Shigan Quantum Technologies
Shigan Quantum Technologies has come out with an initial public offering (IPO) of 45,39,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share.
The issue will open on February 28, 2022 and will close on March 03, 2022.
The shares will be listed on NSE Emerge Platform.
The share is priced 5 times higher to its face value of Rs 10.
Book running lead manager to the issue is Finshore Management Services.
Compliance Officer for the issue is Gunjan Gupta.
Profile of the company
The company is engaged in the business of designing, developing and manufacturing of varieties of Alternate Fuel Systems including CNG, LNG and Hydrogen Fuel Kit systems for OEMS and others. It manufactures Alternate Fuel Systems for heavy duty vehicles, light duty vehicles and off- highway applications.The company was incorporated in the year 2008 with an object to manufacture alternate fuel systems in India. Subsequently, it has gained expertise in various products in the alternate fuel systems, especially in CNG and LNG fuel kits within automotive industry through its in-house expertise and technical assistance. Since April 2020, the company has also ventured into manufacturing of Fire Detection & Alarm System and Fire Detection & Suppression System (FDAS &FDSS). The turnover from this newly ventured business activity as on August 31, 2021 is Rs 85.21 lakh and March 31, 2021 is Rs 139.61 lakh. The installed capacity of manufacturing of FDAS & FDSS is 36,000 nos. per annum, however the company has manufactured 671 nos. of FDAS & FDSS as on March 31, 2021.
The company source its critical technologies from MNC companies with whom it has long term technology user agreement or manufacturing license. It has entered into technology agreements with companies for developing exclusive products customised to its requirements. It has got exclusive manufacturing rights in India for these products after their development. With change in technologies, it has plan to acquire the Foreign Suppliers’ expertise through Joint Venture or by outright purchase of their technologies and localise production of Gaseous Fuel Injection Technology systems. Such Gaseous Fuel Injection Technology systems will enable the Company to manufacture products that will meet the upcoming Emission norms thereby enhancing the performance of the vehicle. It is engaged in designing, optimizing, manufacturing, assembling, testing and kit integration of alternate fuel systems/kits for heavy/light duty commercial vehicles and buses, power generation equipment and industrial equipment viz. forklifts etc.
The company imports its raw materials from countries like Singapore, USA, Chicago, Mexico, Switzerland, China, Hong Kong, UAE, Italy, France, etc. It also procure its raw materials from domestic suppliers located in Pune, Gurugram, Ghaziabad, Bangalore and other domestic market in India. It export certain components of CNG Fuel Systems to countries like New Jersey, Australia, Italy, Sweden, Canada.
Proceed is being used for:
Meeting Working Capital requirements.
Finance the purchase of machinery.
General corporate purpose.
Meet offer related expenses.
Industry overview
The automobile industry in India is the world’s fifth largest. India was the world's fifth largest manufacturer of cars and seventh largest manufacturer of commercial vehicles in 2019. Indian automotive industry (including component manufacturing) is expected to reach Rs 16.16-18.18 trillion ($251.4-282.8 billion) by 2026. The industry attracted Foreign Direct Investment (FDI) worth $25.85 billion between April 2000 and March 2021 accounting for 5% of the total FDI during the period according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).
The Indian automotive industry is expected to reach $300 billion by 2026. Domestic automobile production increased at 2.36% CAGR between FY16-FY20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at 1.29% CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20. Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94% during FY16-FY20. Two wheelers made up 73.9% of the vehicles exported, followed by passenger vehicles at 14.2%, three wheelers at 10.5% and commercial vehicles at 1.3%. Indian automobile exports stood at 1,419,430 units from April 2021 to June 2021 as compared to 436,500 units in April 2020 to June 2020.
Increased concern on the environmental pollution caused by conventional auto fuels such as diesel/petrol, Compressed Natural Gas (CNG), an environmentally friendly and clean fuel is opted as an alternate fuel. Auto fuel Policy introduced during 2003 by MoPNG aims at to address the issues of vehicle emission, vehicle technology and auto fuel quality. And also, it aims at optimal utilization of oil & gas infrastructure. The use of CNG and LPG would be increased in pollution effected cities. CNG Vehicles are in use in major states in Maharashtra, Gujarat, Delhi, Andhra Pradesh, Bengal, UP, MP etc. In recent future, it is likely that most Southern cities will also go on CNG. CNG is dispensed using specialized dispensing equipment to the vehicle. In the Automobile sector, there is a continuous growth of CNG stations.
Pros and strengths
Quality assurance and standards: The company is committed to deliver the good quality product in proper manner at all steps from manufacturing to dispatch. Its dedicated internal quality control team ensures the compliance with good standard practices. It give prime focus to providing quality material to its customers and follows high quality standards.
Cordial relationships with its suppliers: The company has cordial relationship with its suppliers for supply of materials, which provides it with the competitive advantage of effective and timely sourcing of raw materials. The company's effective sourcing of materials ensures timely delivery of its products to its customers, thereby enhancing the value provided to its customers.
Experienced management team: The company’s management team includes professionals with experience in the Automotive industry as well as finance and marketing functions. Its Promoters Shishir Agrawal and Gagan Agrawal brings their entrepreneurial vision and leadership which has been instrumental in growing and sustaining its business operations. Its management team is growth oriented and has ability to manage growth in rapidly changing business environment and delivery of high-quality materials at sustainable cost.
Risks and concerns
Operations have significant raw material requirement: The success of the company’s operations depends on its ability to source raw materials at competitive prices. Principal raw materials that it use in its production are aluminium components, brass components, steel components, plastic granules & plastic components, bare PCB, semi-conductor components & pressure die casting components etc. among others. It also purchase products which it use directly as input materials, including materials which do not require any processing. It procure these raw materials from various suppliers in the industry. Its ability to identify and build relationships with reliable vendors contributes to its growth and its successful management of its inventory as well as other aspects of its operations. Its raw material and component suppliers may fail to consistently deliver products of acceptable quality and within stipulated schedules, which may adversely affect its operations.
Dependent on certain suppliers: The company is dependent on its top 10 suppliers for its raw materials and certain components used in the manufacture of its products. It selects suppliers based on total value (including total landed price, quality, delivery, and technology), taking into consideration their production capacities and financial condition and expect that they will deliver in accordance with its quality standards and comply with their contractual obligations with it. However, there can be no assurance that capacity limitations, industry shortages, labour or social unrest, weather emergencies, commercial disputes, government actions, riots, wars, sabotage, cyber- attacks, non-conforming parts, acts of terrorism, “Acts of God” such as fire, earthquake, floods, natural disasters and other events beyond human control, financial or operational instability of suppliers or other problems that its suppliers experience will not result in occasional shortages or delays in their supply of components to it. It is dependent upon the ability of its suppliers to meet performance and quality specifications and delivery schedules.
Dependent on continuing operation of manufacturing facilities: Any significant interruption in manufacturing at the company’s facilities could have a material adverse effect on its business, results of operations and financial condition. The company manufactures substantially all of the products at its manufacturing facility located at Gurgaon, which are subject to the normal risks of industrial production, including equipment breakdowns, labour stoppages, natural disasters, industrial accidents, power interruptions etc. In case of any disruption at such facilities, it may adversely affect the manufacturing cycle, and may lead to time over-run in the execution of the project. The manufacturing facility requires a significant amount and continuous supply of electricity and any shortage or non-availability of electricity may adversely affect its operations.
Outlook
Shigan Quantum Technologies is engaged in the business of designing, developing, manufacturing, and assembling Alternate Fuel Systems i.e. LNG, CNG, and Hydrogen Fuel Kit Systems. Since April 2020, the business has ventured into Fire Detection & Alarm systems. It manufactures Alternate Fuel Systems for high duty & light-duty vehicles power generation equipment, industrial equipment, and off-highway applications. It exports CNG fuel systems to countries such as New Jersey, Sweden, Canada, Australia, and Italy. The company sources its critical technologies from MNC companies with whom it has long term technology user agreement or manufacturing license. It has entered into technology agreements with companies for developing exclusive products customised to its requirements. It has got exclusive manufacturing rights in India for these products after their development. On the concern side, the company’s business could suffer damage from fire, natural calamities, misappropriation or other causes, resulting in losses, which may not be fully compensated by insurance. Besides, it imports certain of its raw-materials from overseas market and also export certain of its products to overseas market as such it is exposed to fluctuations in foreign exchange rates between foreign and Indian currencies.
The company is coming out with an IPO of 45,39,000 equity shares of Rs 10 each at a fixed price of Rs 50 per equity share to mobilize Rs 22.69 crore. On the performance front, total income for the financial year 2020-21 stood at Rs 9602.26 lakh, whereas in the Financial Year 2019-2020 the same stood at Rs. 7278.79 lakh, representing an increase of 31.92%.The company reported Restated profit after tax for the financial year 2020-21 of Rs 351.34 lakh in comparison to Rs 292.07 lakh in the financial year 2019-20. The company intends to invest in developing and enhancing recognition of its brand through brand building efforts, communication and promotional initiatives such as participation in industry events, public relations and investor relations efforts. This will help it to maintain and improve its reach. The company seeks to expand and enhance its presence in its existing business segments by identifying markets where it can provide cost-effective and quality products to prospective consumers. It seeks to capitalize on its existing experience, established contacts with suppliers and entering in the new products market considering the local working conditions.
