What you must know about Shivalic Power Controls IPO?

About Shivalic Power Controls Ltd

Shivalic Power Controls Ltd was incorporated in the year 2004 to manufacture electric panels. The company has a wide product portfolio, which includes PCC Panels, IMCC Panels, Smart Panels, MCC Panels, DG synchronisation panels, Outdoor panels, HT Panels, Power Distribution Boards, Bus Duct and LT & HT APFC Panels etc. Shivalic Power Controls Ltd is also an authorized contract manufacturer for various top notch companies in India. For instance, big names like L&T, Siemens and Shneider Electric have given authorization to Shivalic Power Controls Ltd to manufacture fully type-tested panels. They have also defined the specifications of such manufacture. Currently, Shivalic Power Controls Ltd manufactures the 11KV and 33KV of HT Panels.

Shivalic Power Controls Ltd  currently offers these specialized panels across over 15 countries, apart from the Indian markets. Some of the countries to which the products of Shivalic Power Controls Ltd  reach out include; Nepal and Bangladesh in South Asia as well as Uganda, Kenya, Nigeria, and Algeria in Africa. To be  able to take up contract manufacturing, Shivalic Power Controls Ltd has already obtained certification and accreditation that allows them to be eligible for such bidding and for executing such work. The company has a manufacturing unit located in Faridabad in Haryana, and has a production capacity of 10,000 verticals per annum. Shivalic Power Controls Ltd employs over 180 personnel on its full time rolls.

Highlights of the Shivalic Power Controls IPO

Here are some of the highlights of the Shivalic Power Controls IPO on the SME segment of the National Stock Exchange (NSE). 

•    The issue opens for subscription on 24th June 2024 and closes for subscription on 26th June 2024; both days inclusive.

•    The stock of the company has a face value of ₹10 per share and it is a book built issue. The book building price band for the IPO has been set in the range of ₹95 per share to ₹100 per share. Being a book built IPO, the final price discovery will happen in the above price band only.

•    The IPO of Shivalic Power Controls Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence is not EPS or equity dilutive.

•    As part of the fresh issue portion of the IPO, Shivalic Power Controls Ltd will issue a total of 64,32,000 shares (64.32 lakh shares), which at the upper band IPO price of ₹100 per share aggregates to fresh fund raising of ₹64.32 crore.

•    Since there is no OFS, the fresh issue size will also double as the overall issue. Therefore, the overall IPO size will also comprise of the issue of 64,32,000 shares (64.32 lakh shares) which at the upper band IPO price of ₹100 per share aggregates to overall IPO size of ₹64.32 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 3,36,000 shares as quota for market inventory. SS Corporate Securities  Ltd has already been appointed as the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs.

•    The company has been promoted by Amit Kanwar Jindal and Sapna Jindal. The promoter holding in the company currently stands at 96.63%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 70.86%.

•    The fresh issue funds will be used by the company for capex and working capital expenses, procurement of machinery, civil construction of warehouse, and to bankroll some of the inorganic growth plans through the M&L route. A small part of the IPO proceeds has also be set aside for general corporate purposes.

•    Corporate Capitalventures Private Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is SS Corporate Securities Ltd.
The IPO of Shivalic Power Controls Ltd will be listed on the SME IPO segment of the NSE.

Shivalic Power Controls IPO – Key Dates

Shivalic Power Controls IPO opens on Monday, 24th June 2024 and closes on Wednesday, 26th June 2024. The Shivalic Power Controls Ltd IPO bid date is from 24th June 2024 at 10.00 AM to 26th June 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 26th June 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on June 28th 2024, will be visible to investors under the ISIN Code – (INE0T7B01010). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO Allocation and minimum investment lot size

Shivalic Power Controls Ltd has announced a market maker allocation of 34,000 shares, which will be used as inventory for market making. Beeline Broking Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Shivalic Power Controls Ltd in terms of allocation to various categories are captured below.

Data Source: Company RHP

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹1,20,000 (1,200 x ₹100 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹2,40,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There are no upper limits for investments by HNIs / NIIs in the Shivalic Power Controls IPO..

Financial Highlights: Shivalic Power Controls Ltd

The table below captures the key financials of Shivalic Power Controls Ltd for the last 3 completed financial years. 

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years; i.e., from FY22 to FY24, being the latest year. 

•    The revenues over the last 3 years have growth at a steady clip, with FY23 revenues nearly 60% above the revenues of FY21. As net profit traction has picked up in the last 2 years, the net profit margins have improved from 1.29% to 8.72% between FY21 and FY23. 

•    While net margins of the company have been relatively robust at 8.72%, the margins have also shown strong growth traction in the years prior to that. The return on equity (ROE) stands at 29.23% in FY23, while the return on assets (ROA) is strong at 12.29% in FY23. Both are up sharply from the previous two years.

•    The asset turnover ratio or the sweating ratio has been healthy in the latest year at 1.41X and that only gets further accentuated when you look at the healthy ROA. It remains to be seen how the additional capital base is handled by sales growth.

The company has latest year EPS of ₹4.19, after adjusting for the impact of the bonus shares issued and the private placement done in late 2023. The FY23 earnings are being discounted by the IPO price of ₹100 per share at 23-24 times P/E ratio. That looks tad on the higher side, although the growing net profit margins and the ROE should be positive. If we consider the FY24 9-months EPS of ₹4.45 per share, the presumed P/E ratio on the annualized EPS of ₹5.93 per share at the IPO price of ₹100 is more reasonable at 16-17 times expected earnings for financial year FY24. The valuations look a lot more compelling if the FY24 numbers are imputed into valuations.

To be fair, Shivalic Power Controls Ltd some bring some intangible advantages to the table. It has established relationships and strategic partnerships; it understands the customer mindset and has been authorized for contract manufacturing of specific panels by the large Indian companies. For now, the pricing of the IPO looks reasonable if you consider the FY24 projected numbers. Investors can look at the IPO from a longer term perspective and a holding period of at least one year. Of course, investors must be prepared for assuming the higher risk implicit in such IPO stocks.