Euro Panel Products coming with an IPO to raise upto Rs 45.50 crore

Euro Panel Products

• Euro Panel Products is coming out with an initial public offering (IPO) of 65,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 70 per equity share.
• The issue will open on December 14, 2021 and will close on December 16, 2021.
• The shares will be listed on NSE Emerge platform.
• The share is priced 7 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Hiral Shah.

Profile of the company

Euro Panel Products was originally incorporated as a private limited company in the name of “Archer Trading House Private Limited” under the provisions of the Companies Act, 1956 vide Certificate of Incorporation dated December 18, 2013 by the Registrar of Companies, Maharashtra, Mumbai. Subsequently, the name of the company was changed to “Euro Panel Products Private Limited” pursuant to the special resolution passed by the Shareholders of the company at the Extra-Ordinary General Meeting held on August 18, 2014. The Deputy Registrar of Companies, Mumbai issued a fresh Certificate of Incorporation dated October 22, 2014, upon change of the name of the Company. The company was converted into a public limited company pursuant to the special resolution passed by the Shareholders of the company at the Extra-Ordinary General Meeting held on August 25, 2021 and consequently upon conversion, the name of the company was changed to “Euro Panel Products Limited” vide a fresh Certificate of Incorporation dated September 21, 2021 by the Registrar of Companies, Mumbai.

The company is ISO 9001:2015 certified and contribute towards improving the quality standards of the construction industry in India. It manufactures Aluminum Composite Panels (ACPs) at its factory unit located at Umbergaon, Gujarat and its Head Office is located at Mumbai, Maharashtra. It operates through its distribution channels on PAN India basis, through its depots, distributors and dealers. Currently, the company’s depots are located at Chhattisgarh, Delhi, Gujarat, Madhya Pradesh, Maharashtra, Uttar Pradesh through which it can ensure that its products are supplied at proper time to its customers, distributors and clients. Under “Eurobond”, it integrates the innovation along with quality to offer a wide portfolio of ACPs that complements the architectural structures in India.

Euro manufactures ACPs through Quality-Controlled Production method. ACPs are kind of panels, which are widely used as an exterior covering of commercial buildings and corporate houses due to its durability and easy maintenance in almost any kind of climate. The company manufactures varieties of ACPs in different colors, designs and texture to cater the varied needs of its customers. To achieve the optimum utilization of resources, it has adopted Kaizen strategy. Kaizen strategy is an approach to create continuous improvement, where employees at all levels of a Company work together proactively to achieve commitments, incremental improvements to the manufacturing process.

Proceed is being used for:

• Meeting incremental working capital requirements.
• Repayment of unsecured loan availed by the company.
• General corporate purposes.

Industry Overview

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. Meanwhile, FDIs in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction (infrastructure) activities stood at $26.08 billion and $24.72 billion, respectively, between April 2000 and March 2021. In FY21, infrastructure activities accounted for 13% share of the total FDI inflows of $81.72 billion.

The market is segmented by Top Coatings (PE, PVDF, and Other Top Coatings), Application (Interior Decoration, Hoarding, Insulation, Cladding, Railway Carrier, Column Cover & Beam Wrap, and Other Applications), End-user Industry (Building and Construction, Transportation, and Other End-user Industries), and Geography (Asia-Pacific, North America, Europe, South America, and Middle-East and Africa). The Aluminum Composite Panel (ACP) market is expected to register a CAGR of over 6% during the forecast period. Aluminum Composite Panel (ACP) is a flat panel crafted out of two aluminum alloy sheets bonded with a non-aluminum core, in order to form a composite. It is used as cladding or facade material of buildings, insulation, and signage. In addition, ACPs have many applications associated with body paneling, in the automotive industry.

Pros and strengths

Brand Image: The company’s brand name is what differentiates it in the market place. It gives a competitive edge to the company with other brands in the market. Its brand image has helped the company to form customer base. Its brand image has helped the company to reach its strategic vision and mission.

Widespread Geographical reach: The company has sales offices located at different regions in the country to channelize the strategic marketing plan. Its distribution network enables the company to enhance customers base and establish new relationships with prospective customers so that the customer base can be expanded and new territory can be explored.

Investment in R&D driving sustainable growth: The company intends to continue to drive its R&D initiatives towards the development of innovative products for its domestic as well as international market and develop on its brand value. The company’s primary focus is to research and innovate new formulations to increase the portfolio of its products, so that the company can get a competitive edge over its peers. It also intends to improve its R&D capabilities, with a focus on capturing more high value first-to-market opportunities in key international markets, as well as leveraging its broad product basket to enhance its market position at global level.

Risks and concerns 

Risks associated with overseas markets: The company derives revenue from operations from both domestic and export sales. For the three months ended June 30, 2021 and for the years ended March 31, 2021, 2020 and 2019, its revenue from exports were Rs. 120.05 lakh, Rs. 672.33 lakh, Rs. 425.62 lakh and Rs. 84.31 lakh, respectively. The company exports to many countries namely Uganda, United States etc. Consequently, any adverse changes in these economies such as slowdown in the economy, acts of terrorism or hostility targeting these countries, etc. would directly impact its revenues and results from operations. In the event of change in policies or laws in these regions with respect to quality standards, branding or restrictions on usage of certain products, imposition of anti-dumping duties, etc. its financial condition and business operations may be adversely affected. In case of any contingencies in future due to which it is unable to operate effectively in these markets, its results from operations, revenues and profitability may be adversely affected.

Significant working capital requirement: The company’s business is working capital intensive in nature and involves significant amount in trade receivables and inventories. The company intends to continue growing by expanding sales orders. This may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funds, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

No long term agreements with dealers or customers: The company has not entered into any long term or definitive agreements with its dealers or customers, and instead rely on purchase orders to govern the volume, pricing and other terms of sales of its products. However, such orders may be amended or cancelled prior to finalisation, and should such an amendment or cancellation take place, it may be unable to seek compensation for any surplus unpurchased products that it manufactures. Its customers do not, typically, place firm purchase orders until a short time before the products are required from it as a result of which, it does not hold a significant order book at any time, making it difficult for it to forecast revenue, production or sales.

Outlook

Euro Panel Products is engaged in the manufacturing and supplying of Aluminium Composite Panels (ACP) globally. ACPs are kind of panels, which are widely used as an exterior covering of commercial buildings and corporate houses. The company manufactures varieties of ACPs in different colors, designs, and textures for its customers through the quality-controlled production method. On the concern side, the company has not entered into any long term or definitive agreements with its dealers or customers. If its dealers or customers choose not to source their requirements from it, its business, financial condition and results of operations may be adversely affected.

The company is coming out with a IPO of 65,00,000 equity shares of Rs 10 each at a fixed price of Rs 70 per share to mobilize Rs 45.50 crore. On performance front, the total income from operations of the company decreased merely 0.09% in FY21 at Rs 14,225.16 lakh as compared to Rs 14,238.14 lakh during the FY20. The company’s PAT decreased from Rs 396.52 lakh in FY20 to Rs 370.19 lakh in FY21. The profit after tax decreased by 6.64% as compared to FY20 on account of decrease in revenue from operations. Meanwhile, the company’s principal strategy includes adding new products to its existing product range. It will help the company to accelerate its growth along with balanced portfolio. It will also help to expand its customer base. Moreover, the company’s diversified growth strategy protects the company from country specific economic downturns. It assists it to gain access to new markets and identify new customers and manufactures. Hence, its sales agents are spread out to extend its geographical presence to expand its business and in turn increase the revenue and profitability of the company.