Shivalic Power Control IPO

The electric control panel market is on the cusp of significant expansion. It’s expected to reach $7.79 billion by 2028, growing at a rate of 7.3% each year. Shivalic Power Control is one company positioned to benefit in this niche industry.  

As the company prepares to debut with its IPO, it presents a promising investment opportunity. Before making any investment decisions, read the following to get all the essential details.

About Shivalic Power Control Pvt Ltd

As noted earlier, the company is an ISO-certified electric panel manufacturer. An electrical panel takes power from a generator or transformer and sends it to different devices. It helps operators monitor and maintain the electric system easily and safely.

The 2004-founded company specialises in a variety of electric panels. Like Power Control Center or PCC panels, Intelligent Motor Control Center or IMCC panels, smart panels and various other products. It is into both Low Tension or LT and High Tension or HT panels, including 11KV and 33KV panels.

The manufacturing facility is in Haryana. It covers 1.25 lakh square feet and has a capacity of 10k verticals each year. 500+ customers in sectors including FMCG, autos, sugar, paper, cement, and steel. Some of their marquee clientele are Hewlett Packard, Jindal Steel & Power, JK Cement, Yamaha Motors, Dabur, and Radico.

The firm also exports to countries such as neighbouring Nepal and Bangladesh, as well as African countries like Uganda, Kenya, Nigeria, and Algeria. Leading companies in the sector, including TDK, Siemens, Schneider Electric, and L&T, have given the company authority to produce entirely type-tested panels.

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The company now

As per the recent data available in the IPO prospectus, LT products contributed 6% to revenue, while HT products made up 94%. The company has minimal revenue concentration, with the top 10 customers contributing 53% in FY23, down from 56% in FY22. This indicates a broader revenue base. 

The revenue distribution by state shows Haryana contributing 44.5%, Delhi 10%, Uttar Pradesh 10%, Telangana 4%, Madhya Pradesh 3.5%, and others 28%.

The company received its largest order from HP in November 2023 for LT works at the RBI Data Centre Complex in Bhubaneshwar. The employee count is around 180.

Shivalic Power Controls Pvt Ltd financial performance

Source: Shivalic Power Control RHP

Shivalic Power Control IPO

The electric panel manufacturer submitted the draft prospectus for a public issue in March 2024. Now, the subscription is open. Let’s check the important details.

About the SME IPO

The manufacturer is launching its IPO to raise approximately ₹64 crore. The issue is entirely of a fresh equity issue of 64.32 lakh shares. The price will be between ₹95-100 apiece. Investors can buy shares in lots of 1.2k.

The intermediaries are Corporate Capital Ventures and Skyline Financial Services. The first is the lead manager and the latter is the registrar, handling all the administrative tasks related to the IPO.

The SME IPO is set up to accommodate all kinds of investors. The shares are reserved for Qualified Institutional Buyers (QIBs) in excess of 50%. Retail bidders may purchase 35% of the shares. The rest is for non-institutional investors or the NII.

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IPO schedule

The issuance is scheduled to go live on the ‘Emerge’ SME platform of the National Stock Exchange of India. Here are the important dates of the subscription.

By 3:30 pm on the first day, i.e., June 24, the IPO was subscribed more than five times. In the retail category, it was subscribed 8.8 times, and in the NII category, almost three times.

Also read: What sets an SME IPO apart from a regular IPO?

Fund utilisation plan

Shivalic Power Control Pvt Ltd has a tentative plan for using the funds raised from the IPO. 

• The electric panel maker plans to use almost half of the funds raised, i.e. around ₹30.03 crore, to meet its working capital needs. 
• Around ₹5.82 crore will be spent on buying new machinery. Another ₹1.82 crore will go towards building a new warehouse.
• The company also wants to expand by acquiring other companies. They have set aside ₹5.75 crore for this purpose.
• Some of the funds raised will be used for general business expenses. The exact amount isn’t decided yet but won’t exceed 25% of the total funds.

Shareholding pattern 

Shivalic Power Control Pvt Ltd’s directors, Amit Kanwar Jindal and Sapna Jindal, currently hold 96.63% of the shares pre-issue. After the IPO, their ownership will be 70.86% of the issued capital. The remaining 26.67% will be available for shareholders who subscribe through the SME IPO.

Potential pitfalls

• Bank guarantees default: The company has given ₹6.95 crore in bank guarantees. If defaults happen, it can hurt cash flow and future growth.
• Dependency on state revenues: Most of the company’s income comes from Haryana. Problems in this state could impact overall revenue.
• Revenue concentration: The top ten clients make up around 40% of the company’s earnings in the 9 months of FY24. Losing any of them could affect profits.
• Order basis business model: The business works on purchase orders without long-term contracts. This means revenue can be uncertain.

Bottomline

Shivalic Power Control IPO presents a unique investment opportunity in a growing market. While the company shows promise with a strong client base and expansion plans, potential investors should consider the associated risks. Assess the IPO details and fund utilisation plan carefully before making any investment decisions.