Ranjeet Mechatronics IPO Analysis (Neutral)

Review By Finception on September 11, 2018

Ranjeet Mechatronics is in the business of providing end to end solutions for security and firefighting requirements. In 2009, they began their journey as a fire fighting solution provider when installation of fire pumps & fire engines was made mandatory in high rise buildings, mall and industries by the government. Their services range from fire hydrant systems to Gas suppression devices to CCTV systems. Investors must note that the company does not manufacture their products in-house.

So how are they doing as a business?

There is a sudden drop in revenues in FY17 and revenues remained flat during FY18. The company stated that the drop was mainly due to a shrinking order book.
The bottom-line and the operating margin has increased substantially from the past 4 years primarily due to decrease in cost of goods sold.

FY	FY 18	FY 17	FY 16	FY 15	FY 14
Revenue(Cr)	17.7	17.6	25.25	23.61	10.63
PAT (Cr)	0.91	0.5	0.16	0.04	0.03
PAT Margin (%)	5.1	2.8	0.63	0.17	0.28

High Trade Receivables?

The company also has high trade receivables. In FY17, it accounted for almost 50% of its revenue while in FY18, it formed 30 % of the total revenue. Well, it is quite evident that the company recognizes revenue as soon as it wins a contract from a client w it takes some time for cash to enter the system. On average, the company took a total of 107 days to collect payments from its customers during FY18, albeit a significant improvement over 184 days it took to collect payment during FY17.

Particulars	FY 18	FY 17	FY 16	FY 15	FY 14
Revenue(Cr)	17.7	17.6	25.25	23.61	10.63
Trade receivable as % of Revenue	30	50	33	28	32

Point of Interest

An Interesting Transaction

The company carried out a very interesting transaction in FY18. Related party transactions between Ranjeet and Himgiri (a firm solely owned by the Promoter) increased by 10 times in one year.

Ranjeet’s sales to Himgiri stands at about 6 Crores, about 34% of its total sales
Ranjeet purchased 5.7 Crores worth of goods from Himgiri
Over 91% of Himgiri’s income comes from sale of goods to Ranjeet
Over 96% of Himgiri’s expenses are from purchase of products from Ranjeet
Himgiri is a proprietorship solely owned by the promoter
If you remove this particular transaction from the income statement, the company’s top line reduces to about 12 Cr.

Particulars( in Cr)	FY18	FY17	FY16	FY15
Sales to Himgiri(% of revenue)	6(34.4%)	0.54(3%)	-	-
Purchases from Himgiri(% of Total Expense)	5.78(34%)	0.84(6%)	-	-

Review Author

Finception

Finception is a startup dedicated to simplifying stocks through compelling storytelling. Finception aggregates, analyses and filters information from multiple sources and creates compelling narratives about publicly listed companies in an easy to understand language without financial jargons. The startup is the brainchild of 3 IIM Ahmedabad alumnus and they are currently based out of Ahmedabad.

Email: support@finception.in

Web: https://finception.in/

Particulars	Amount Raised through IPO (Cr)
Working Capital Requirements	3.12
General Corporate Purpose	1.00
Total	4.12

Ranjeet Mechatronics IPO Analysis (Neutral)

Conclusion / Investment Strategy

Review Author

Read more about Ranjeet Mechatronics IPO