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Home Articles Polycab India’s Rs 1,346-cr IPO, What the Experts Say?

Polycab India’s Rs 1,346-cr IPO, What the Experts Say?

IndianMoney.com Research Team | Posted On Monday, April 08,2019, 05:23 PM

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Polycab India’s Rs 1,346-cr IPO, What the Experts Say?

 

 

Polycab India is the country’s largest manufacturer of electric wires and cables. Polycab India plans to raise around Rs 1,345 Crores from the three-day IPO which closes tomorrow. The Polycab India IPO opened for subscription on 5th April 2019 and closes for subscription on 9th April 2019.

What’s the Price of Polycab India?

Polycab India is offering 2.5 Crore equity shares at a price band of Rs 533 to Rs 538. This is a combination of OFS (Offer for Sale), which facilitates promoters of listed Companies to dilute holdings and a fresh issue. Polycab India will use the money raised to repay debt and for working capital needs. You can subscribe to shares of the IPO in lots of 27 units. This works out to around Rs 14,391 to Rs 14,526.

Polycab Offer Details

The total offer size is Rs 1,345 Crores. The fresh issue is Rs 400 Crores, while the OFS is Rs 945 Crores. The debt repayment will be Rs 80 Crores, the working capital usage will be Rs 240 Crores and the General Corporate purpose will be Rs 80 Crores. The Company is valued at Rs 8,000 Crores. By the end of the first day, Polycab India IPO was subscribed 71.4%.

What is Polycab India’s Business?

According to the draft red herring prospectus, Polycab India has a market share of around 12% in the electric wire and cable market. Polycab India manufactures fans, LED lighting, switches, solar products and switchgears. Polycab exports to over 40 countries, contributing around 3.4% of total revenues.

Polycab India is the largest manufacturer of wires and cables in India by revenue. It’s engaged in the business of selling wires, cables and fast moving electric goods. Polycab India has 24 manufacturing facilities located in Gujarat, Maharashtra, Daman and Diu and Uttarakhand. Polycab India is setting up a plant at Halol in Gujarat to make copper wire rods.

Polycab India has a pan-India distribution network with over 2,800 authorized dealers covering 1 Lakh retail outlets and 30 warehouses. Polycab India no longer deals with small dealers.

SEE ALSO:  What Is an IPO?

Financials of Polycab India

Polycab India’s net worth as of December 31st 2018 was Rs 2,723 Crores. This is a book value of Rs 183 a share. The Company’s revenue grew at an annualized rate of 11.1% in the four years till March 2018, while net profit grew at 42.7% in the same time period.

Polycab India reported revenue of Rs 5,507 Crores and a net profit of Rs 358 Crores for the first nine months of FY 2018-19. EBIT (Earnings before interest, tax and depreciation and amortization grew at an annualized rate of 25.4%). The EBITDA was 9.2% for the 4 years till FY 2018-19.

Polycab India had a debt of around Rs 620 Crores till December 31st 2019. This debt would reduce by 80 Crores to Rs 540 Crores after Polycab India used part of the IPO proceeds to repay the debt. The rise in prices of copper, aluminum, PVC and steel would impact Polycab India’s margins. Polycab India’s debt to ratio is just 0.2 times. This is after distributing dividends for at least 4 years and a capital expenditure of Rs 900 Crores.

Polycab India: Peers and Valuations

Finolex Cables, KEI Industries and Havells India are the peers of Polycab India. Finolex Cables gets 96% of the revenue from electric cables and wires, while KEI Industries gets 75% and Havells India 32% respectively. Polycab had a much higher growth than peers in the 4 years up to March 2018.

Expert opinion: Polycab India

  • The Indian wire and cable industry has grown at the rate of 11% CAGR from FY13 to FY18. The focus is on electrification of rural areas. Polycab dominates this market. It has a 12% share of the overall market and 18% share of the organized market.
  • Polycab India is in the fast moving electric goods space and meets consumer needs in the construction industry, mining, infrastructure, metals and cements.
  • Polycab India is the largest player in the cable and wire industry in India. It has excellent relationships with suppliers and customers.
  • The revenue, EBITDA and PAT have grown at a CAGR of 14.2%, 22.9% and 41.6% respectively, for FY 16-18.
  • Return on Equity or ROE has gone up from 10.4% in FY16 to 15.8% in FY 18.

Strengths of Polycab India:

  • Polycab India is a market leader in wires and cables in India.
  • It has an excellent distribution network.
  • The manufacturing facilities enjoy backward integration. (This could be vis-à-vis suppliers).
  • It has strong brand value in the electric sector.
  • A strong management team.
  • It’s expanding in the fast moving electric goods space.
  • It invests in customer satisfaction, sales and technology.

Polycab India IPO Lead Managers:

  • Kotak Mahindra Capital Company Limited
  • Axis Capital Limited
  • Citigroup Global Markets India Private Limited
  • Edelweiss Financial Services Limited
  • IIFL Holdings Limited
  • YES Securities (India) Limited

SEE ALSO:  How To Invest In IPO?

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