Bansal Wire IPO review (May apply)

• IPO Details
• Docs
  • RHP
  • DRHP
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on June 28, 2024

•    The company is engaged in manufacturing and marketing over 3000 SKUs in various types of metal wires under its own brand "Bansal".
•    The company marked steady growth in its top and bottom lines for the reported periods. 
•    The management is confident of growth in its bottom lines post-IPO with debt reduction.
•    Based on FY24 earnings, the issue appears aggressively priced.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Bansal Wire Industries Ltd. (BWIL) along with its Subsidiary, Bansal Steel & Power Limited, offers over 3000 SKUs (i.e., stock keeping units) in three broad segments, i.e., high carbon steel wire, mild steel wire (low carbon steel wire) and stainless steel wire, with Company's offering of approximately 2000 SKUs and its Subsidiary's offering of 1500 SKUs. Further, there are approximately 500 SKUs which are common in both the Company and Subsidiary. 

High carbon steel wires refer to wires made from high carbon steel with 0.30% to 1.00% carbon and are known for their exceptional strength, hardness, and durability. They are used in applications where these properties are crucial, such as in the manufacturing of springs, cutting tools, and various industrial components that require resilience and resistance to wear and fatigue. Mild Steel Wire is made out of a low-carbon steel with a carbon content ranging from 0.05% to 0.25% and is known for its ductility, malleability, weldability, and versatile nature. They are commonly used in power & transmission, agriculture, poultry, fencing, and construction. Stainless steel wire is made from a corrosion-resistant alloy which is a combination of iron, chromium, nickel, and other elements and is used in consumer durables, hardware, automotive, agriculture and other general engineering products. 

BWIL operates from its four established manufacturing facilities in the National Capital Region, India, with three manufacturing facilities in Ghaziabad (U.P.) and one manufacturing facility in Bahadurgarh (Haryana). While it has built its network in order to ensure pan India presence across all regions of India, i.e., it is present in 22 states and six union territories, by way of its dealer distribution network, the company has robust revenue from operations in northern states and western states in India with 65.61%, 67.78% and 64.80% of revenue from operations generated from Delhi, Haryana, Maharashtra and Uttar Pradesh in Fiscal 2022, 2023 and 2024, respectively.

In terms of the operational benchmarking, steel wires industry is a highly fragmented industry with top 10 manufacturers contributing to around 22% of the overall production and BWIL contributes 2% of the overall production and other unbranded larger and medium and small manufacturers contributing 75% of the overall production. The company operates in three broad segments, i.e., high carbon steel wire, mild steel wire (low carbon steel wire) and stainless steel wire and it will be also adding new segment of specialty wires through its manufacturing plant in Dadri, which will help it to grow and expand market presence in upcoming fiscals. The extensive range of its products include sizes as thin as 0.04 mm to as thick as 15.65 mm like high carbon steel wires for springs, wire for ropes, mild steel wires (low carbon steel wires), stainless steel wires, cold heading quality wires, cable armoring wires and strips, galvanized steel wires in high/ mild steel wire (low carbon steel wire) in wide range of, zinc coating, profile/ shaped wires in various steel grades in different cross sections etc.

It sources raw materials from a diversified base of suppliers. Its top 10 key raw material suppliers for mild steel wires (low carbon steel wires) and stainless-steel wires include Steel Authority of India Limited, Rashtriya Ispat Nigam Limited, Mukand Ltd., Rathi Steel and Power Limited and JSW Steel Limited. The Company sources raw materials from a diversified base of suppliers which not only offers competitive prices but also the quality and quantity assurance. BWIL markets and sells its products under the brand name 'BANSAL' which has a strong reputation in the market as a trusted brand since incorporation. The Company undertakes various initiatives to promote its brands and products, which has not only helped maintain a sales momentum but has also resulted in an impressive customer retention ratio of above 64% as of Fiscal 2024, Fiscal 2023 and Fiscal 2022.

The company is exporting its products to several countries, with 14 global representatives, covering countries like Bangladesh, Brazil, France, Germany, Israel, Italy, Netherland, South Korea, South Africa, Sri Lanka, Turkey, United Kingdom, United States of America and Vietnam. Its export turnover in Fiscal 2024 was Rs. 2,83.94 cr., with Europe and U.S. markets accounting to more than 70% of the total exports in Fiscal 2024. As of Fiscal 2024, it has 3717 employees on its payroll including 767 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of fresh equity shares issue worth Rs. 745.00 cr. (approx. 29101558 shares at the upper cap). The company has announced a price band of Rs. 243 - Rs. 256 per equity shares of Rs. 5 each. The issue opens for subscription on July 03, 2024, and will close on July 05, 2024. The minimum application to be made is for 58 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 18.59% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 452.68 cr. for repayment/prepayment of certain borrowings, Rs. 93.71 cr. for investment in its subsidiary for repayment/prepayment of certain borrowings., Rs. 60.00 cr. for working capital, and the rest for general corporate purposes. 

The joint Book Running Lead Managers (BRLMs) to this issue are SBI Capital Markets Ltd., and DAM Capital Advisors Ltd., while KFin Technologies Ltd. is the registrar to the issue. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 12.50 - Rs. 100 per share (based on Rs. 5 FV), between March 2004 and March 2015. It has also issued bonus shares in the ratio of 6 for 1 in December 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 1.17, Rs. 1.20, Rs. 1.22, and Rs. 1.68 per share. 

Post-IPO, its current paid-up equity capital of Rs. 63.73 cr. will stand enhanced to Rs. 78.28 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 4007.83 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 2205.07 cr. / Rs. 57.29 cr. (FY22), Rs. 2422.57 cr. / Rs. 59.93 cr. (FY23), and Rs. 2470.89 cr. / Rs. 78.80 cr. (FY24). 

For the last three fiscals, the company has posted an average EPS of Rs. 5.42 and an average RoNW of 20.49%. The issue is priced at a P/BV of 7.73 based on its NAV of Rs. 33.14 as of March 31, 2024, and at a P/BV of 3.43 based on its post-IPO NAV of Rs. 74.57 per share (at the upper cap). 

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 50.90. Based on FY23 earnings, the P/E stands at 66.84. Thus the issue is aggressively priced. The issue appears aggressively priced discounting all near term positives. 

The company reported PAT margins of 2.60% (FY22), 2.47% (FY23), 3.19% (FY24), and RoCE margins of 18.59%, 17.34%, 18.46% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has paid dividend of 6% for FY22, and thereafter it skipped. It has already adopted a dividend policy in December 2023, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Rajratan Global Wire, DP Wires, and Bedmutha Ind., as their listed peers. They are trading at a P/E of 41.7, 18.9, and 35.4 (as of June 27, 2024). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The two BRLMs associated with the offer have handled 42 pubic issues in the past three fiscals, out of which 18 issues closed below the offer price on the listing date. 

Bansal Wire IPO FAQs