Sunrise Efficient Marketing coming with an IPO to raise upto Rs 16.70 crore

Sunrise Efficient Marketing

• Sunrise Efficient Marketing is coming out with an initial public offering (IPO) of 1380000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 121 per equity share.
  
• The issue will open for subscription on March 30, 2022 and will close on April 05, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 12.10 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 Manish Vaghela. 
  

Profile of the company

The company is an ISO 9001:2015 certified Company primarily engaged in the business as traders, distributors,  super stockiest, retailers, wholesalers, importers, exporters, agents, dealers, buyers, sellers, fabricators, assemblers, fitters, installers, repairers of all types of Industrial machineries, its spare parts, electrical items, electronic items, mechanical and engineering items, pipes, pipe fittings, sanitation parts, all types of machined and un-machined castings, industrial valves and its spares, Oils, lubricants, all types of motors, pumps, generator sets, batteries and all types of electrical, mechanical, electromechanical & electronic items, and spare parts, accessories used for industrial, domestic and agricultural purposes. It is also distributor for FMCG products. Subsequently, the company has acquired the business comprising of distribution agreement, customer relationship, employees and brands of Sunrise Marketing and Services with effect from July 24, 2020.

The company is in the distribution business of Automation, Drive, Gear Box, Motors, Pumps, Oils and FMCG Products and aids to manage complete supply chain right from the manufacturers and end user. Currently, it is authorized dealer of 138 manufacturers. Its business model helps to spread its market risks arising out of fluctuation in the market shares of various brands besides helping it to achieve economies of scale. It follow B2B and B2C business model. The focus is to capture a considerable market share in each of the product categories.

Proceed is being used for:

• Meeting incremental working capital requirements.
  
• General corporate purposes.
  

Industry overview

India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India’s textiles industry has a capacity to produce wide variety of products suitable for different market segments, both within India and across the world. The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted Foreign Direct Investment (FDI) worth $ 3.75 billion from April 2000 to March 2021.

Fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector with household and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55%) is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared to urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50% of the total rural spending. The retail market in India is estimated to reach $1.1 trillion by 2020 from $840 billion in 2017, with modern trade expected to grow at 20 25% per annum, which is likely to boost revenue of FMCG companies. The FMCG market in India is expected to increase at a CAGR of 14.9% to reach $220 billion by 2025, from $110 billion in 2020.

Pros and strengths

Diverse product portfolio: The company is currently dealing in a wide range of products like Motor, Lubricants, Gears, Lighting, Grease, Pump and Drives which are majorly used by the textile companies.

Established relationship with institutional customers: The company focuses on providing the customers with the desired quality and standard products. By providing the products with the desired quality and standards it aim to achieve highest level of customer satisfaction and procure repeated orders from customers.

Quality assurance and control: The company has received an ISO 9001:2015 certification on the quality management system of Company for designing, assembling, repairing, importing, buying and selling of industrial pumps, gearbox and motors. It follows a practice of testing its products for the desired quality and customer requirement before dispatching the same to the customers.

Risks and concerns

Demand for products is cyclical in nature: Demand for industrial products is driven by the demand from Original Equipment Manufacturers (OEMs) and from replacement market. Further, the company’s FMCG business are affected by seasonal factors and particularly in the monsoon and winter season. The industry has been cyclical in the past and it expects this trend to continue. The future growth of the company’s business depends on its ability to adjust to the variation in demand, in a timely manner and at competitive prices. Any such inability could adversely affect its operations and profitability

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors, inventories and cash and cash equivalents. It has been sanctioned working capital of Rs 600 lakh from Axis bank and Rs 300 lakh from Standard Chartered Bank. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay its debts, could adversely affect its financial condition and result of its operations.

Geographical constraints: Currently, the company’s office and godowns is based in Surat and nearby cities of Gujarat. Hence, its revenues are generated from operations in this region only. In the event that demand for its products and services in general reduces or stops by any reason including political discord or instability or change in policies of State, then financial condition and operating results may be materially and adversely affected. If the company is unable to reach or expand business into new geographic regions, including different districts in Gujarat its growth may be constraint to the Surat region which would result an opportunity loss for Company. Its lack of exposure in geographical boundaries outside its operating region could impact future revenues.

Outlook

Sunrise Efficient Marketing engages in the business of trading, distributing, and wholesaling different types of industrial products such as electrical items, electronic items, spare parts, etc. The company distributes Automotive Parts, Gear Boxes, Motors, Pumps, Oils, and FMCG Products. The company follows B2B and B2C business models and is currently an authorized dealer of 138 manufacturers. The company retails, imports, exports, sells, fabricates, and assembles a wide range of products such as pipes, pipe fittings, sanitation parts, mechanical and engineering items, all types of machined and un-machined castings, industrial valves, and its spares, Oils, lubricants, all types of motors, pumps, generator sets, batteries and all types of electrical, mechanical, electromechanical & electronic items, and spare parts, accessories used for industrial, domestic and agricultural purposes. On the concern side, the company may encounter problems in executing the orders in relation to its products, or executing it on a timely basis. Moreover, factors beyond its control or the control of its customers may result in the postponement of the delivery of products or cause its cancellation. In the event that the company and its component suppliers are not able to meet the regulatory quality standards, or strict quality standards imposed by its customers, which are applicable to it in its manufacturing processes, it could have an adverse effect on its business, financial condition, and results of operations.

The company is coming out with a maiden IPO of 1380000 equity shares of Rs 10 each at a fixed price of Rs 121 per equity share to mobilize Rs 16.70 crore. On the performance front, total income of the company for the half year ended September 30, 2021 stood at Rs 3006.79 lakh and for the Financial Year FY 2020-21, it stood at Rs 2618.52 lakh. Moreover, the profit after tax for the half year ended September 30, 2021 is Rs 312.36 lakh and for the Financial Year 2020-21, it was Rs 18.37 lakh. The company aims to achieve operational efficiencies through cost reduction and this could be done through economies of scale and further increasing its areas of operations. The company has strong presence in Surat and aims to further increase its distribution networks. It aims to widen its marketing network further to cover unexplored areas in India and strengthen its customer base. Due to changes in the trends of the technology, it intent to add products in its current portfolio which may have market potential and this would help company to keep its portfolio balanced and spread its vendor/product risk.