The company is engaged in production and sales of portfolio of wires & cables and FMEG including electric fans, LED lighting & luminaire, switches & switchgears, solar products and conduits & accessories. Its products are used in the power industry and a range of other industries, including petrochemicals, metal & mining, communication and railways, shipbuilding and construction among others. Since its diversification into FMEG in 2014, the company has been able to transform itself from a pure B2B company to a B2B and a B2C company. As per Crisil, the Indian Switches industry is expected to register CAGR of ~9% to ~Rs6,200cr, the Indian lighting and luminaire industry is expected to post CAGR of ~7% to ~Rs30,100cr and Indian electric fan industry is expected to record CAGR of ~ 7% to ~Rs11,100cr. This provides the company with good opportunity to leverage on its brand strength and distribution reach.

Key Risk

Significant increase or fluctuations in prices of, or shortages of, or delay/disruption in supply of primary raw materials could affect the estimated costs, expenditures and timelines. This may have a material adverse effect on its business, financial condition, results of operations and cash flows.

Exposure to foreign currency fluctuation risks, particularly in relation to borrowings, import of raw materials and export of products, may adversely affect its results of operations, financial condition and cash flows.

Research Disclaimer

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Polycab India Ltd - Information Note

04 Apr 2019 Nikita Bhoota

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens- April 05, 2019
Issue Closes- April 09, 2019
Price Band- Rs 533- 538
Issue Size- ~2.50cr equity shares
Issue Size#- ~Rs 1,345 cr (at upper price band)
Bid Lot- 27 equity shares

% Shareholding

Pre IPO

Post IPO

Promoter

78.9

68.7

Public

21.1

31.3

Source: RHP

Company Background

Polycab India Limited manufactures and sells wires & cables and fast moving electrical goods (FMEG, entered in 2014) under the ‘Polycab’ brand. It had also diversified into EPC business in 2009 for power distribution and rural electrification projects. As on December 2018, its distribution network in India comprised over 2,800 authorized dealers and distributors. It has 24 manufacturing facilities including two JVs with Techno Electromech Pvt Ltd and Trafigura Pte Ltd.

Issue Details

The issue consists of Fresh issue of Rs400cr and an offer for sale (OFS) of ~93.7 lakh /~82.1 lakh shares by the Promoters group/selling shareholders; 1.75 lakh shares are reserved for eligible employees with a discount of Rs53/share. Net offer works out to ~Rs1,336cr at the upper end of the price band. The proceeds from the fresh issue will be utilized for (1) Rs80cr towards repayment of borrowings, (2) Rs240cr towards funding incremental working capital requirements and (3) balance towards general corporate purposes.

Financials

Consolidated RsCr

FYF16

FY17

FY18

9MFY19

Revenue less excise duty

5,236

5,576

6,841

5,561

EBITDA Margin %

10.0

10.0

11.7

13.4

PAT

185

233

371

358

EPS

13.0

16.5

26.2

25.3

P/E (x)

41.4

32.6

20.5

--

RONW (%)

10.4

11.7

15.8

--

Source: RHP, 5paisa Research; *EPS & Ratios at higher price band; ^non-annualized 9MFY19 numbers; PAT includes minority interest

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Points

As per Crisil Research, Polycab is the largest wires & cables manufacturer in India in terms of segment revenues. It has a market share of ~18% of the organized wires & cables industry and ~12% of the total wires & cables industry in India in FY18. Polycab is one of the faster growing manufacturers in the organized wires & cables industry over FY14-18. Its extensive range of wires & cables encompasses power cables, control cables, solar cables, etc. and also includes welding cables, railway signaling cables, green wires, etc. catering to needs of retail and institutional customers, respectively, in different industries. As per Crisil, the Indian wires & cables industry is expected to post 15% CAGR to reach an estimated Rs1.03 lakh cr by FY23 and the company intends to capture this opportunity by leveraging on its brand, product quality and strong distribution network.

The company is engaged in production and sales of portfolio of wires & cables and FMEG including electric fans, LED lighting & luminaire, switches & switchgears, solar products and conduits & accessories. Its products are used in the power industry and a range of other industries, including petrochemicals, metal & mining, communication and railways, shipbuilding and construction among others. Since its diversification into FMEG in 2014, the company has been able to transform itself from a pure B2B company to a B2B and a B2C company. As per Crisil, the Indian Switches industry is expected to register CAGR of ~9% to ~Rs6,200cr, the Indian lighting and luminaire industry is expected to post CAGR of ~7% to ~Rs30,100cr and Indian electric fan industry is expected to record CAGR of ~ 7% to ~Rs11,100cr. This provides the company with good opportunity to leverage on its brand strength and distribution reach.

Key Risk

Significant increase or fluctuations in prices of, or shortages of, or delay/disruption in supply of primary raw materials could affect the estimated costs, expenditures and timelines. This may have a material adverse effect on its business, financial condition, results of operations and cash flows.

Exposure to foreign currency fluctuation risks, particularly in relation to borrowings, import of raw materials and export of products, may adversely affect its results of operations, financial condition and cash flows.

Research Disclaimer