Rulka Electricals coming with IPO to raise Rs 26.40 crore

Rulka Electricals 

• Rulka Electricals is coming out with initial public offering (IPO) of 11,23,200 shares of Rs 10 each in a price band Rs 223-235 per equity share.   
• The issue will open for subscription on May 16, 2024 and will close on May 21, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 22.30 times of its face value on the lower side and 23.50 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Kejal Niken Shah.

Profile of the company

The company is in business of turn key projects contractor engaged in offering solution for all types of Electrical & Fire Fighting Turnkey Projects. The company offers wide range of services like Electrical Solutions, Electrical Panels, Solar EPC Contracts, Turn Key Electrical Warehousing Projects, Electric Commercial Industrial Services, Maintenance Services, Electrical Contracting and Data & Voice Cabling Installation across the Industrial Sector, Commercial, Retail and Theatre sector. It offers electrical contracting services for all types of industrial plants.

The company has integrated operations which involve Designing, Supplying, Installation, Testing & Commissioning of the project. It also maintains the projects as per the Requirements. It has completed Warehouses projects across country. Also, it has completed Retail Stores projects, theatres project across country & many more Hospitals & Hospitality. As part of its on-going commitment to delivering comprehensive solutions and ensuring the longevity of the systems it installs, it provides Operations and Maintenance (O&M) services, specifically tailored for electrical and fire-fighting systems. The O&M services are designed to proactively address the needs of its Clients systems, offering a range of services including routine inspections, preventive maintenance, prompt issue resolution, and emergency response. It also provides Annual Maintenance which are customized to meet the specific requirements of systems and operations. Under an Annual Maintenance Contacts, it provides dedicated team of technicians and engineers, ensuring that systems are consistently maintained to the highest standards. 

Proceed is being used for:

• Meeting Working Capital Requirement.
• General Corporate Purpose.
• Meeting the Offer Expenses.

Industry overview

Power is among the most critical components of infrastructure, crucial for the economic growth and welfare of nations. The existence and development of adequate power infrastructure is essential for sustained growth of the Indian economy. The fundamental principle of India’s power industry has been to provide universal access to affordable power in a sustainable way. The Ministry of Power has made significant efforts over the past few years to turn the country from one with a power shortage to one with a surplus by establishing a single national grid, fortifying the distribution network, and achieving universal household electrification. India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power, to viable non-conventional sources such as wind, solar, agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. India was ranked fourth in wind power capacity and solar power capacity and fourth in renewable power installed capacity, as of 2021. India is the only country among the G20 nations that is on track to achieve the targets under the Paris Agreement.

The Indian electrical industry has a diversified, mature and strong manufacturing base, with robust supply chain, fully equipped to meet domestic demand and any capacity addition. A rugged performance design of domestically manufactured electrical equipment has evolved over the years to meet the tough network demand in the country. The industry is fully geared up to meet the demand power infrastructure demand of the country. Currently operating at around 60-70 per cent capacity utilization, the Power Equipment Industry Production size in 2021-22 was $30 Billion. While exports were $10 Billion, it imported $11 Billion and the share of Capital Goods Sector was Over 50 percent. Power Equipment Industry growth in FY2021-22 & Estimated Half year FY23 over FY22. 

Pros and strengths

Quality Assurance and Standards: Quality standards followed right from the beginning are very stringent, and adhere during the services and assembling process. The company is very particular from usage of right person at right place to render specialized services to its clients. Its dedicated efforts towards the quality of services, processes and inputs have helped it gain a competitive advantage over others. Its quality services have earned it a goodwill from its customers, which has resulted in repeat services orders from many of them.

Existing client relationship: The company has earned reputation based upon which it has been successful in retaining its reputed clients. Its existing customer relationship helps it to get repeat business from its customers. This has helped it maintain a long-term working relationship with its customers and improve its customer retention strategy. Its relationship with the existing customers represents a competitive advantage in gaining new customers and increasing its business.

Diversified Client Base: The company serves a diverse mix of end markets across several industry sectors which are warehouse clients, retail clients, Industrial clients and Hotel/Hospital clients. In its business, it serves a number of customers with variety of services. Since it caters to a diverse customer base, it has historically been able to pass a significant portion of increases in operating costs such as infrastructure cost, and other operating expenses through review. 

Risks and concerns

Operation and maintenance of electrical services involves significant risks: The operation and maintenance of the company’s electrical installations involves significant risks and a number of factors could increase its maintenance needs, reduce the availability of its transmission systems, or result in forced outages, suspension of its operations, personal injury, loss of life, or damage to property. In addition, its business requires its employees and contractors to work under potentially dangerous circumstances (such as being exposed to electricals equipments). Its operations are subject to hazards associated with the handling of dangerous materials, working on heights and working on live lines. Despite compliance with requisite safety requirements and standards, due to the nature of the materials and circumstances its employees and contractors work under, it may be liable for certain costs, including costs for healthrelated claims, or removal or treatment of hazardous substances, including claims and litigation from its current or former employees for injuries arising from occupational exposure to materials or other hazards at its project site. This could subject it to significant disruption in its business and to legal and regulatory actions, which could materially adversely affect its business, prospects, financial condition, cash flows and results of operations. 

Subject to performance risk from third-party contractors: The company relies on third-party contractors and its employees for the development, execution and operation of its projects as well as other business operations. While it maintains a diversified set of vendors, it remains subject to the risk that the third-party contractors will not perform their obligations. If the third-party contractors do not perform their obligations (including regulatory compliances) or if they deliver any components that have a manufacturing defect or do not comply with the specified quality standards and technical specifications, it may have to enter into new contracts with other contractors at a higher cost or suffer schedule disruptions. Changing a contractor may incur additional costs in finding a replacement service provider or experience significant delays. In addition, if any of its employees or third-party contractors take, convert, or misuse funds, documents, or data, or fail to follow protocol when interacting with consumers and regulators, it could be liable for damages and subject to regulatory actions and penalties. 

Business is manpower intensive: The company’s business is manpower intensive and it is dependent on the availability of its permanent employees and sometimes the supply of a sufficient pool of contract labourers at its project locations. Unavailability or shortage of such a pool of workmen or any strikes, work stoppages, increased wage demands by workmen or changes in regulations governing contractual labour may have an adverse impact on its cash flows and results of operations. The number of contract labourers employed by it varies from time to time based on the nature and extent of work contracted to it and the availability of contract labour. It may not be able to secure the required number of contractual labourers required for the timely execution of its projects for a variety of reasons including, but not limited to, possibility of disputes with sub-contractors, strikes, less competitive rates to its sub-contractors as compared to its competitors or changes in labour regulations that may limit availability of contractual labour.

Outlook

Rulka Electricals, a Home of Electrical and Fire Fighting solutions was established in the year 2004. It is a trusted and reliable turn key projects contractors from Mumbai (Maharashtra, India) engaged in offering excellent solution for all types of electrical works. For its clients, it can offer services like Electrical Solutions, Electrical Panels, Turn Key Electrical Warehousing Projects, Electric Commercial Industrial Services, Maintenance Services, Electrical Contracting and Data & Voice Cabling Installation. It can offer electrical contracting services for all types of industrial plants. It has fast growing in this domain due to the hard work and industrious efforts of its skilled professionals. Its team comprises skilled personnel including technicians, engineers, quality controllers and management experts. On the concern side, the company is exposed to counterparty credit risk in the usual course of its business dealings with its clients or other counterparties who may delay or fail to make payments or perform their other contractual obligations. The financial condition of its clients, business partners, suppliers and other counterparties may be affected by the performance of their business which may be impacted by several factors including general economic conditions.

The company is coming out with an IPO of 11,23,200 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 223-235 per equity share. The aggregate size of the offer is around Rs 25.05 crore to Rs 26.40 crore based on lower and upper price band respectively. On performance front, revenue from operations had increased by 29.15% from Rs 3626.51 lakh in Fiscal 2022 to Rs 4683.74 lakh in Fiscal 2023 was due to increase in sales of products during the year. The company reported a net profit of Rs 280.52 lakh in Fiscal 2023 as compared to a net profit of Rs 112.08 lakh in Fiscal 2022. Meanwhile, the company constantly endeavours to improve its service process to optimize the utilization of resources. It has invested resources, and intend to further invest in its activities to develop customized systems and processes to ensure effective management control. It plan to increase its customers by meeting orders in hand on time, maintaining its customer relationship and renewing its relationship with existing buyers.