What you must know about Rulka Electricals IPO?

About Rulka Electricals Ltd

Rulka Electricals Ltd was incorporated in the year 2013 to offer electrical and fire-fighting solutions  to B2B customers. Among its various offerings are: electrical panels, solar EPC contracts, electrical warehousing projects, maintenance services, electrical contracting, and data and voice cabling installation. These are largely B2B customers and the offering by Rulka Electricals includes design, supply, installation, testing, and commissioning. Its entire revenue model is based on turnkey projects and it offers the full value chain ranging from materials and labour; to engineering, design, and consulting. Its broad verticals, apart from electrical services and fire-fighting systems, include security systems, PAS, access control systems, CCTV systems, solar systems etc. It also provides IT and networking services as part of the project. The company has nearly 92 employees on its rolls.

Highlights of the Rulka Electricals IPO

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

• The issue opens for subscription on 16th May 2024 and closes for subscription on 21st 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 ₹223 to ₹235 per share. Being a book built issue, the final price will be discovered within this band.
   
• The IPO of Rulka Electricals Ltd has a fresh issue component and an 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, Rulka Electricals Ltd will issue a total of 8,42,400 shares (8.42 lakh shares approximately), which at the upper band IPO price of ₹235 per share aggregates to fresh fund raising of ₹19.80 crore.
   
• The offer for sale (OFS) portion of the Rulka Electricals Ltd IPO comprises the sale of 2,80,800 shares (2.81 lakh shares approximately), which at the upper band IPO price of ₹235 per share aggregates to OFS component of 6.60 crore. The entire 2.81 lakh shares in the OFS are being offered by investor shareholder, Abhay Kantilal Shah HUF.
   
• Therefore, the overall IPO size will comprise of the issue of 11,23,200 shares (11.23 lakh shares approximately) which at the upper band IPO price of ₹235 per share will aggregate to overall IPO size of ₹26.40 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 56,400 shares. Sunflower Broking 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 Rupesh Laxman Kasavkar and Nitin Indrakumar Aher. The promoter holding in the company currently stands at 86.28%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 69.22%.
   
• The fresh issue funds will be used by the company for funding the working capital expenses and for general corporate expenses.
   
• Beeline Capital Advisors Private 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 Sunflower Broking Private Ltd.

The IPO of Rulka Electricals Ltd will be listed on the SME IPO segment of the NSE.

Rulka Electricals IPO – Key Dates

The SME IPO of Rulka Electricals IPO opens on Thursday, 16th May 2024 and closes on Tuesday, 21st May 2024. The Rulka Electricals Ltd IPO bid date is from 16th May 2024 at 10.00 AM to 21st May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 21st 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 23rd 2024, will be visible to investors under the ISIN Code – (INE0R7301013). 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

Rulka Electricals Ltd has already announced the market maker allocation at 56,400 shares as inventory for market making. Sunflower Broking 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 Rulka Electricals 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 600 shares. Thus, retail investors can invest a minimum of ₹1,41,000 (600 x ₹235 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 1,200 shares and having a minimum lot value of ₹2,80,000. 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 Rulka Electricals Ltd.

Financial highlights: Rulka Electricals Ltd

The table below captures the key financials of Rulka Electricals 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 still relatively low at 5.99%, it has built up traction in the last 3 years. The return on equity (ROE) has grown sharply to 50.33% in FY23, while the return on assets (ROA) is robust at 9.92% in FY23.
   
• The asset turnover ratio or the sweating ratio has been healthy at 1.69X and that is understandable 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 ₹8.50 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 ₹235 per share at 27-28 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 11-month EPS for FY24 stands at ₹16.67 per share and when extrapolated to full-year EPS of ₹18.19, it translates into a more reasonable P/E ratio of 12-13 times earnings.

In addition, Rulka Electricals Ltd also brings some intangible advantages to the table like capabilities in execution in stringent timelines, its diverse value proposition, the full value chain offering etc. All these factors make the story compelling, if we consider the extrapolated earnings and P/E ratio of the company. Investors must appreciate that there may not be much on the table right now, but a better story could emanate once the numbers of the next few quarters start to flow in.