Plaza Wires Ltd. IPO

Published by Sharekhan Education | October 3, 2023

Plaza Wires Ltd IPO has an issue size of Rs.71 crores with price range of Rs.51-54.  The issue opens on Friday, September 29th, 2023 and closes on Wednesday, October 4th, 2023

Plaza Wires Ltd IPO Overview:

Plaza Wires Ltd. primarily manufactures and sells cables, wires, and Fast Moving Electrical Goods (FMEG), such as electric fans, water heaters, switches, and switchgear. Moreover, their product lineup features renowned brands like “PLAZA CABLES,” along with in-house brands such as “Action Wires” and “PCG.”

The company situates its existing manufacturing facility in Baddi, Himachal Pradesh. They boast a network of 1,249 authorized dealers and distributors across India. Furthermore, they have established partnerships with service centers in Uttar Pradesh, Uttarakhand, Jammu & Kashmir, Punjab, Haryana, and Tamil Nadu. Additionally, Plaza Wires’ products meet stringent quality standards, holding certifications such as ‘BIS’ and ‘QCL.’

Objectives of the Issue:

The initial public offering (IPO) comprises a fresh issue of equity shares totaling ₹71 crores. Additionally, the company plans to utilize the funds raised to finance the establishment of a new manufacturing unit and meet its working capital requirements. Investors are required to apply for a minimum of 277 shares, with subsequent multiples. Following allotment, both BSE and NSE will list the shares.

Industry Outlook:

The consumer electrical industry in India plays a significant role in the nation’s manufacturing production. It contributes approximately 8% to this sector, 1.5% to India’s GDP, and around 1.5% to its exports. This industry encompasses Wiring and Cabling (W&C) as well as FMEG segments. A leading brokerage report predicts that the sector will experience a Compound Annual Growth Rate (CAGR) of 10% over the next five years.

Furthermore, Plaza Wires Ltd. possesses a diversified product portfolio that includes high-margin FMEG products. Additionally, they have a dedicated sales and marketing team comprising 70 employees who oversee the nationwide distribution of their products. Moreover, the management team brings valuable expertise in key areas such as production, sales, marketing, and finance. Notably, Sanjay Gupta, the promoter, has played a pivotal role in managing the company’s expanding operations and implementing strategic marketing and business initiatives..

Business Strategy:

The company is expanding existing manufacturing capacities and adding a new facility with an additional capacity of 8,37,000 coils and 8,700 kilometers of cables per year. It aims to enhance its market share by targeting key growth sectors like mining, oil and gas, power, infrastructure, etc.

Key Concerns:

One notable concern is the concentration of their existing and planned manufacturing facilities in a single region, Himachal Pradesh. Additionally, they have not yet initiated orders for the capital expenditure associated with the Proposed Manufacturing Unit, which could potentially result in time and cost overruns. The company is susceptible to disruptions in the supply of raw materials, which could adversely impact its operations. Moreover, their business model is working capital intensive, with a substantial portion allocated to inventory management.

Financial Performance:

Plaza Wires Ltd. has delivered impressive financial performance, with revenue growing at a CAGR of 12% between FY21 and FY23. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) has shown a robust CAGR of 20.2% during the same period. Profit After Tax (PAT) has surged at a CAGR of 33%. Notably, the net profit margin has expanded from 2.9% to 4.1%, resulting in an improved Return on Equity (RoE) from 10.7% to 14.1%. At the upper end of the price band (₹51-54), the market values the issue reasonably at 22 times the FY23 Earnings Per Share (EPS).

Source: IPO Red Herring Prospectus

For those interested in learning more about investing, we invite you to participate in our free “Power Money Workshops” and join our investing education program, “The Ace Investor Program.” In this program, you will gain valuable insights into the step-by-step process of identifying fundamentally strong stocks and learn how to invest like a professional. Come and experience it firsthand!

Disclaimer:

Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer and registered office details visit link – https://www.sharekhan.com/disclaimer/Sharekhan_Education.html