Viaz Tyres coming with an IPO to raise Rs 20 crore

Viaz Tyres

• Viaz Tyres is coming out with an initial public offering (IPO) of 32,26,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 62 per equity share.
  
• The issue will open for subscription on February 16, 2023 and will close on February 21, 2023.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 6.2 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Beeline Capital Advisors.
  
• Compliance Officer for the issue is Akshita Dave.
  

Profile of the company

The company is engaged in manufacturing of rubber tubes for bicycles, two and three wheeleres, passenger vehicles and heavy load industrial vehicles. It also deals in ancillary products like Off The Road (OTR) Tyre tubes and Animal Driven Vehicle (ADV) Tubes, Engine Oil and Grease on white labeling bases. Further, it has recently started selling bicycle tyres which it get manufactured on job work basis, depending upon the market demands. It sells rubber tubes, bicycle tyres and ancillary products under the brand names. It sells its products in domestic as well as international markets. In order to capture more market share the company is developing alternate brand.

The company has recently ventured into trading of Tyres through exclusive distributorship of Maxxis Rubbers for Turkey. It has exclusive distributorship for selling tyres in the brand name Maxxis Rubbers, for the territorial limits of Turkey. It has started the said business operations in the financial year 2022-23. The company has state-of-the-art infrastructure with latest production facility with installed capacity of manufacturing 7,00,000 Tube per Month, located at Nandasan near Ahmedabad, Gujarat India. Its production facility is latest and updated with employee and environment friendly measures.

Proceed is being used for:

• Repayment or Prepayment or part repayment of Loan.
  
• Meeting Working Capital Requirements.
  
• General Corporate Purpose.
  
• Meeting Public Issue Expenses.
  

Industry overview

Tyre Industry is raw-material intensive. Tyre Industry is not very price sensitive. The tyres produced are almost homogeneous in functionality, quality and price. Indian tyre industry is an essential part of the auto segment and its fortunes are reliant on those of the auto segment. Indian tyre industry is manufacturing all categories of tyres (except some specialized categories like Snow Tyres for which currently there is no requirement and Aero Tyres). Indian tyre industry has the capability to produce all categories of tyres. It has good acceptance in global markets. There is a vast population and production of two-wheelers in India for which different sizes of tyres are required and produced. Indian tyres are meant, and expected to perform, under different and extreme road conditions, from unmetalled village roads to newly constructed national highways, from extreme cold to hot and wet conditions prevailing in different geographical parts of the country. Indian tyre industry is facing intense competition from China and other South East Asian countries in tyre exports to other countries. Tyres are readily available and easily serviced even in remotest corners in India. Indian Tyre Industry provides direct and indirect employment, taking into account dealers, retreaders, growers of Natural Rubber, employment in raw-material sector etc.

Tyre inner tubes are the internal components of the primary tyre which are designed to sustain air pressure. Majority of the tyres which are used in motorcycles, bicycle, large vehicles such as tractors, heavy trucks, cars, and buses are designed for their application with inner tubes. These are made from impermeable materials such as synthetic, elastic, soft rubber for the purpose of avoiding air leakage and are torus shaped in nature. In addition, inner tubes which are larger in size possess the ability to be re used for other applications such as rafting and swimming. These tubes are large inflatable toruses which are manufactured for these applications while also offering a choice of decks, handles, fabric covering, colours and other various accessories, eliminating the protruding valve stem. Manufacturers such as Schrader International develop inner tubes for two-wheeler vehicles which provide high performance to motorcycle tube tyres.

Pros and strengths

Widespread distribution network: As on September 30, 2022, the company has total 15 domestic distributors for rubber tubes across India. Its distribution network is spread across 19 states, namely, Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Tamil N?du, Telangana, Uttar Pradesh, Uttarakhand, West Bengal. It also has presence in 5 countries namely United States of America, Turkey, Romania, United Arab Amirates and Colombia. Further it has and 7 international distributors for sale of rubber tubes and tyres.

Wide range of Products: The company manufactures wide range of butyl rubber tubes, suitable for tyres of vehicles viz., Two Wheelers, Three Wheelers, Cars, Jeeps, Heavy Commercial Vehicles such as Buses, Trucks, Tractors, Animal Driven Vehicles (ADV) etc. Its variety of product offering has enabled it to cater to large customer base in domestic market.

Long standing relationship with distributors: The company continually invests in strengthening its relationships with distributors and suppliers. It has deployed sales personnel who actively engage with its distributors. Its sales and marketing operations are led by its Promoters, Janakkumar Mahendrabhai Patel, Rajeshkumar Prabhudasbhai Patel, who has got rich experience of the business of the company. It organizes annual meetings with its distributors, conduct periodic training programs to ensure appropriate marketing of its products. Such initiatives encourage its distributors to effect greater sales and increase its brand visibility. It also has a dedicated sales team of employees which handles business development and relationship management with its distributors. Its sales personnel are in constant touch by making visits to its distributors periodically and undertake localized training and branding programs to augment their marketing expertise.

Risks and concerns

Working capital requirements: The company business requires significant working capital, part of which would be met through additional borrowings in the future. In many cases, significant amounts of working capital are required to finance the procurement of branded products before payments are received from customers. Its working capital requirements may increase, under certain conditions, where payment terms do not include advance payments or include delayed payments from customers. Additionally, its working capital requirements have increased in recent years due to the general growth of its business.

Dependent on third party transportation provider: The company depends on third-party transportation to receive input materials required for its products and to deliver its finished products to its customers. The company uses third-party logistics providers for all of its product distribution and input materials procurement. This makes the company dependent on such third-party transportation providers. Weather-related problems, strikes, or other events which affects third-party transportation could impair its ability to receive the raw materials and/or deliver the requisite quantities of products in time to its customers, which could adversely affect the performance of its business, results of operations and cash flows.

Face competition: The market for the company’s industry is competitive on account of organized players. Players in this industry generally compete on key attributes such as timely delivery, pricing, the quality etc. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and financial condition.

Outlook

Incorporated in 2018, Viaz Tyres is Ahmedabad-based company engaged in the manufacturing of rubber tubes for bicycles, two and three-wheelers, passenger vehicles, and heavy-load industrial vehicles. The company also deals in ancillary products like Off The Road (OTR) Tyre tubes and Animal Driven Vehicle (ADV) Tubes, Engine Oil, and Grease on white labeling bases. Company sells rubber tubes, bicycle tires, and ancillary products under the brand name ‘Viaz’ in domestic as well as international markets. The company continually invests in strengthening its relationships with distributors and suppliers. It has deployed sales personnel who actively engage with its distributors. On the concern side, the company is governed by various laws and regulations for its business and operations. Besides, the company has not entered any contract with its distributors. Consequently, there is no commitment on the part of the distributor to continue to source their requirements from it, and as a result, its sales from period to period may fluctuate significantly as a result of changes in its distributors vendor preferences.

The company is coming out with a maiden IPO of 32,26,000 equity shares of Rs 10 each at a fixed price of Rs 62 per share to mobilize Rs 20 crore. On performance front, the total revenue from operations for the year ended on FY 2021-22 was Rs 2919.61 lakh as compared to Rs 2914.00 lakh during the FY 2020-21 showing an increase of 0.19%. Profit after Tax (PAT) increased from Rs 60.64 lakh in the FY 2020-21 to Rs 146.91 lakh in FY 2021-22. Meanwhile, the company currently sale through its distribution network spread across India and Abroad. Its plan is to improve the sales by expanding its reach in Tier 2 and Tier 3 towns. This will enable it to grab better market size. It intends to expand its footprint across all states in Western India. The company further intends to reduce the overhead costs which will spread out over time. It also proposes to increase the number of channel partners/dealers in order to broaden its reach.