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Excellent Wires NSE SME IPO review (Avoid)

Review By Dilip Davda on September 8, 2024

•    The company is engaged in the manufacturing and marketing of various types of wires.
•    It marked static top lines for FY23 and FY24.
•    The sudden boost in bottom line for FY24 raised eyebrows and concern over its sustainability.
•    There is some garble in the offer document on pre and post IPO equity data.
•    There is no harm in skipping this pricey bet. 

PREFACE:
Time and again, we are witnessing some garbled data in the offer document of this company which has erred on equity dilution and the post-IPO paid-up equity data (see page 38, 50, and 51. It is really raises concern about approval of such documents by the regulators, who are supposed to be more alert on the information contained in the offer documents. Will NSE clarify on this??? 

ABOUT COMPANY:
Excellent Wires & Packaging Ltd. (EWPL) started its business in April 2012 in the name of Perfect Wire Industries, Partnership Firm, as a manufacturer of various types of wires, such as Spring Steel Wire, High Carbon Wire, Galvanized Wire or GI Wire, Round Stitching Wire, Flat Stitching Wire, Mild Steel (M.S.) & Low Carbon Wire, H.B. & H.H.B. Wire, Annealed Wire, Brass Wire, Copper Wire, Stainless Steel Wire, Spiral Wires, Binding Wires, Bailing Wires and all types & sizes of Wire Ropes made of high carbon or SS Wire With or without PVC Coating for multiple applications under the brand name of Excellent. 

Its other packaging products like PP Strapping Rolls and BOPP Self Adhesive Tapes are purchased from the market and sold to customers on as and when need basis. These packaging products are sold under the brand name of Excellent. It supplies products to various industries viz. Packaging, Engineering, Stationery, Imitation Jewellery, Wires & Cable etc. The Company was incorporated on March 16, 2021 to pursue the business of Perfect Wire Industries in corporate entity and reduced the business in partnership firm over a period of time and is stopped from August 2021 and entire production facility with assets was rented to the Company vide agreement dated June 01, 2021 and it sold all machines to the Company on March 01, 2024 at Rs. 17.75 Lakhs at written down value. As on date above business is completely carried on in Excellent Wires and Packaging Limited. As of July 31, 2024, it had 18 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1400000 equity shares of Rs. 10 each at a fixed price of Rs. 90 per share to mobilize Rs. 12.60 cr. The issue opens for subscription on September 11, 2024, and will close on September 13, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 31.32% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.00 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 5.78 cr. for acquisition of land and construction of building, Rs. 2.00 cr. for acquisition of plant and machineries, Rs. 1.50 cr. for working capital, and Rs. 2.32 cr. for general corporate purposes. 

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Inventure group's Inventure Growth & Securities Ltd.  is the market maker for the company. The issue is underwritten to the tune of 15.09% by Inventure Merchant Banker and 84.91% by Inventure Growth.

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 90 per share in March 2024 and April 2024. The company has also issued bonus shares in the ratio of 7 for 1 in April 2024. The average cost of acquisition of shares by the promoters is Rs. 10.51, Rs. 10.88, and Rs. 11.25 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 3.07 cr. will stand enhanced to Rs. 4.47 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 40.23 cr.  (Page no. 38 of offer document erred on pre-IPO equity data as it shows 3835400 shares).

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 7.29 cr. / Rs. 0.05 cr. (FY22), Rs. 14.48 cr. / Rs. 0.10 cr. (FY23), Rs. 15.41 cr. / Rs. 0.83 cr. (FY24). The sudden boost in bottom line in a pre-IPO year raises eyebrows and concern over its sustainability going forward. 

For the last three fiscals, it has reported an average EPS of Rs. 1.85, and an average RoNW of 42.57%. The issue is priced at a P/BV of 5.66 based on its NAV of Rs. 15.90 as of March 31, 2024, and at a P/BV of 2.12 based on its post-IPO NAV of Rs. 42.51 per share. 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 48.39. The IPO relatively appears exorbitantly priced.

For the reported periods, the company has posted PAT margins of 0.65% (FY22), 0.72% (FY23), 5.39% (FY24), but missing RoCE margins data for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Bedmutha Ind., KEI Ltd., and Rajratan Global as their listed peers. They are trading at a P/E of 25.6, 65.4 and 40.8 (as of September 06, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 12th mandate from Inventure Merchant in the last four fiscals (including the ongoing one), out of the last 11 listings, 3 opened at discount, 1 at par and the rest listed with premiums ranging from 0.46% to 90% on the date of listing.


Conclusion / Investment Strategy

The company is engaged in the manufacturing and marketing of various types of wired. It is operating in a highly competitive and fragmented segment. It has posted average financial performance with boosted bottom lines for FY24, that raises eyebrows and concern over its sustainability. Small equity post-IPO indicates longer gestation period for migration. Based on FY24 super earnings, the issue relatively appears exorbitantly priced. There is no harm in skipping this pricey bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on September 8, 2024

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

Excellent Wires and Packaging IPO FAQs

  1. 1. Why Excellent Wires and Packaging IPO?

    The initial public offer (IPO) of Excellent Wires and Packaging Limited offers an early investment opportunity in Excellent Wires and Packaging Limited. A stock market investor can buy Excellent Wires and Packaging IPO shares by applying in IPO before Excellent Wires and Packaging Limited shares get listed at the stock exchanges. An investor could invest in Excellent Wires and Packaging IPO for short term listing gain or a long term.

  2. 2. How is Excellent Wires and Packaging IPO?

    Read the Excellent Wires and Packaging IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Excellent Wires and Packaging IPO what should investors do?

    Excellent Wires and Packaging IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Excellent Wires and Packaging IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Excellent Wires and Packaging IPO good?

    Our recommendation for Excellent Wires and Packaging IPO is to avoid.

  5. 5. Is Excellent Wires and Packaging IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Excellent Wires and Packaging IPO.

  6. 6. When will Excellent Wires and Packaging IPO allotment status?

    The Excellent Wires and Packaging IPO allotment status will be available on or around September 16, 2024. The allotted shares will be credited in demat account by September 17, 2024. Visit Excellent Wires and Packaging IPO allotment status to check.

  7. 7. When will Excellent Wires and Packaging IPO list?

    The Excellent Wires and Packaging IPO will list on Thursday, September 19, 2024, at NSE SME.

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