Bansal Wire Industries Ltd. (Apply for Listing Gains)

HighlightsIssue Size –: 29,101,562 sharesIssue Open/Close – 03 July / 05 July, 2024Price Band (Rs.)  243 – 256Issue Size (Rs.) – 7,450 mnFace Value (Rs) 5Lot Size (shares) 58Bansal Wire Industries Limited (BWIL) incorporated in 1985, The company, along with its subsidiaries offers over 3000 SKUs in three broad segments, i.e., high carbon steel wire, mild steel wire (low carbon steel wire) and stainless-steel wire, with Company’s offering of approximately 2000 SKUs and their Subsidiary’s offering of 1500 SKUs.They operate from their 4 established manufacturing facilities in the National Capital Region, India, with 3 manufacturing facilities in Ghaziabad (U.P.) and one manufacturing facility in Bahadurgarh (Haryana).They market and sell products under the brand name ‘BANSAL’ which has a strong reputation in the market as a trusted brand since incorporation. The Company undertakes various initiatives to promote brands and products, which have not only helped maintain a sales momentum but have also resulted in an impressive customer retention ratio of above 64 pct as of FY24, FY23 and FY21.BWIL are exporting their products to several countries, with 14 global representatives, covering countries like Bangladesh, Brazil, France, Germany, Israel, Italy, Netherland, South Korea, South Africa, Sri Lanka, Turkey, United Kingdom, United States of America and Vietnam. Out of the total proceeds of Rs. 7,450 mn, Rs. 4,527 mn would go towards repayment and/or prepayment of all or a portion of certain outstanding borrowings availed by the company, Rs. 937 mn would go towards investment in their subsidiary for repayment or prepayment of all or a portion of certain of its outstanding borrowing, Rs. 600 mn would go towards funding working capital requirements of the company and ~Rs. 1,386 mn would go towards general corporate purpose.Key HighlightsThe steel wire industry has witnessed a significant growth at a CAGR of 6.90 pct over FY19-FY23, growing to 5.6 mn tonnes, primarily owing to increasing infrastructure development activities across the country and growing production in the automobile industry. Demand is expected to grow 8-10 pct at the CAGR between FY23 and FY28, growing to 8-9 mn tonnes.The company has a customer base exceeding 5,000 customers, spreading across various industrial sectors. Some of the major sectors that they serve include automotive, cables, fencing, infrastructure and agriculture out of which automotive and consumer durables sectors give them the highest EBITDA margins.They have an installed capacity of 259,000 MTPA of mild steel, high carbon and stainless-steel wires at its existing 4 manufacturing facilities located in National Capital Region, India which includes the manufacturing facility of BSPL, their subsidiary, located at Bahadurgarh, Haryana. BWIL is also in process of setting up a manufacturing facility which spreads across 32 acres approx. at Dadri. This facility will be one of the largest in Asia and largest steel wire plant in India.To counter the volatility in the cost of the raw materials, the company adjust and revise the prices for their products on a monthly basis. Furthermore, when the fluctuation in the price of raw materials go beyond a certain level during the period concerned, the list prices of products are revised as and when required. Most of the production that they entail is carried by them after the receipt of the order at a pre-agreed price and hence, as a result they are able to maintain the margins and work on a cost-plus model and are largely immune to commodity price fluctuations, which has helped them in maintaining EBITDA margins between 4.73 pct to 6.04 pct consistently over last 3 years.BWIL key strategies includes (i) Expansion of their customer base in North India and increase penetration in other geographies. (ii) Focus on increasing exports sales and growing sectors like automotive and infrastructure. (iii) Entering into B2C segment steel products and establishing retail distribution network. (iv) Increase in margin profile by focusing on high margin products and adding speciality wire segment and (v) Technological advancement of manufacturing facilities.Sales of the company has grown by ~5.91 pct CAGR during the period FY22–24, while EBITDA and profit grew ~14.93 pct CAGR and ~17.27 pct CAGR over the same period respectively. During FY24, company reported sales of Rs. 24,660 mn which increased by ~2.190 pct YoY, while EBITDA increased by 30.17 pct YoY to Rs. 1,493 mn as EBITDA margin improved from 4.73 pct in FY23 to 6.04 pct in FY24. As of FY24 the company reported profit of Rs. 788 mn which was up 31.33 pct YoY.Key RiskThe company needs substantial working capital requirements and may require additional financing to meet those requirements, which could have a material adverse effect on their results of operations, cash flows.They are dependent on the performance of the steel wires market. Any adverse changes in the conditions affecting the steel wires market can adversely impact their business.Financial PerformanceParticularsFY22FY23FY24Revenue (Rs. mn)219842413024660EBITDA (Rs. mn)113111471493EBITDA Margin (%)5.13 %4.73 %6.04 %Profit (Rs. mn)573600788Profit Margin (%)2.6 %2.47 %3.19 %Debt to EBITDA (x)3.652.833.23Debt to Equity (x)1.851.491.48RoE (%)29.92 %23.71 %21.19 %RoCE (%)18.59 %17.34 %18.46 %Peer comparison based on FY24 FinancialsParticularsBansal Wire Ltd.Rajratan Global Wire Ltd.DP Wires Ltd.Bedmutha Industries Ltd.Revenue (Rs. mn)246608904100238120EBITDA (Rs. mn)14931311557831EBITDA Margin %6.04 %14.66 %5.53 %9.57 %Profit (Rs. mn)788718363209Profit Margin (%)3.19 %8.04 %3.6 %2.41 %Debt to EBITDA (x)3.231.34-0.832.68Debt to Equity (x)1.480.3901.95RoE (%)21.19 %15.41 %17.39 %19.04 %RoCE (%)18.46 %17.52 %24.6 %15.98 %ValuationBWIL are the largest stainless steel wire manufacturing company and the 2nd largest steel wire manufacturing company by volume in India with a production of 72,176 MTPA and 206,466 MTPA, respectively, in FY23, representing 20 pct and approximately 4 pct market share. Since incorporation, they have consistently delivered quality products, creating a niche identity in the industry. At the upper end of the price band of Rs. 256 the issue is priced at a PE of 50.86x its FY24 earnings. The issue looks fully priced. However, one can subscribed for listing gains.Also read: Evolving Landscape of Financial Advisory in IndiaDisclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communications cannot be held responsible for it.