Plaza Wires Limited IPO Summary

About the Company:

Plaza Wires Ltd. was incorporated in the year 2006. The company manufactures wires, low tension (LT) aluminium cables and fast-moving electrical goods (FMEG).

Its product portfolio includes house wires, flexible industrial cables and industrial cables for submersible pumps and motors up to 1.1 KV-grade. It also makes LT power control cables, TV dish antenna co-axial cables, telephone & switchboard industrial cables, LAN networking cables, close circuit television cables and solar cables; via third party manufacturers.

It has more than 20 after-sales service centres spread across Uttar Pradesh, Uttarakhand, Jammu and Kashmir, Punjab, Haryana, and Tamil Nadu. Plaza Wires Ltd also recently launched miniature circuit breakers and distribution boards (DB). The company has over 1249 authorized dealers and distributors, 3 branches and 4 warehouses. The company is domiciled in India and the entire revenue is derived from India.

The segment wise revenue bifurcation of the company for FY 2022-23 is as under:

Industrial Overview:

The global economic forecast suggests that worldwide real GDP growth is anticipated to hover around 3.00%. In this comparison, the prospects of growth for India look positive as its real GDP is expected to grow at a rate exceeding 6.00%. This growth rate is even higher than that of China’s.

The Indian Cables & Wires industry is expected to grow to ₹1,033bn in FY23, boosted by increased infra spends by the government. Demand for building wires and power cables would be spurred by government schemes such as Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya scheme) and Power for All, focusing on electrification of rural households and T&D efficiencies, as well as an increase in cabling demand from commercial establishments and public utilities.

Apart from these statistics, the government has also undertaken various initiatives which will act as growth drivers for the industry like
· Housing for All
· Government’s Focus on improving electrification
· Make in India
· Smart Cities Mission

IPO Objectives:

1. Funding the capital expenditure towards setting up a new manufacturing unit for house wires, fire-resistant wires & cables, aluminum cables, and solar cables to expand the product portfolio.

2. Funding of working capital requirements of the Company; and

3. General corporate purposes.

Financials

The Company’s revenue from operations increased from Rs. 145.38 crores in FY 2020 - 21 to Rs. 182.49 crores for FY 2023 indicating a CAGR growth of 12.35%.

The company's EBITDA expanded from Rs. 10.86 Crores in FY 2020-21 to Rs. 15.70 Crores in FY 2022-23, with a CAGR of 20.24%. The company’s EBITDA margin has been improving from 7.47% in FY 2020-21 to 8.60% in FY 2022-23.

The company's Net Profit expanded from Rs. 4.24 Crores in FY 2020-21 to Rs. 7.51 Crores in FY 2022-23, with a CAGR of 33.00%. The company’s Net Profit margin has been improving from 2.92% in FY 2020-21 to 4.12% in FY 2022-23.

The company's ROCE has been in an increasing trend as it stood at 11.62% for FY 2020-21, improved to 13.90% for FY 2021-22, and further improved to 15.57% in FY 2022-23. Similarly, the ROE has been in an increasing trend from FY 2020-21 to FY 2022-23 with 10.75% in FY 20-21, 13.08% in FY 21-22 & 14.15% in FY 22-23.

Valuation:

The company's price-to-earnings ratio stands at 21.95, while the industry's PE ratio is 24.47, suggesting that the issue price is undervalued. Additionally, the company's price-to-book ratio is 3.11, whereas the industry's PB ratio is 3.57, signifying a under valuation of the issue price.

Peer Comparison

Key Risks:

1. Inadequate or interrupted supply and price fluctuation of our raw materials and packaging materials could adversely affect the company’s business, results of operations, cash flows, profitability and financial condition.

2. The company generates significant portion of sales from operations in certain geographical regions. For the FY 2022-23, 29.44% and 31.11% of the revenue from operations was generated from the states of Delhi and Uttar Pradesh respectively. Any adverse developments affecting operations in these regions could have an adverse impact on revenue and results of operations.

3. The industry segments in which the company operates is becoming fragmented, it faces competition from large players, which may affect its business operations and financial conditions

IPO Details