Jaipur based Shera Energy Limited IPO proposes to garner ₹ 35.20 crore through IPO and shares will be listed on NSE Emerge platform.. The company manufacture winding wires and strips made of non-ferrous metals primarily Copper and Aluminium. Alongside, they also process products like wire rods, wires, and tubes of Copper and Brass. The OFS is from Canbank Venture Capital Fund which through its Fifth Fund, Emerging India Growth Fund has invested Rs 10 crore by way of equity for a minority stake in the company through preferential allotment of equity shares to CVCFL.
IPO open:
7-Feb-23
IPO Close:
9-Feb-23
IPO Size (Rs.)
~ ₹35.20 Cr (Fresh ₹5.97 Cr, OFS ₹29.23 Cr)
IPO Size (shares)
6,176,000 shares
Face Value:
₹10
IPO Price Band:
₹55 to ₹57
Minimum Lot
2000
Listing At
NSE SME
QIB quota
48.42% of the Net issue
NII Quota
15.84% of the Net Issue
Retail Quota
35.74% of the Net Issue
Lead Manager
Holani Consultants
Registrar
Bigshare Services Pvt Ltd
Company is primarily engaged in the business of manufacturing of winding wires and strips made of non-ferrous metals primarily Copper and Aluminium. Company also manufactures wire rods, wires and tubes of Copper and Brass. These wires, tubes and rods are manufactured in various shapes and sizes as per the requirement of the customers and / or demand in the market.
The major raw material used are copper rod, aluminum rod and copper scrap and raw material consumption contribution is 94.34%, 94.19%, 95.46% and 91.01% of revenue from operations for the period ended September 30, 2022 and financial year ended March 31, 2022, 2021 and 2020 respectively based on restated consolidated financial statements. The industry in which we operate is highly fluctuating specially the prices of copper and aluminum.
As on September 30, 2022, it had 146 employees which include Accounts & Finance, Compliance, Maintenance, Marketing & Logistics, Production & Operations, Quality, Top Level Management and Permanent Labour.
The product range includes paper covered wires, enamel and fiber covered wires, round wires, rectangular wires, bunched wires, tubes, rods, strips, etc.
These products are mainly used in transformers, motors and electrical panels. Range of products is depicted below.
Promoters of the Company are Mr. Sheikh Naseem, Mrs. Shivani Sheikh and M/s Isha Infrapower Private Limited
Shera Energy Limited IPO: Financials
Particulars/ Rs Lacs
H1FY23
2022
2021
2020
Income
Revenue from operations
33871.58
52382.19
42197.36
42532.84
Other income
82.14
76.02
74.56
86.3
Total income
33953.72
52458.21
42271.92
42619.14
Expenses
Cost of material consumed
31953.84
49339.33
40283.04
38707.84
Purchase of stock in trade
Change in inventories of finished goods, work-in-progress and stock in trade
-1407.94
-2680.73
-3280.79
-1507.01
Employee benefit expenses
390.97
679.6
566.7
803.67
Finance costs
1170.79
1988.1
2135.73
2024.47
Depreciation and amortization expenses
246.96
482.96
492.39
439.92
Other expenses
1020.01
1682.71
1364.68
1605.87
Total expenses
33374.63
51491.97
41561.75
42074.76
Profit before tax
579.09
966.24
710.17
544.38
Profit after tax
428.25
699.5
502.67
361.43
Total comprehensive income for the year
433.76
693.43
490.73
360.97
NPM
1.3%
Earning per equity share of ₹ 10/- each (in ₹)
2.15
3.51
2.52
1.81
Post issue Share Capital
2279
3.51
2.52
1.81
FV
10
IPO price
57
EPS FY22
3.04
PE Fy22
18.73
EPS annualized
3.81
PE
14.97
Market cap in Lacs
12990.30
Market Cap/sales
0.25
Salient Points
Shera Energy Limited had undertaken a Pre-IPO Placement of 18,00,000 Equity Shares for cash consideration aggregating up to ₹ 1,008 Lakhs in Jan 2023. This translates to price of Rs. 56 per share.
The proceeds of the Issue are intended to be used for:
Funding capital expenditure towards change in electricity supply voltage from 33 KV to 132 KV at the manufacturing facility.
To meet Working Capital requirements
General Corporate Purpose
To meet issue expenses
It operates in a competitive industry as evident by its profit margins.
business is working capital intensive and requires a significant amount of working capital for smooth functioning.
The major raw material used are copper rod, aluminum rod and copper scrap and raw material consumption contribution is 94.34%, 94.19%, 95.46% and 91.01% of revenue from operations for the period ended September 30, 2022 and financial year ended March 31, 2022, 2021 and 2020 respectively.
The industry in which Shera Energy Limited operates is fragmented and highly fluctuating specially the prices of copper and aluminum.
Company intends to undertake expansion of existing manufacturing facility by setting up Briquetting Plant for production of briquettes of ferrous waste fines in backward integration. The briquettes shall be used as raw material feed for production of Cast Iron Lumps. It intends to finance the said project from internal accruals/ surplus funds available for general corporate purpose and/or from loan facilities for which we have moved an application with Yes Bank Limited which is under appraisal.
HDFC Bank, Yes Bank and Kotak Bank are bankers to the company. It has availed term loans from SBI and SIDBI. It has taken loan for working capital from Vivriti Capital Private Ltd. It has repaid loans taken from Clix Capital Services, Edelweiss Retail Finance, Fullerton India Credit Co. in 2022.
Peers comparison:
Company
Face value
CMP (INR)
Revenue Fy22 Rs. Cr
Ebita%
P/E
RONW (%)
NAV
Debt/equity
Shera Energy Limited*
10
57
525
5.65%
15
10.48%
33.47
1.62
Precision Wires
1
65.7
2,690
4.19%
16.8
17.27%
31.55
0.05
Rajnandini Metal
1
13.9
1,029
3.26%
28.5
33.86%
16.05
1.48
RamRatna Wires
5
159
2,019
4.04%
14
18.37%
120.45
1.03
Cubex Tubings Limited
10
33.1
135
4.44%
18.7
3.90%
43.34
0.12
Bhagyanagar India
2
48.6
1,090
1.53%
27.5
3.40%
40.21
1.21
Company has also commenced manufacturing special grade brass rods through Cold Extrusion process suitable to make bullet shells for defence applications. Company has successfully done the requisite trials and tests on this with customers. This product has been recently developed by the company on account of demand in the ammunition industry in our country.
The manufacturing facilities are located in the city of Jaipur. It generates majority of revenue from this state i.e., out of ₹ 52,382.19 Lakhs in FY 2021-22, it has generated revenue of ₹ 31,829.06 Lakhs i.e., 60.76% from Rajasthan.
Vendor Approval Validation from Power Grid Corporation of India, a GoI Enterprise, for Enamelled (Copper & Aluminium), PICC and PIAC conductors for Power and Distribution transformers up to 33KV class.
Social media reports indicate a GMP of about Rs. 20 on the issue price.
PE ratio is 18x (fy22 earnings) and 15x (fy23 annualized)
Debt levels are high and debt equity ratio stands at 1.62 which is on the higher side.
Shera Energy Limited IPO may see good subscription due to good listings by SME IPOs in recent past.
I intend to apply in Shera Energy Limited IPO.
SME IPO are more volatile and I generally exit on the listing day, many times in pre open session.
Lead Manager Holani has a mixed track record with 3 out of last 6 IPOs listing with gains. The last one Insolation energy listed with good gains.
Please do your own diligence as SME IPOs are more volatile and risky than mainboard IPOs and need more funds.
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. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.
