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Polycab India Limited IPO Detail

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HIGHLIGHTS OF THE ISSUE

COMPANY INSIGHTS

• Polycab India is going to list at Rs. 538 per share at a market-cap of Rs. 8000 crores.

• The sales to market-cap rat­io stands at 0.68 factoring in the upper price band of the issue price, which is undervalued in comparison to its peers like Havells India which has a sales to market-cap rat­io of 0.17.

• The PE rat­io of Polycab India is 20.51 which is quite lower in comparison to Havells India which stands at 59.41.

• The company has excellent operating efficiency and reports almost a bil-lion dollars in revenues annually. Polycab India is also tapping into international markets now.

• They have reported consistent profits that have doubled since 2017.

• Their Fast Moving Electrical Goods (FMEG) have been consistently grow-ing and have started offering LED lightings and luminaries, switches, switch gears, solar products and accessories since 2014.

• They have a total of 24 manufacturing plants and have two joint ventures.

• Their 50:50 joint venture with Techno Electromech Pvt Ltd has been commenced to manufacture LED lightings and luminaries.

• The other joint venture with Traigura Pte Ltd is a 50:50 venture for Ryker Plant for base metal manufacturing. 60% production will be bought by Polycab and the rest would be available in the market.

• In October 2018, the company received order from GTPL Hathaway (sub-sidiary of Reliance).

• We could see more orders from the parent company of GTPL Hathaway and Bhar­i Airtel for optical fiber business in the future.

• A recent CRISIL Research study has found the Indian cable and wire industry has grown at a compound annual growth rate of about 11 per cent by value in the last five years to reach Rs 52,500 crore in FY18. In general, the industry’s earnings go in tandem with prices of key raw materials, mainly copper and aluminum. In value terms, CRISIL Research expects the industry to grow by a CAGR of approximately 15 per cent and reach an estimated Rs 1,033 billion by FY23. Meanwhile, rising copper prices have prompted manufacturers to raise prices of their products, which they revise every 14 days.

• Wire and cable manufacturers have changed their strategy and are focusing more on retail than institutional sales, owing to delay in receiving payments from institutional. The company has large trade receivables which will reduce once the payments kick in and reflect into profits.

• “Our dependence on ins­itu­ional sales is limited. Most of our institutional sales is done by distributors. We supply to large and reputed EPC (engineering, procurement and construction) contractors and our pay-ments are secured by appropriate commercial contracts. These could in-clude le­ters of credit, discoun­ing facility, etc. We have steadily improved our position vis-à-vis debtors,” said Ramakrishnan Ramamurthi, chief executive, Polycab India

FROM THE DESK

• Based on the current data, we believe that Polycab India Ltd is a good bet for long term investment as well as for list­ing gains.

• The company has a similar business model to that of Havells India. The EV of Polycab India is Rs 10,314 crores and that of Havells India is Rs 48,107. Hence, we believe Polycab India's IPO is reasonably priced giving head-room of 15%-20% lis­ing gains.

• We advise our clients to SUBSCRIBE to this public issue.