Vectus Industries – the Noida based manufacturer of plastic storage tanks and pipes – has received SEBI approval to launch its IPO. According to the draft prospectus, the company plans to tap the primary equity market through a mix of fresh issue and an Offer For Sale (OFS). The company competes with the likes of Patton International, Prabh Dayal Om Prakash, RC Plasto Tanks & Pipes and Sintex Plastics Technology. Here are a few points to know about Vectus Industries IPO:
Vectus Industries IPO: New product segments
The company sells its products under Vectus, Ganga and Waterwell brands. It also offers poly vinyl and composite pipes and fittings under the Vectus brand. Its products are largely consumed in the domestic plumbing and sanitation sector. It has 14 manufacturing units and as of 31 March 2018, its products are sold across 4,300 dealers and distributors across India.
The company plans to enter into new product segments, including DWC Pipes, foam core underground drainage system, silent piping systems and higher diameter HDPE pipes. For the same, it has already acquired land to set up a new manufacturing facility at Tumkur.
Vectus Industries IPO: Use of funds
The company plans to issue fresh shares worth INR85 crore. These funds are proposed to be used towards:
- Prepayment/ repayment of all or a portion of the outstanding working capital facilities – INR38.93 crore
- Purchase of equipment for manufacturing facilities – INR31.07 crore
Vectus Industries IPO: Creador to exit
Apart from the fresh issue, existing shareholders plan to offload 3,898,575 equity shares through the offer for sale (OFS) in the IPO. Of these, promoters Ashish Baheti and Atul Ladha plan to sell 657,341 and 394,405 shares, respectively. The biggest chunk of shares will be offered by Latinia Limited which plans to sell 2,846,829 shares or 21.65% stake in the company. Latinia, an affiliate of private equity firm Creador, invested INR100 crore in the company in June 2014. Through the OFS, Creador plans to fully exit Vectus Industries.
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Vectus Industries IPO: Debt reduction on priority
The company has identified debt reduction as a major priority to further improve its balance sheet. It had nominal long-term borrowings as of 31 March 2018 and majority of borrowings were short-term in nature amounting to INR429 crore. This translates into net debt to equity ratio is quite less at 0.11. Since a large part of IPO proceeds will be used towards retirement of outstanding working capital facilities, investors can expect this figure to further reduce.
Vectus Industries IPO: Improving margins
Vectus has seen a steady improvement in sales of its products and this is reflected in its financial performance. Sales revenues in the last five years jumped from INR408 crore to INR631.5 crore. Similarly, profits expanded from INR21.4 crore in FY2014 to INR35.5 crore in FY2018. After a dip in FY2015, its profit margins have also registered a steady improvement and stood at 5.6% in the latest year, reflecting the best performance in the last five years. This is in part facilitated by debt reduction drive mentioned above.
Vectus Industries’ financial performance (in INR crore)
|Profit after tax||21.4||14.4||25.0||28.9||35.5|
|Net margin (%)||5.2||2.9||4.4||4.7||5.6|