What you must know about Vilas Transcore IPO?

About Vilas Transcore Ltd

Vilas Transcore Ltd  was incorporated in the year 2006 to manufactures and supply power distribution and transmission components. Their product portfolio essentially comprises of key inputs for transformer and other power equipment manufacturers in India and globally. Vilas Transcore Ltd  manufactures and supplies various electrical lamination products. These include CRGO cores and slit coils used in power and distribution transformers. Being a precision task, the company deploys the latest technology in this effort. The manufacturing units of Vilas Transcore Ltd  are located in Ramangamdi in Vadodara and at Por Village, also in Vadodara. These two manufacturing units cover 2,200 SQM and 11,000 SQM respectively. In addition, Vilas Transcore Ltd has also been approved to source toroidal cores for current transformers (CT) up to 400 KV class as part of Power Grid projects. Vilas Transcore Ltd has about 250 employees on its rolls.

Highlights of the Vilas Transcore IPO

Here are some of the highlights of the Vilas Transcore IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 27th May 2024 and closes for subscription on 29th May 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 price for the book building issue is set in the price band of ₹139 to ₹147 per share. Being a book built issue, the final price will be discovered within this band.
   
• The IPO of Vilas Transcore 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, Vilas Transcore Ltd will issue a total of 64,80,000 shares (64.80 lakh shares), which at the upper band IPO price of ₹147 per share aggregates to fresh fund raising of ₹95.26 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 64,80,000 shares (64.80 lakh shares) which at the upper band IPO price of ₹147 per share will aggregate to overall IPO size of ₹95.26 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,26,.000 shares. Hem Finlease Private Ltd will be the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Nilesh Patel and Natasha Patel. The promoter holding in the company currently stands at 99.97%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 73.51%.
   
• The fresh issue funds will be used by the company for capex of its factory building, capex to acquire additional plant & machinery, and for funding strategic mergers and acquisitions in the market. A small part will also be used for general corporate expenses.
   
• Hem Securities Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

The IPO of Vilas Transcore Ltd will be listed on the SME IPO segment of the NSE.

Vilas Transcore IPO – Key Dates

The SME IPO of Vilas Transcore Ltd IPO opens on Monday, 27th May 2024 and closes on Wednesday, 29th May 2024. The Vilas Transcore Ltd IPO bid date is from 27th May 2024 at 10.00 AM to 29th May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 29th May 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 May 31st 2024, will be visible to investors under the ISIN Code – (INE0AZY01017). 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

Vilas Transcore Ltd has already announced the market maker allocation at 3,26,000 shares as inventory for market making. Hem Finlease Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Vilas Transcore 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 1,000 shares. Thus, retail investors can invest a minimum of ₹1,47,000 (1,00 x ₹147 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 2,000 shares and having a minimum lot value of ₹2,94,000. 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 IPO of Vilas Transcore Ltd.

Financial highlights: Vilas Transcore Ltd

The table below captures the key financials of Vilas Transcore 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.

• The revenues have grown at a robust pace in the last 2 years and in the latest year FY23, the total sales more than doubled over FY21. More importantly, this has been accompanied by growth in the net profit levels and net profit margins (PAT margins).
   
• While net margins of the company are fairly attractive at 7.13%, it has built up traction in the last 2 years. The return on equity (ROE) stands at 14.72% in FY23, while the return on assets (ROA) is robust at 10.68% in FY23. The size of the equity is proving to be a drag on the ROE of Vilas Transcore Ltd.
   
• The asset turnover ratio or the sweating ratio has been healthy at 1.50X and that is good considering the capital intensity of the business. However, this sweating ratio also gets supported by the robust levels of return on assets (ROA).

The company has latest year EPS of ₹11.20 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price of ₹147 per share at 13-14 times P/E ratio. One has to look at the P/E ratio from two perspectives. Since the company is yet to announce the FY24 results, we can use available data to extrapolate. The 4-month EPS for FY24 stands at ₹4.05 per share and when extrapolated to full-year EPS of ₹12.15, it translates into a more reasonable P/E ratio of 12 times earnings.

In addition, Vilas Transcore Ltd also brings some intangible advantages to the table. It has a long standing track record in the manufacture of input equipment for transformers and power equipment sector. Also, the long standing relationships with customers matter as this is a mission critical input for the power sector. Its financial position is fairly strong and the stock is well capitalized, although that has been a drag on ROE. One question that the company has not answered is how the ROE will grow, since that is the key to valuations. Investors must be satisfied on this point. However, this would be an investment that entails a higher level of risk and longer waiting period.