Plaza Wires IPO Review: Plaza wires is coming up with the IPO which is set to be listed on the NSE and BSE. The IPO will be open for subscription on 29th September 2023, and closes on 4th October 2023.
In this Plaza Wires IPO Review, we will provide a comprehensive and in-depth analysis of the company’s operations, financials, GMP as well as the strengths and weaknesses. Keep reading for more details!
Table of Contents
Plaza Wires IPO Review – About The Company
Plaza Wires Limited, incorporated in 2006, is a company engaged in the manufacturing and selling of wires. It also markets and sells LT aluminium cables and fast-moving electrical goods under the flagship brand “PLAZA CABLES” and home brands such as “Action Wires” and “PCG”.
The company offers a wide range of products, including various types of wires and cables, as well as FMEG products such as electric fans, water heaters, switches and switchgears, PVC insulated electrical tape, and PVC conduit pipe & accessories. The key products in the wires and cables segment include building wires (also known as house wires), single & multicore round flexible industrial cables, and industrial cables.
The manufacturing unit of Plaza Wires is located in Baddi, Himachal Pradesh, with an installed production capacity of 1.2 million coils per annum.
Plaza Wires employs a variety of distribution channels to sell its products, depending on geography and industry norms. The business model includes a dealer & distribution network for product sales and promotion, including sales through C&F agents. Dealers & distributors are selected based on their sales network and market reputation. The company also secures government tenders for supply to government projects and conducts direct sales to infrastructure projects.
The company strategically directs 3.5% of its sales towards government contracts, while the vast majority, 96.4%, is focused on dealers, distributors, and direct sales.
In terms of revenue generation, 9.19% comes from aluminium cables, 84.87% is generated from copper and wire cables, and FMEG products generate 5.9% of the revenue.
Plaza Wires IPO – Industry Overview
The global wires and cables market, valued at $191.6 billion in 2022, is projected to reach $351.3 billion by 2032, growing at a compound annual growth rate (CAGR) of 6.30% during the forecast period from 2023 to 2032.
In India, the cables and wire industry plays a crucial role in the economy, contributing approximately 40-45% to the electrical industry. The industry’s rapid growth is fueled by urbanization, industrialization, and government investments in infrastructure development.
The Indian Cable and Wire (C&W) industry is projected to expand to ₹1,033bn in FY23. This growth is driven by increased government infrastructure spending and demand for building wires and power cables. Government schemes such as the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya scheme) and Power for All are expected to boost demand by focusing on rural household electrification and Transmission & Distribution efficiencies. Additionally, commercial establishments and public utilities are expected to increase cabling demand.
The growth of renewable energy capacities will stimulate demand for solar cables and elastomeric cables used in windmill applications. In Tier I cities, the increasing demand and lack of open spaces for tower setup, along with rising demand from infrastructure projects like metro, have escalated the demand for Extra High Voltage (EHV) underground cables.
According to Resurgent India Limited, the Indian wires and cables industry has grown at a CAGR of approximately 13.68% over the last five years, reaching ₹788.00 billion in Fiscal 2021. The industry is expected to expand at a CAGR of approximately 14.50% to reach approximately ₹1550.00 billion by Fiscal 2026.
The Indian cable and wire industry’s growth is expected to continue in the coming years, driven by the government’s focus on infrastructure development, smart cities mission, and the increasing demand for electricity and telecom services.
Plaza Wires IPO Review – Financial Highlights
Plaza Wires has demonstrated a robust financial performance. The operational revenue has seen a substantial increase, rising from ₹145.5 crore in March 2021 to ₹182.4 crore in March 2023.
Concurrently, the Profit After Tax (PAT) has grown from ₹4.2 crore in March 2021 to ₹7.5 crore in March 2023. The company’s net worth has followed an upward trajectory, escalating from ₹39.4 crore in 2021 to ₹53 crore in 2023.
In terms of liabilities, the company’s borrowings have decreased from ₹43.3 Crore in March 2021 to ₹39.68 crore in March 2023, improving the Debt to Equity ratio from 1.10 in March 2021 to 0.75 in March 2023. Furthermore, Plaza Wires reported a healthy Return on Equity (ROE) of 14.15% and a Return on Capital Employed (ROCE) of 15.57%
Financial Metrics
(Source: RHP of the company)
Competitors of Plaza Wires
Key industry peers include Cords Cables Industries Ltd, Ultracab India Ltd, V Marc India Limited, Dynamic Cables Limited, and Paramount Communication Limited.
Strengths of the company :
- The company boasts a wide distribution network across India, with over 1249 authorized dealers and distributors, and 3 branch offices in Rajasthan, Uttarakhand, and Uttar Pradesh. This network is strengthened by repeat relationships with key distributors and dealers.
- Plaza Wires Limited offers a diverse mix of products, including wires and cables, FMEG products such as electric fans, water heaters, switches and switchgears, PVC insulated tape, and PVC conduit pipe & accessories. This variety caters to a wide range of customer needs.
- The company excels in strategic marketing and brand building, investing in campaigns to enhance brand visibility and awareness. It engages key stakeholders through Electrician Meets, distributor & dealer meets, and customer-centric advertising, promoting brand loyalty and product quality.
- Plaza Wires Limited plays a pivotal role in the communication, automotive, power, infrastructure, and household sectors. With India being the fastest-growing telecom market globally and the government’s ambitious housing initiatives, the demand for the company’s cable products is expected to remain strong.
Weaknesses of the company:
- The inability to construct the proposed manufacturing unit and expand the product portfolio within the estimated timeframe could hinder business expansion, cost reduction, competitive positioning, and profitability. Delays could lead to time and cost overruns, negatively impacting the business.
- The company’s production quantity and costs are heavily reliant on sourcing raw materials and packaging materials at acceptable prices. Price volatility and supply interruptions could adversely affect the business.
- Plaza wires generates a significant portion of its sales from operations in Delhi, UP, Haryana, Kerala, and Uttarakhand, accounting for 75% of the revenue. Any demographic or economic changes in these regions could impact business operations.
- The company’s financial health is predominantly dependent on the sale of its Wires and Cables products. Failure to anticipate customer preferences, ensure product quality, or adapt to reduced demand for these products could adversely affect the business.
Plaza Wires IPO Review – GMP
The IPO for Plaza wires is set at a price band of ₹51-₹54. The latest grey market price stands at ₹13. The IPO is projected to list at a premium of 24.07%, with an estimated listing price of ₹67.
Plaza wires IPO Review – Key IPO Information
| PARTICULARS | DETAILS |
|---|---|
| IPO Size | 71.28Cr |
| Fresh Issue | 71.28Cr |
| opening date | 29th September 2023 |
| closing date | 4th october 2023 |
| face value | ₹10 per share |
| price band | ₹51- ₹54 per share |
| lot size | 277 shares |
| Minimum lot | 1 (277 shares) |
| maximum lot | 13 (3601 shares) |
| Investment amount | ₹14,958 |
| listing date | 12th october 2023 |
Promoters: Mr. Sanjay Gupta and Mrs. Sonia Gupta are the promoters of the company
Book Running Lead Manager: Pantomath capital advisors private limited
Registrar to the Offer: Kfin technologies limited
The Objective of the Issue:
The company intends to utilize the net proceeds from the issue towards the funding of the following objects:
- 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.
- Funding the working capital requirements of the company.
- General corporate purposes.
In Closing
Cables are integral to the communication, power, infrastructure and automotive sectors. Plaza Wires has carved a niche in the domestic wire and cable industry by offering quality products at competitive prices. The company’s growth is fueled by favorable demographics and diversified portfolio.
As part of its future strategy, Plaza Wires plans to expand its manufacturing capabilities, increase the capacity to manufacture new products, and continue to broaden its brand in the wires and cables business as well as the FMEG business.
What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written By Niharika Jadhav
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