IPO Note | Cables
April 04, 2019
Polycab India Ltd
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sue Open: April 05, 2019
Is
Issue Close: April 09, 2019
Polycab India Ltd (PIL) manufactures and sells a diverse range of wires & cables. The
company’s key products in the wires & cables segment include power cables, control
cables, instrumentation cables, solar cables, building wires and flexible cables. In the
Issue Details
year 2009, the company diversified into engineering, procurement and construction
(EPC) business. Further, it also ventured into fast moving electrical goods (FMEG)
Face V alue: `10
segment in 2014 and started offering products such as electric fans, LED lighting &
Present Eq. Paid up Capital: `141.2cr
luminaires, switches & switchgears, solar products & conduits and accessories. The
company has 24 manufacturing facilities, including two joint ventures.
Fresh issue: `400cr
Market leader in wires and cables in India: PIL is the largest wires & cables
Post Eq. Paid up Capital:` 148.6cr
manufacturer in India in terms of segment revenues, with a market share of ~18% of
the organized wires & cables industry and ~12% of the total wires & cables industry in
Issue size (amo unt ): `13 37cr -**`134 6 cr
FY2018 (Source: CRISIL Research).
Strong distribution network: PIL’s strong distribution network across India enables it to
Price Band: `533-538
roll out new products more quickly, which gives competitive advantage over
Lo t Size: 2 7 shares and in multiple thereaft er
competitors. Currently, PIL has over 2,800 authorized dealers and distributors. Further,
the company supplies products directly to authorized dealers and distributors who in
Post-issue implied mkt. cap: *`7923cr - **`79 97cr
turn sell these products to over 100,000 retail outlets in India.
Promoters holding Pre-Issue: 78.9%
Established brand in the electrical industry: PIL is an established manufacturer of wires
& cables and other electrical products, and the company sells products under the
Promoters holding Post-Issue: 63.2%
‘POLYCAB’ brand. PIL intends to continue to advertise through social media,
*Calculat ed on lo wer price b and
conventional media (television, print) and internet coupled with in-store promotions
such as sales promotion, retail pop-ups and visual merchandising.
** Calculated o n up per p rice band
Outlook & Valuation: In terms of valuations, the pre-issue P/E works out to 16.7x its
Book Building
FY2019 annualized earnings (at the upper end of the issue price band), which is slightly
Q IB s
50% o f issue
lower compared to its peers like Finolex Cables (20.7x) & Kei Industries (20.x). Further,
Polycab’s market leadership position in wires & cables segment, diversified product
Q IB s
15% o f issue
portfolio, strong distribution network & brand recall and proven financial track record
Q IB s
35% o f issue
are the key positives. Given the above favorable factors, we recommend Subscribe to
issue.
Post Issue Shareholding Pattern
Key Financials
Y/E March (Rs cr)
FY2017
FY2018E
FY2019E
FY2020E
Promoters
78.9%
Net Sales
6,045
6,911
4,821
5,475
Others
2 1.1%
% chg
5.8
14.3
(30.2)
13.6
Net Profit
232
371
183
361
% chg
24.6
59.6
(50.6)
97.3
OPM (%)
7.9
10.6
8.1
12.6
EPS (Rs)
16.5
26.3
13.0
25.6
P/E (x)
32.7
20.5
-
-
Amarjeet S Maurya
P/BV (x)
3.8
3.2
-
-
+022 39357600, Extn: 6831
RoE (%)
11.6
15.8
-
-
RoCE (%)
12.5
19.7
-
-
EV/Sales (x)
1.4
1.2
-
-
EV/EBITDA (x)
17.5
11.2
-
-
Source: Company, Angel Research; Note: Valuation ratios based on pre-issue outstanding
shares and at upper end of the price band
Please refer to important disclosures at the end of this report
1
Polycab India | IPO Note
Company background
Polycab India Ltd (PIL) manufactures and sells a diverse range of wires & cables. The
company’s key products in the wires & cables segment include power cables, control
cables, instrumentation cables, solar cables, building wires and flexible cables.
In the year 2009, the company diversified into engineering, procurement and
construction (EPC) business. Further, it also ventured into fast moving electrical
goods (FMEG) segment in 2014 and started offering products such as electric fans,
LED lighting & luminaires, switches & switchgears, solar products & conduits and
accessories.
The company has 24 manufacturing facilities, including two joint ventures with
Techno Electromech and Trafigura, located across the states of Gujarat,
Maharashtra and Uttarakhand and the union territory of Daman and Diu.
Issue details
Polycab is raising ~`400cr through fresh issue and selling 1,75,82,000 equity
shares through offer for sale in the price band of `533-538. The company will dilute
~12% (at upper price band) of its Post-offer paid-up equity share capital.
Exhibit 1: Pre and Post IPO shareholding pattern
No of shares (Pre-issue)
% No of shares (Post-issue)
%
Promoters
111472029
78.9%
93890029
63.2%
Others
29733809
21.1%
54,750,753
36.8%
Total
141205838
100.0%
148640782
100.00%
Source: Source: RHP, Note: Calculated on upper price band
Objectives of the Offer
Repayment of debt (`80cr), working capital requirements (`240cr), and
balance for general corporate purposes.
April 04, 2019
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Polycab India | IPO Note
Income Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
9MFY18
9MFY19
Net Sales
5715
6045
6911
4821
5475
% chg
5.8
14.3
(30.2)
13.6
Total Expenditure
5,223
5,568
6,176
4,430
4,785
Raw Material
4321
4682
5225
3747
3918
Personnel
204
227
256
188
234
Others Expenses
698
659
695
494
633
EBITDA
492
477
736
392
690
% chg
(3.0)
54.2
(46.8)
76.1
(% of Net Sales)
8.6
7.9
10.6
8.1
12.6
Depreciation& Amortisation
111
127
132
98
106
EBIT
381
350
604
293
584
% chg
(8.2)
72.6
(51.4)
99.0
(% of Net Sales)
6.7
5.8
8.7
6.1
10.7
Interest & other Charges
147
65
92
54
90
Other Income
34
75
65
47
54
(% of PBT)
12.6
21.0
11.3
16.3
9.9
Recurring PBT
267
360
577
287
548
% chg
34.7
60.2
(50.3)
91.4
Tax
81
128
206
104
187
(% of PBT)
30.2
35.5
35.7
36.1
34.1
PAT (reported)
186.5
232.3
370.8
183.0
361.1
Extraordinary Items
-
-
ADJ. PAT
186.5
232.3
370.8
183.0
361.1
% chg
24.6
59.6
(50.6)
97.3
(% of Net Sales)
3.3
3.8
5.4
3.8
6.6
Basic EPS (`)
13.2
16.5
26.3
13.0
25.6
Source: Company, Angel Research
April 04, 2019
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Polycab India | IPO Note
Exhibit 2: Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
9MFY18
9MFY19
SOURCES OF FUNDS
Equity Share Capital
141
141
141
141
141
Reserves& Surplus
1638
1853
2209
2036
2579
Shareholders Funds
1,779
1,994
2,350
2,177
2,720
Total Loans
794
811
719
1176
531
Deferred Tax Liability
7
31
82
19
173
Total Liabilities
2,581
2,836
3,151
3,371
3,424
APPLICATION OF FUNDS
Net Block
984
1113
1180
1133
1251
Capital Work-in-Progress
40
37
39
37
39
Investments
4
37
39
37
40
Current Assets
2,742
3,190
3,035
3,198
3,900
Inventories
980
1517
1356
1659
2288
Sundry Debtors
1389
1247
1375
1166
1195
Cash
45
28
9
41
5
Other Assets
315
396
278
332
411
Current liabilities
1170
1512
1116
1058
1773
Net Current Assets
1,572
1,678
1,919
2,140
2,127
Deferred Tax Asset
125
566
302
298
107
Mis. Exp. not written off
-
-
-
-
-
Total Assets
2,581
2,836
3,151
3,371
3,424
Source: Company, Angel Research
April 04, 2019
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Polycab India | IPO Note
Exhibit 3: Cash Flow Statement
Y/E March (Rs cr)
FY2016
FY2017
FY2018
9MFY18
9MFY19
Profit before tax
267
360
577
287
548
Depreciation
111
127
132
98
106
Change in Working Capital
-213
-185
-367
-605
-167
Interest / Dividend (Net)
147
65
92
54
90
Direct taxes paid
-119
-100
-139
-89
-79
Others
27
15
58
50
20
Cash Flow from Operations
221
283
352
-205
518
(Inc.)/ Dec. in Fixed Assets
-239.0
-269.0
-171.4
-127.5
-200.7
(Inc.)/ Dec. in Investments
(12)
0
(6)
10
(51)
Cash Flow from Investing
-251
-269
-178
-117
-252
Issue of Equity
-149
-66
-93
-53
-82
Inc./(Dec.) in loans
99
91
68
66
0
Dividend Paid (Incl. Tax)
0
0
0
0
0
Interest / Dividend (Net)
91
(44)
(164)
327
(186)
Cash Flow from Financing
41
-19
-189
340
-268
Inc./(Dec.) in Cash
10
(5)
(15)
17
(2)
Opening Cash balances
16
26
21
21
7
Closing Cash balances
26
21
7
39
5
Source: Company, Angel Research
April 04, 2019
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Polycab India | IPO Note
Exhibit 4: Key Ratios
Y/E March
FY2016
FY2017
FY2018
Valuation Ratio (x)
P/E (on FDEPS)
40.7
32.7
20.5
P/CEPS
25.5
21.1
15.1
P/BV
4.3
3.8
3.2
EV/Sales
1.5
1.4
1.2
EV/EBITDA
17.0
17.5
11.2
EV / Total Assets
3.2
2.9
2.6
Per Share Data (`)
EPS (Basic)
13.2
16.5
26.3
EPS (fully diluted)
13.2
16.5
26.3
Cash EPS
21.1
25.5
35.6
Book Value
126.0
141.2
166.4
Returns (%)
ROCE
14.8
12.5
19.7
Angel ROIC (Pre-tax)
15.1
12.8
20.0
ROE
10.5
11.6
15.8
Turnover ratios (x)
Asset Turnover (Gross Block)
2.2
2.1
2.2
Inventory / Sales (days)
63
92
72
Receivables (days)
89
75
73
Payables (days)
68
82
48
Working capital cycle (ex-cash) (days)
83
85
96
Source: Company, Angel Research
April 04, 2019
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Polycab India | IPO Note
Research Team Tel: 022 - 39357800
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April 04, 2019
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