Sanco Industries Knocks On The NSE Emerge Platform

The NSE Emerge platform is buzzing with IPOs from many small companies. The recent one to join the club is Sanco Industries (SIL). The company has filed a DRHP to list its shares on the NSE Emerge platform. SIL has proposed to raise an amount of Rs 14 crore for its working capital requirement. Equity shares worth Rs 70 lakh will be reserved for market makers while the rest worth Rs 13.3 crore will be the net issue. The offering will be based on book-building method for which the lead manager is Keynote Corporate Services. At present, the company has 61.70 lakh outstanding shares. However, the company is yet to declare the price band and issue size for the said public issue.

SIL has proposed to utilise the net issue proceeds for its capital expenditure and working capital margin requirement, while the remaining amount is supposed to meet the company’s general corporate and listing expenses. The company has plans to invest Rs 3.77 crore in its existing manufacturing plant PVC pipes for capacity expansion in Himachal Pradesh. The entire process includes installations of machinery including spare parts and auxiliary equipments. Further, Rs 6.75 crore will be used to meet its working capital margin.

SIL, based in Delhi, was incorporated in the year 1989. It is involved in the manufacturing of Polyvinyl Chloride (PVC). It offers a wide range of products including rigid PVC conduit pipes, PVC casing and capping, PVC/PPR plumbing pipes, PVC insulated domestic wires and many more. To diversify its product risk profile, SIL entered into the manufacturing of PPR plumbing pipes after its incorporation.

SIL, with its large product portfolio, caters to various sectors like agriculture, telecom, construction, railways and irrigation sector. It has one manufacturing facility located in Paonta Sahib, Himachal Pradesh. The existing manufacturing capacity is 18,000 KMPA for PVC insulated wires & cables and for PVC conduit pipes, it has a production capacity of 4000 KMPA, which it plans to expand to 36,000 KMPA and 6000 KMPA respectively. Coming to the client list of SIL, its has received vending approvals from government and public limited companies including BSNL, MTNL, HCL, Railways etc.

On the financial front, SIL reported a growth of 9% to Rs 40.18 crore on the topline for FY12 as compared to Rs 36.92 crore in FY11. This is mainly due to an increased demand of PVC conduit pipes & profiles. The operating expenses of the company increased by 7% to Rs 34.72 crore, due to an increase in raw material expenses with increased production and other expenses like customs duty, clearing, freight etc. The EBITDA grew by 23% to Rs 5.46 crore in FY12 on a YoY basis. However, due to the rise in interest charges on working capital loan and unsecured loan finance expenses increased by 50% in this period, the bottomline showed a growth of 7% to Rs 2.68 crore due to increase in turnover in FY12.

Certainly, the Indian government is spending tremendously on infrastructure, which is in turn boosting the demand for PVC industry. The durability of PVC pipes makes it a preferred option over the other type of pipes. Also, the agriculture and construction segments are expected to grow and create a good demand for PVC sector. The challenge for the PVC pipes manufacturers is the continuous increase in the prices of crude oil, which is directly affecting their margins.

However, SIL has not yet come up with its price band and other issue related details. We will keep the reader updated as and when the company comes up with the public issue details.