PFB my research notes on Rulka Electricals. I added a few lots today
Stock overview
Price
Rs 386 / share
Market Capital - Rs 164 Cr
P/E (based on FY24E earnings) - 26.6x y✅,
P/B - 4.9x
Business overview:
Rulka electricals is a turnkey project contractor for providing electrical contracting services, design and installation of fire fighting systems. They also offer other services for warehouse / industrial facility installations, such as:
-> Data and voice cabling installation services
-> Security systems
-> CCTV systems
-> IT and Networking services
-> Audio video systems services
-> Access control systems
-> Public address systems
By bundling these services, Rulka increases the average order value and gross margins.
They work closely with vendors to source and design products for installations.
Projects typically last 12-18 months and are capital-intensive.
Management background
Rupesh Kasavkar - Founder promoter and managing director
-> Diploma in Electrical Engineering, 20+ years in electrical and fire fighting projects, key in strategy and management.
-> Salary withdrawn - 25.36 lakhs for FY23 ✅
Nitin Aher - Founder promoter and whole time director
-> Diploma in Electrical and Software Engineering, 20+ years in the field, oversees project execution and business expansion.
->Salary withdrawn - 25.36 lakhs for FY23 ✅
Criminal case against the directors - NIL
Tax litigation against the company - 3 (total litigation amount is INR 30.5 lakhs)
Customer base
-> Rulka electricals has served a reputed client base, a lot of which are blue chip companies. The strong ties with its existing customers helps them to get repeat orders.
-> As customers expand and set up more industrial / warehouse units, the company benefits from repeat orders from its existing client base.
-> The company has also completed projects for retail stores, theaters, hospitals, and hospitality across the country.
Key clientele :
-> Delhivery, DMART, Sun Pharma, Big Basket, PVR, Trent, Reliance, Shoppers Stop, Westin, Mahindra Logistics, Lodha and many others
Big Contract updates
-> Ongoing projects : ~INR 52 Cr with avg. ticket size of ~INR 2 Cr
Issue size
-> Total raised: INR 26.4 Cr (INR 6.6 Cr offer for sale)
-> Anchor investors: INR 7.5 Cr from reputed investors like BofA Securities Europe SA, Negen Undiscovered Value Fund, Galaxy Noble Global Opportunities Fund PCC, etc.
Use of IPO proceeds
Net working capital requirement - INR 14 Cr
General corporate expenses - INR 6 Cr
As a working capital-intensive business, funds will mainly support net working capital needs, enabling the company to scale operations and take on more projects.
Revenue bifurcation
-> While the company has nationwide presence, more than 55% of the revenues come from Maharashtra, with Gujarat, Delhi, Haryana, Telangana being other top contributors.
Revenue distribution by top customers:
-> Decreasing trend in revenue contribution from top customers, implying less customer concentration risk. ✅
Margin outlook :
The management is confident of maintaining current margin levels and increasing it going forwards with more larger ticket size contracts. ✅
Growth drivers :
-> Warehousing market : The Indian warehousing market in top 8 cities (by total space in mn sq.ft) has grown by 17% CAGR over the last 5 years.
-> Manufacturing Sector : In 2023, India's manufacturing sector contributed 17% to GDP. With the Make in India initiative and rising FDI, the government aims to increase this to 25% by 2025.
-> Shift to Organized Market : As the market develops, organized players with access to technology, deep vendor relations and a highly accountable work process will be favored over unorganized players.
The company is expected to benefit from this growth with an increased order flow from new warehousing and industrial capacity setups. ✅
Business Moat
-> Integrated solutions provider : Offers multiple warehouse installation services under a single umbrella differentiating it from other competitors.
-> Strong client base : Long-term relationships with blue chip clients across sectors and geographies
-> Strong execution : Experienced team with a track record of timely, quality work which is evident from the repeat business it gets from its existing clients.
-> Cost management : The deep ties with its vendors and partners has helped to execute the projects in a cost effective and timely manner.
Zerodha (Trading & Demat Account)
RHP
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