Plaza Wires IPO Review Today India | PWL IPO

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Plaza Wires IPO Review – About The Company

Plaza Wires Ltd. (PWL) is a company engaged in several business sectors:

  • Core Business: Manufacturing and selling wires, selling and marketing LT aluminum cables, and fast-moving electrical goods (FMEG) under the flagship brand “PLAZA CABLES” and home brands like “Action Wires” and “PCG”.
  • Product Expansion: In 2021, PWL introduced a line of house wires under the “Action Wires” brand, targeting an economical price range.
  • Market Standing: As per the Resurgent India Research Report, PWL is a growing player in the wires and cables industry in northern India. They offer a wide range of wires, cables, and FMEG products, including electric fans, water heaters, switches, switchgear, PVC insulated electrical tape, and PVC conduit pipe and accessories.
  • Industry Growth: The wires and cables industry in India has experienced a compound annual growth rate (CAGR) of approximately 13.68% in value terms over the last five years, reaching Rs. 788.00 billion in Fiscal 2021. Projections suggest it could expand at a CAGR of approximately 14.50% to reach Rs. 1550.00 billion by Fiscal 2026.
  • Distribution Channels: PWL employs multiple distribution channels based on geographic factors, industry norms, and market trends. This includes dealer and distribution networks, government tenders for supply to government projects, and direct sales to infrastructure projects.
  • Network: As of March 31, 2023, PWL had 1,249 dealers and distributors and a workforce of 192 employees.

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ISSUE DETAILS/CAPITAL HISTORY:

  • IPO: PWL is launching an IPO through the book-building route, offering 13,200,158 equity shares of Rs. 10 each. The price band is set at Rs. 51 – Rs. 54 per share, with a total mobilization of Rs. 71.28 crores at the upper limit.
  • Subscription Dates: The IPO subscription is open from September 29, 2023, to October 05, 2023.
  • Allotment and Listing: Shares will be listed on BSE and NSE after allotment. The IPO constitutes 30.17% of the post-IPO paid-up capital.
  • Utilization of Funds: Proceeds from the IPO will be allocated towards various purposes, including capex for expanding the product portfolio, working capital, and general corporate purposes.
  • Allocation: The IPO allocation is set at not less than 75% for QIBs, not more than 15% for HNIs, and not more than 10% for Retail investors.
  • Lead Manager: Pantomath Capital Advisors Pvt. Ltd. is the sole Book Running Lead Manager (BRLM), and KFin Technologies Ltd. is the registrar of the issue.
  • Capital History: PWL previously issued equity shares in the price range of Rs. 50 – Rs. 60 (based on a face value of Rs. 10) between November 2007 and March 2016. It also issued bonus shares in the ratio of 7 for 1 in March 2022. The promoters’ average acquisition cost per share is Rs. 8.40 and Rs. 38.32.
  • Post-IPO Scenario: After the IPO, PWL’s paid-up equity capital will increase from Rs. 30.55 crore to Rs. 43.75 crore. At the upper cap of the IPO pricing, the company’s market capitalization will be approximately Rs. 236.26 crores.

FINANCIAL PERFORMANCE:

  • Recent Financials: In the last three fiscal years, PWL reported a total income/net profit of Rs. 145.60 cr. / Rs. 4.24 cr. (FY21), Rs. 176.94 cr. / Rs. 5.95 cr. (FY22), and Rs. 182.60 cr. / Rs. 7.51 cr. (FY23).
  • Key Metrics: The company’s average EPS over this period was Rs. 2.11, with an average RoNW of 13.23%.
  • Valuation: The IPO is priced at a P/BV of 3.11 based on the NAV of Rs. 17.37 as of March 31, 2023, and at a P/BV of 1.90 based on the post-IPO NAV of Rs. 28.42 per share (at the upper cap). The P/E ratio, based on FY23 earnings and post-IPO fully diluted paid-up equity capital, is 31.40.
  • Margins: For the last three fiscal years, PWL posted PAT margins of 2.91% (FY21), 3.37% (FY22), and 4.11% (FY23), and RoCE margins of 11.62%, 13.90%, and 15.57%, respectively.

DIVIDEND POLICY:

PWL has not declared any dividends in the reported periods but intends to adopt a prudent dividend policy based on financial performance and future prospects.

COMPARISON WITH LISTED PEERS:

  • Listed Peers: PWL’s peers include Cords Cable, Ultracab, V-Marc, Dynamic Cables, and Paramount Communications, which are trading at P/E ratios of 18.29, 26.53, 21.47, 28.52, and 27.49 (as of September 27, 2023), respectively.
  • Apples-to-Apples Comparison: It’s important to note that these peers may not be directly comparable to PWL in all aspects.

MERCHANT BANKER’S TRACK RECORD:

The BRLM associated with the issue has managed 7 public issues in the past three fiscal years, and all of them closed above the issue price on the listing date.

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CONCLUSION / INVESTMENT STRATEGY:

PWL operates in a competitive segment with established players. While it has demonstrated steady growth in both top and bottom lines, the IPO price appears to be fully priced based on FY23 earnings. However, considering its expansion plans, investors may consider holding the stock for potential medium to long-term rewards.

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