Introduction:
Bansal Wire Industries Limited was incorporated on 11th December 1985. Currently the company operates in three segments which are broadly classified as high carbon steel wire, mild steel wire and stainless steel wire.The company and its subsidiary offer 3000 different types of steel products of varying sizes. The company has 4 existing manufacturing facilities with a total capacity of 259000 MTPA and has opened another manufacturing facility in Dadri. The company operates in 22 states and 6 union territories through a dealer distribution network, while the company mainly generates 60% if its revenue from northern and western states of India namely Delhi, Maharashtra, Haryana and Uttar Pradesh.
IPO Details:
IPO Date | 3rd July 2024 to 5th July 2024 |
Face Value | ₹ 5/- per share |
Price Band | ₹ 243 to ₹ 256 per share |
Lot Size | 58 shares and in multiples thereof |
Issue Size | ₹ 745 crores |
Fresh Issue | ₹ 745 crores |
OFS | ₹ - NIL |
Expected Post Issue Market Cap (At upper price band) | ₹ 3262 crores |
Objectives of Issue:
- Repayment or prepayment of all or portion of borrowings availed by the company
- Investment in Company Subsidiary for repayment or prepayment of all or a portion of certain of its outstanding borrowings
- Funding the working capital requirements of our Company
- General Corporate Purpose
Key Strengths:
- Diversified Customer and End user Mix- The company has primarily 3 products which contributes more than 99 % of company revenue. However no customer contributes more than 25% of the turnover and no user segment contributes more than 10% of the revenue.
- Consistent Performance – The company focus on operational and functional excellence has led to health financial performance with total revenue having grown at a CAGR of 6% between Fiscal 2021 and Fiscal 2023, EBITDA having grown at a CAGR of 15% between Fiscal 2021 to Fiscal 2023 and Profit After Tax at a CAGR of 17% between Fiscal 2021 and Fiscal 2023
- Quality Emphasis- The Company are subjected to strict quality requirements and any product defect issues or failure by us or our raw material suppliers or our customers to comply with quality standards may lead to the cancellation of existing and future orders, recalls or exposure to potential product liability claims. However there have not been any material product liability claims made against our products or any cancellation of existing or future orders.
Risks:
- Fragmented Industry – The company belongs to an industry with a lot of local and regional players. Unbranded market player have market share upto 75%.Such competitiveness from local players could significantly affect its business.
- Negative Cash flows- The company is regularly witnessing negative operating cash flows from business which has resulted into increasing working capital days and increasing trade receivable days. The continuation of the trend can affect its business's ability to repay its financial obligations.
- Concentrated Geographical Mix- The company majorly generates revenue from Delhi, Haryana, Maharashtra, and Uttar Pradesh which amounts to more than 65% in the last 3 years. Any disruption in this year could significantly affect the business.
- Concentrated Manufacturing Capacity -The company's existing manufacturing facilities are located in north India from where all the products are supplied. Company levies additional charge in nature of transportation costs over and above the price which could significantly affect its competitiveness against the local players
Financial Snapshot:
Particulars | Year ended March'24 | Year Ended March'23 | Year Ended March'22 |
Revenue (In Millions) | 24,660 | 24,130 | 21,984 |
Growth | 2.2% | 9.8% | NA |
EBITDA (In Millions) | 1,493 | 1,147 | 1,131 |
Growth | 30.17% | 1.38% | NA |
PAT (In Millions) | 788 | 599 | 573 |
Growth | 31.48% | 4.61% |
|
EBITDA Margin | 6.05% | 4.75% | 5.15% |
PAT Margin | 3.20% | 2.48% | 2.61% |
ROCE | 18.46% | 17.34% | 18.59% |
ROE | 21.19% | 23.71% | 29.92% |
Interest Coverage Ratio | 4.71 | 4.39 | 3.94 |
Fixed Asset (In Millions) | 2,293 | 1,155 | 1,156 |
CWIP (In Millions) | 2,119 | 379 | 4 |
Debt To Equity | 1.48 | 1.49 | 1.85 |
Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.
Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.
KPI comparison with Industry Peers
Particulars | Bansal Wire | Industry Average |
P/E | 41.42 | 32.71 |
P/B Ratio | 7.72 | 5.11 |
Revenue Growth | 5.91% | 12.87% |
3 years EBITDA margin | 5.30% | 11.29% |
3 Years Pat margin | 2.75% | 5.58% |
3 years ROCE | 18.13 | 23.21 |
3 years ROE | 24.94 | 21.32 |
Conclusion
The Company belongs to an industry which is expected to grow at a CAGR of 8-10% in the next 5 years. Company products are predominantly used in the infrastructure and automotive sector which has good growth potential. Despite company has relatively higher valuation compared to its peers, business growth potential, company growth oriented actions, and company concentration in the market make it an investable option in the long run.
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