R R Kabel IPO Review

R R Kabel IPO comprises fresh issue of equity shares worth ₹180 crore and an OFS of 1.72 crore equity shares worth ₹1,784 crore by TPG and promoters. The OFS will see TPG Asia VII SF Pte Ltd offloading 1.29 crore equity shares, while public shareholder Ram Ratna Wires will sell its entire shareholding of 13.64 lakh shares in the company. Among others, promoters Mahendrakumar Rameshwarlal Kabra, Hemant Mahendrakumar Kabra, and Sumeet Mahendrakumar Kabra, as well as Kabel Buildcon Solutions, a part of the promoter group, will also partially dilute their stake via OFS.

IPO opens13-Sep-23
IPO Closes15-Sep-23
IPO Size (Rs.)1,963 Cr
IPO Size (shares)19,067,937 – 18,975,938 Shares
BreakupFresh issue ₹180 Cr
 OFS  17,236,808 shares  (₹1,784.01 Cr)
Face Value:₹5/-
IPO Price in Rs :₹ 983 – 1,035
Minimum Lot14 Shares
QIB Quota50%
NII Quota15%
Retail Quota35%
 Lead ManagerAxis Capital, Citigroup Global, Hsbc Securities, Jm Financial
RegistrarLink Intime

About R R Kabel Limited:

  • R R Kabel Limited is one of the leading companies in the Indian consumer electrical industry (comprising wires and cables and fast moving electrical goods), with an operating history of over 20 years in India.
  • It sells products across two broad segments – (i) wires and cables including house wires, industrial wires, power cables and special cables; and (ii) fast moving electrical goods including fans, lighting, switches and appliances.
  • Company has five manufacturing facilities which are located at Waghodia, Gujarat (“Waghodia Facility”), Silvassa, Dadra and Nagar Haveli and Daman and Diu (“Silvassa Facility”), Roorkee, Uttarakhand (“Roorkee Facility”), Bengaluru, Karnataka (“Bengaluru Facility”) and Gagret, Himachal Pradesh (“Gagret Facility”).
  • The following table sets forth the installed production capacity and the capacity utilization rate at the manufacturing facilities for Fiscals 2021, 2022 and 2023 and three months ended June 30, 2022 and June 30, 2023.
  • As at June 30, 2023, it had 3,450 distributors, 3,656 dealers and 114,851 retailers in its pan-India distribution network.
  • As of June 30, 2023, it had relationships with 72 distributors in its distribution channel to our overseas markets, namely, North America, Asia Pacific, Europe and Middle East.
  • Company’s promoters are Tribhuvanprasad Rameshwarlal Kabra, Shreegopal Rameshwarlal Kabra, Mahendrakumar Rameshwarlal Kabra, Kirtidevi Shreegopal Kabra, Tribhuvanprasad Kabra HUF, Kabra Shreegopal Rameshwarlal HUF and Mahendra Kumar Kabra HUF.

R R Kabel IPO: Financials

Particulars / Rs. Cr.2023 (03)2022 (03)2023 (12)2022 (12)2021 (12)
Revenue from Operations1,597.311,235.915,599.204,385.942,739.41
Revenue Growth (%)29.24%27.66%60.11%
EBITDA129.947.18357.7353.73253.24
EBITDA Margin (%)8.05%3.79%6.35%7.98%9.22%
Profit before Tax99.3924.62255.99284.36181.43
Net Profit for the period74.3518.14189.87213.94135.4
Net Profit Margin (%) as stated4.61%1.46%3.37%4.83%4.93%
Share Capital55.5323.9247.8523.9223.92
Reserves1,060.87841.11956.66811.19607.52
Net Worth1,494.691,250.251,390.471,237.051,033.38
EPS – Diluted (₹)6.681.6317.0719.2212.18
RONW (%)4.97%1.45%13.66%17.29%13.10%
Net Asset Value (₹)134.57112.56125.19111.3893.04
ROE (%)5.05%1.43%14.22%18.63%13.88%
ROCE (%)5.951.8615.5717.4113.59
Post issue Share Capital56.40
FV5
IPO price1035.00
EPS Fy2316.83
PE Fy2361.49
EPS(annulaized Q1Fy24)26.37
PE (Annualized Q1Fy24)39.26
Market cap in Lacs11675
Market Cap/sales7.3

Anchor Investors:

R R Kabel IPO: Salient Points

  • The Indian consumer electrical industry was estimated at ₹1,811.50 billion in Fiscal 2023 and is expected to grow at a CAGR of 10% until Fiscal 2027 to reach a market value of approximately ₹2,665 billion.
  • From the issue proceeds, 136 crore shall be marked for repayment or prepayment, in full or in part, of borrowings availed by the Company from banks and financial institutions.
  • RR Kabel is the fastest growing consumer electrical company among their peers in India, growing at a CAGR of 43.4% between Fiscal 2021 and Fiscal 2023,
  • RR Kabel is the 5th largest player in the wires and cables market in India, representing approximately 5% market share by value as of March 31, 2023,
  • RR Kabel is the 5th largest player in branded wires and cables market in India, representing approximately 7% market share by value as of March 31, 2023.
  • RR Kabel has the highest revenue contribution from the business-to-consumer (“B2C”) sales channel in wires and cables with approximately 74% of revenue coming from the B2C sales channel as of March 31, 2023,
  • It is one of the leading exporters of wires and cables from India representing approximately 9% market share (in value terms) of the total W&C exports from India in FY2022.
  • For Fiscals 2021, 2022 and 2023 and three months ended June 30, 2022 and June 30, 2023, its revenue from outside India amounted to 21.54%, 22.97%, 22.69%, 27.80% and 26.94%, respectively, of its revenue from operations, .
  • It largely sells through distributors, but now also started selling online. In Fiscals 2023 and three months ended June 30, 2022 and June 30, 2023, revenue from e-commerce platform dealers represented 0.24%, 0.22% and 0.57%, respectively, of its revenue from operations.
  • It derives most of the revenue from operations from the manufacture and supply of wires and cables. For Fiscals 2021, 2022 and 2023 and three months ended June 30, 2022 and June 30, 2023, revenue from operations from our wires and cables segment amounted to ₹25,202.47 million, ₹41,112.71 million, ₹49,585.32 million, ₹11,058.27 million and ₹14,230.82 million, which accounted for 92.52%, 93.74%, 88.56%, 89.47% and 89.09%, respectively of the total revenue from operations in such periods
  • Company has pursued inorganic growth opportunities in the past mainly to grow its FMCG business. In Fiscal 2020, it acquired the light emitting diode lights and related hardware business of Arraystorm Lighting Private Limited, In May 2022, we acquired the home electrical business of Luminous Power Technologies Private Limited, along with its trademarks and design certificates, to strengthen our fast moving electrical goods portfolio.
  • Credit Rating
 July 20, 2018April 4, 2019June 5, 2020September 30, 2021December 19, 2022
RatingIND AIND AIND A+IND AA-IND AA-
OutlookStablePositiveStableStableStable

Peers

ParticularsR R KabelHavellsPolycabKEI IndFinolexV-Guard
Revenue from operations (in ₹ million)55,992.001,69,107.301,41,077.7869,123.3044,811.1041,260.44
Revenue from operations (Outside India) (in ₹ million)12,701.904,885.8013,835.235,892.48N.A.51.58
Net Profit1,898.7210,717.3012,915.1647,734.204,342.901,890.47
NPM3.39%6.34%9.15%69.06%9.69%4.58%
Segment revenue operations (wires and cables) (₹ million)49,585.3255,326.001,23,202.8248,205.0936,835.10N.A.
% of revenue wirs cables88.56%32.72%87.33%69.74%82.20% 
Segment revenue from operations (FMEG)6,406.6870,329.4012,404.00N.A.N.A.27,928.39
Revenue from operations growth (%)27.6621.3215.620.7118.92N.A.
Segment revenue operations (wires and cables) growth (%)20.6119.1714.14-9.873.09N.A.
Segment revenue from operations (FMEG) growth (%)133.2512.46-1.11N.A.N.A.5.09
Trade Receivables days361741871746
Inventory days63108828087113
Trade Payable days247750652373
PAT Margin (%)3.376.279.076.889.444.56
EBITDA (in ₹ million)3,577.0417,768.5019,854.407,337.936,271.003,363.53
EBITDA Margin (%)6.3510.413.9410.5713.648.12
EBITDA Growth (%)1.12-6.8746.5121.6225.44-4.17
Return on Capital Employed (%)15.5726.4825.9524.6112.5218.78
Return on Equity (%)14.2216.9721.1120.2110.4712.52
Debt to Equity ratio (times)0.3600.020.0500.26
Working Capital Cycle (days)754566976488
B2C Sales (%)76.68N.A46,334.33N.AN.AN.A.
Distributors (numbers)3,296N.A4,300+1,900+5,000+N.A.
Dealers (numbers)3,444~17,000   N.A.
Retailers (numbers)1,06,6262,22,000205,000+N.A.1,75,00060,000+
PE 51.179.6051.146.7035.274.4
  • On FY23 earnings EMS IPO is valued at 51.1x P/E on TTM basis.
  • Polycab has much higher margins and its revenue is about 2.75x that of R R Kabel.
  • Even as growth prospects remain, IPO looks almost fully priced.
  • Company has reported good nos. in Q1FY24 which may support the price post listing if same trend continues.
  • I neutral on R R Kabel IPO and may only apply if there is a strong response to IPO on Day 3.
  • GMP as reported on social media is around Rs. 150-180/-.
  • Recent market melt down is not good for listing gains in the IPO as it has been priced in different ,market conditions.
  • Please do your own diligence. There is good amount of risk in all equity investments.
  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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