BEW Engineering coming with an IPO to raise up to Rs 4 crore

BEW Engineering

• BEW Engineering is coming out with an initial public offering (IPO) of 6,84,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 58 per equity share.  
• The issue will open on September 2, 2021 and will close on September 7, 2021.
• The shares will be listed on the Emerge platform of NSE.
• The share is priced 5.80 times higher to its face value of Rs 10.
• Book running lead manager to the issue is First Overseas Capital.
• Compliance Officer for the issue is Vikram Vinay Mukadam.

Profile of the company

The company was incorporated in the year 2011, however it's Promoter, Prakash Lade has been in this business since 1974. First manufacturing facility was set up by Prakash Lade and V Khokrale in Partnership firm viz. Bifriends Engineering Works. Second manufacturing facility was set up in 1993 under group company Sterling Fabricating Engineers. The company was established in 2011 to consolidate the operations of BEW group under one roof. In January 2018, Lade family took 100% management control of the group by buying out Khokrale family‘s stake in the Company.

The company is engaged in design and manufacture of Pharmaceutical & Chemical plants and process equipment. It design and manufacture special range of filtration, mixing and drying equipments specifically used in Pharmaceuticals, Sterile Applications, Intermediate Compounds, Fine Chemicals, Chemicals, Agro Chemicals, Pesticides, Insecticides, Dyes and Food Products. These equipments are manufactured from material such as Stainless Steel, Alloy Steel, Hastelloy etc. with various linings as per International Codes : a) IS b) BS c) ASME d) TEMA e) DIN f) CE Marks etc.

Proceed is being used for:

• Meeting additional working capital requirements.
• General corporate purpose.

Industry overview

India is the largest provider of generic drugs globally. Indian pharmaceutical industry supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicines in UK are met by exports from India. The country‘s pharmaceutical industry has expanded at a CAGR of 22.4 % over 2015-20 to reach $55 billion. India‘s pharmaceutical exports stood at $17.27 billion in 2017-18 and are expected to reach $20 billion by 2020. By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and 6th largest market globally in absolute size.

India is the world’s 4th largest producer of agrochemicals after United States, Japan and China. Indian Agro chemical segment can be broadly classified into Insecticides which dominate the Indian crop protection market and form almost 53% of the domestic agrochemicals market followed by Herbicides, Fungicide & others having market share of 24%, 19% and 4% respectively, however herbicides are emerging as the fastest growing segment amongst the agrochemicals. Indian agro-chemical firms are preparing products for near future that could significantly boost their sales as molecules worth over Rs 26,000 crore are going off-patent by 2020. Industry experts feel the agrochemical sector may witness an annual growth of 15-20 per cent following patent expiry from currently around 8-9 per cent.

Specialty chemicals are particular chemical products which provide a wide variety of effects on which many other industry sectors rely. Such industries that depend heavily on it are automotive, aerospace, food, cosmetics, agriculture, manufacturing, and textiles. They can be some kind of formulation or single chemical entities whose chemical composition influences the end product. Specialty chemicals are made with extensive research and development, which is the main difference between them and commodity chemicals. Unlike commodity chemicals, Specialty chemicals have couple of core applications and are used in various industries like cosmetics, dyes & pigments, agrochemicals, polymers additives, water treatment etc. these user industries contribute over 80% sales of specialty chemicals.

Pros and strengths

Cost effective and quality manufacturing: The company is certified as an authorized ASME U & R stamp manufacturer. This is one of the pre requisite certification for some of its clients for manufacturing few equipments. It has been manufacturing custom made equipments for many of its customers at a much cheaper cost compared to some of its competitors, which helps it win the customers. It also sticks to very quality and time bound manufacturing to meet the capex requirements of its customers.

Efficient after sales support teams: The company has trained after sales support teams stationed at Mumbai and Hyderabad to cater key customers across India. Its clientele is mainly situation in Maharashtra, Gujarat, Andhra Pradesh, Telangana and Karnataka. Its team at Mumbai takes care of customers in Maharashtra and Gujarat regions and team at Hyderabad takes care of customers in southern region. Thus it serves its customers very efficiently and in a very timely manner.

Strong brand value: BEW brand has strong legacy of over 3 decades. The company has esteemed client base across Pharmaceuticals, Agro Chemicals and Specialty Chemicals Industry. Most of its clients give it repeat orders and has been with it for last many years.

Risks and concerns

Operations significantly located in Thane region: Currently, all the company’s manufacturing facilities and registered office are situated in Thane district, Maharashtra state, India and it is carrying its business mainly from these facilities. For the financial year ended March 31, 2021 and financial year ended March 31, 2020, its revenue from operations from Southern states accounted for approximately 44.34% and 21.85% and from Western States accounted for approximately 48.24% and 76.22% respectively. In the event that demand for its services in general reduces or stops by any reason including political discord or instability or change in policies of these States, then its financial condition and operating results may be materially and adversely affected.

Depends on debt funds for business: The company’s business has been highly capital intensive and working capital intensive, it has been largely using Debt from Banks in the form of Term Loans and Working Capital. As it is using more of Debt, its interest obligation is also higher and accordingly it is not able to maintain Interest coverage ratio of 2 or more, which is generally consider adequate by the lenders. Any changes in terms of lending by lenders or non-availability of debts may adversely affect its business and financial operations.

Operate in highly competitive, fragmented industry: The filters and dryers market is highly fragmented and competitive. The company competes with both domestic as well as multinational companies. It also faces competition from various regional players. Price competition in the industry is intense. The level of competition will remain high, which could directly impact the size of its workforce and therefore potentially limit its ability to maintain or increase its profitability. Its continued success depends on its ability to compete effectively against its existing and future competitors. With the potential influx of new competitors, its ability to retain its existing clients and to attract new clients is critical to its continued success.

Outlook

Incorporated in 2011, BEW Engineering is engaged in the design and manufacturing of filters and dryers for the Chemicals Industry comprising of Pharmaceuticals - API, Agro Chemicals, and Specialty Chemicals. The company's product portfolio includes a range of filtration, mixing and drying equipment, Sterile Applications, Intermediate Compounds, Fine Chemicals, Chemicals, Argo Chemicals, Pesticides, Insecticides, Dyes and Food Products. It has esteemed client base across Pharmaceuticals, Agro Chemicals and Specialty Chemicals Industry. Most of its clients give it repeat orders and has been with it for last many years. It has trained after sales support teams stationed at Mumbai and Hyderabad to cater key customers across India. On the concern side, it has limited history of operating in the business of design and manufacture of Pharmaceutical & Chemical plants and process equipment vis-à-vis some of its Competitors. If it is not successful in managing its growth, its business may be disrupted and its profitability may be reduced.

The company is coming out with a maiden IPO of 6,84,000 equity shares of Rs 10 each at a fixed price of Rs 58 per equity share to mobilize Rs 3.96 crore. On the performance front, the total income for FY 2021 is Rs 7354.59 lakh as compared to Rs 6771.01 lakh during FY 2020 registering an increase of 8.62%. Profit after Tax (PAT) increased to Rs 286.53 lakh for the FY 2021 from Rs 31.79 lakh in FY 2020. This increase was mainly due to reduction in operating expenses and better margin realizations on its products. The company has been operating in the Industry segment where there has been very few quality suppliers like it, despite that, the company is offering competitive prices to its customers. This helps it to sustain the competition and claim a position of strength in the marketplace. As a practice it does not have marketing department in company. Most of its orders are repeat orders of its old clients or customers those who have come through word-of-mouth publicity. This helps in selecting orders on its terms and at its price. Accordingly, it focuses on the orders which give it good margins and where it does not have to offer any credits.