EP Biocomposites
EP Biocomposites is coming out with an initial public offering (IPO) of 504000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 126 per equity share.
The issue will open on August 29, 2022 and will close on September 05, 2022.
The shares will be listed on SME Platform of BSE.
The share is priced 12.60 times higher to its face value of Rs 10.
Book running lead manager to the issue is Aryaman Financial Services.
Compliance Officer for the issue is Mohammad Faiyazul Haq.
Profile of the company
The company was incorporated on January 17, 2020 and is into manufacturing and supply of fibre re-inforced polymers (FRP) products such as door shutters, frames, Biodigestor Tanks, Bio toilets and allied products for construction and Industrial applications which meets customer requirements. The company got into highly potential sector of waste water recycling in 2021. The company has taken over the running business of it promoter, Om Ventures, a sole proprietorship through a business transfer agreement dated August 31, 2021.
The company focuses on giving sanitation solutions to those who do not have access to toilets, as well as to those who have toilets but face trouble treating and managing the waste through septic tanks. It provides sanitation infrastructure and human waste management solutions and services, involving innovative and simple bio-digester technology licensed from Defence Research and Development Organisation (DRDO) and Industry Interface and Technology Management, operating under the aegis of DRDO, Ministry of Defence, Government of India. The anaerobic bio-digester technology helps users manage waste onsite, without depending on expensive and energy-consuming sewage infrastructure.
Proceed is being used for:
Long term lease deposit for manufacturing facility part repayment of loan.
Funding working capital requirement.
General corporate purpose.
Industry overview
The Indian water and wastewater treatment (WWT) technology market was valued at $2,042.91 million in 2020. The COVID-19 outbreak has been negatively affecting the economy of India. The pandemic negatively affected the operations of several end-user industries of the market studied, which reduced the outflow of industrial wastewater. The COVID-19 pandemic resulted in a huge drop in oil demand. The drop in demand resulted in the futures market for oil turning negative. This resulted in the decreased investments and a major scaling back in the drilling activities. As a result, the demand for water treatment technologies in the industry declined. In the food and beverage industry, labour shortage and the shutdown of plants reduced the food production levels in 2020. The food and beverages industry accounts for 3% of India’s GDP, and it is the single largest employer in the country, with more than 7.3 million workforces. Food items other than staple food and ready-to-eat food witnessed a significant decline, owing to the decreased food consumption in restaurants and hotels. These trends negatively impacted the growth of the food industry. Furthermore, in the pulp and paper industry, reduced imports of packaging material by major consumers resulted in a domestic oversupply of pulp and paper products in the manufacturing countries.
Global Fibre-reinforced Polymer (FRP) Composites Market is valued at 6,194 kilotons in 2020. The market was negatively impacted by COVID-19 in 2020. Considering the pandemic scenario, the construction activities were stopped temporarily during the lockdown in order to curb the spread of COVID-19. For instance the construction output had decreased by 28.4% in the euro area (EU-19 member countries) and by 24% in the European Union (EU-27 member countries) in April 2020 compared to April 2019, mainly due to the impact of the COVID-19. This decreased the demand for FRP composites materials in the construction sector. However, the demand for FRP composites has increased significantly to construct medical shelters for COVID-19 patients across different parts of theglobe, including the United States, India, and others. For instance, in June 2020, Tata Steel introduced FRP composites-based 500-bed Greenfield hospital for quarantining COVID-19 patients in Kasargod, Kerala, India.
Pros and strengths
Partnerships with industry and non-governmental players: DRDO, the inventor of the technology, is the company’s technology partner. NGOs and non-profit organizations are its partners in installing household and community toilets, and creating awareness. In association with them, it reaches out to the rural populace and urban slums. Besides its basic product range of Doors, Bio Digester Toilets and STP / ETP’s it would like to tie up with Entrepreneurs offering containerised STPs & Precast products, SMC tanks etc. considering a huge demand for these in its targeted market segment. In order to take advantage of its diversified product portfolio and existing client base of above mentioned products, it is are planning to diversify its product portfolio by adding Delivery of clean water Dispensers by partnering with Wayout International AB (Wayout), a foreign entity. Currently it is at initial stage and working on the feasibility model. Upon completion of the feasibility model, it will enter into the agreement with Wayout International AB (Wayout) & will foray into this space.
Technology: The company utilizes sandwich technology from TIFAC (Technology investigations & Forecasting) for FRP Doors and unique DRDO (Defence research Development Organisation) Biodigester technology for bio-toilets to offer Greener products for Swachh Bharat Mission. The company is a licensee (through transfer of technology) and has partnered with DRDO for technology commercialization for large-scale deployment of sanitation systems. The technology is effective in resolving the huge challenge of open defecation in India. It also continues to explore more application areas of the technology. With many successful projects in place, and recognition from the government, industry and academia – it has overcome many entry barriers, as also made a mark for itself.
Consistent and standardised product quality: The company has received ISO Certification from Paramount Quality Certifications and was found to be in accordance with the requirements of ISO 9001:2015 in regards to manufacturing and supply of fibre reinforced polymer (FRP) products such as door shutters, frames, Biodigester tanks, bio toilets and allied products for construction and Industrial Applications. The company undertakes stringent quality control as mandated in its Quality Manual to adhere to the quality norms of ISO.
Risks and concerns
Dependent on operating facilities: The company’s facilities are at Bicholim Industrial Estate, Bicholim, Goa, and are subject to operating risks, such as shutdowns due to the breakdown of power supply or processes, performance below expected levels of output or efficiency, labour disputes, strikes, lockouts, disruption by extremist groups, or any other reason, and the need to comply with the directives and regulations of the Government of India (GoI) and relevant state government authorities. It is heavily reliant on its workers at unit. Its inability to continue to procure such services or any disputes with this group of labour could severely affect its operations and may cause under-utilisation of its capacities or a total shut down. Its operations involve a significant degree of integration, and its results of operations are dependent on the successful operation of each facility.
Dependent on third party transportation providers: The toilet super-structures and the bio-tanks are made in the company’s plants and transported to the installation sites; and its team members install/assemble the bio-toilets at the customer site. It uses third party transportation providers for the delivery. Transportation strikes could have an adverse effect on its receipt of raw materials and its ability to deliver its products to its customers. In addition, transportation costs in India have been steadily increasing over the past several years. Continuing increases in transportation costs or unavailability of transportation services for its products may have an adverse effect on its business, financial condition, results of operations and prospects. The company will tie up with reputed logistic partners for seamless operations in future.
Changing technology: The company’s ability to remain competitive may be adversely affected by emerging technologies and its ability to adapt to such changes. Its technology and key infrastructure may become obsolete or may not be upgraded timely, hampering its operations and financial conditions and it may not have the competitive edge. Although it strives to keep its technology, equipment’s and infrastructures in line with the latest technological standards, it may be required to implement new technology or upgrade the equipment’s employed by it. Further, the costs in upgrading its technology and modernizing the equipment’s are significant which could substantially affect its finances and operations. If it fails to exploit emerging technologies, it could have a material adverse effect on its business prospects, financial condition and results of operations.
Outlook
Incorporated in 2020, EP Biocomposites is the manufacturer and supplier of fibre reinforced polymers (FRP) products such as door shutters, frames, Biodigestor Tanks, Bio toilets and allied products for construction and Industrial applications which meets customer requirements. The company got into the high potential sector of wastewater recycling in 2021. The company focus on giving sanitation solutions to those who do not have access to toilets, as well as to those who have toilets but face trouble treating and managing the waste through septic tanks. The company also provide sanitation infrastructure and human waste management solutions and services, involving innovative and simple bio-digester technology licensed from the Defence Research and Development Organisation (DRDO) and Industry Interface and Technology Management, operating under the aegis of DRDO, Ministry of Defence, Government of India. On the concern side, the company may have to confront pressures in respect of pricing; product quality etc. from the clients and such pressures may put strain on its profit margins, which may consequently affect the financial position of the company. Besides, the company is exposed to fluctuations in the prices of various raw materials such as Glass Fiber, Polyester Resin, Stainless Steel, MS rods, Cement, Sand, Adhesives, Pigments etc. due to various reasons such as increased manufacturing costs of these materials, increase in transportation costs, changes in core prices of minerals as a natural resource, etc.
The company is coming out with a maiden IPO of 504000 equity shares of Rs 10 each at a fixed price of Rs 126 per share to mobilize around Rs 6.35 crore. On performance front, in fiscal 2022, the company’s total income increased by Rs 512.32 lakh or 173.53%, from Rs 295.23 lakh in fiscal 2021 to Rs 807.55 lakh in fiscal 2022. The company’s Profit after Tax increased by Rs 45.14 lakh or 126.08 %, from Rs 35.80 lakh in fiscal 2021 to Rs 80.94 lakh in fiscal 2022. Meanwhile, the company proposes to cater to both, domestic as well as international markets. It aims to further develop its domestic sales networks in two ways: By Strengthening its local presence in Goa by having full scale showroom and increase the number of retailers and secondly by creating new distribution channels in non-penetrated geographies considering various cities. It also intends to increase its touch points and engagement with customers through various digital and technology initiatives.
