Reetech International Cargo and Courier
Reetech International Cargo and Courier is coming out with an initial public offering (IPO) of 1114800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 105 per equity share.
The issue will open on September 27, 2022 and will close on September 29, 2022.
The shares will be listed on SME Platform of BSE.
The share is priced 10.50 times higher to its face value of Rs 10.
Book running lead manager to the issue is Gretex Corporate Services.
Compliance Officer for the issue is Chhaya Verma.
Profile of the company
The company was incorporated in the year 2008, in the name and style of M R Agriculture by the joint efforts of Mahendra Ahuja and Roma Ahuja. The company started its operation in the year 2009-10. Initially the company was engaged in the business of agriculture goods such as Rice Milling, Rice Sorting, Dal Milling, Dal Processing and Agriculture Products. The business of trading of Agriculture goods had been operated by the Company successfully in the past. In the year 2020, the company’s promoters commenced business of trading of coal. In the year 2021, the company changed its name from M R Agriculture to Reetech International Cargo and Courier. Its Promoters has a vision to look beyond the ordinary; to foresee opportunities; to attain the unattainable; to create in-roads into newer vistas of change and above all, to bridge the demand-supply gap for coal, the world’s fossil fuel.
Mahendra Ahuja started as a small trader of coal in 2020, and within a short span of time, Reetech has emerged as one of the recognized suppliers of coal in the state of Chhattisgarh. It is based at Raipur, Chhattisgarh, and its operations are spread across India, with a vide network of Customers. Its diversified product portfolio comprises coal from Indonesia, South Africa, Australian and India, among other origins. It supply its products to the customers in various sectors i.e., Power, Steel, Rolling and other industries. An effective handling and transportation of the orders is facilitated through Road transportation and Railway. In a very short span of time, the company has been able to recognize itself as a trusted name in the coal industries due to its commitment to quality and reliability since its inception. The company is one of the recognized traders of Coal and perform its operations from Gangavaram and other ports.
The company is currently importing the entire spectrum of South African coal that comprises 6000 NAR, 5500 NAR & 4800 NAR. The coal is transported in multifarious vessels such as Supramax, Panamax, Babycape & Capesize vessels. It is then stored in various locations including Gangavaram port, Vizag port. It importing the entire spectrum of Indonesian coal grades, extending from Low Calorific Value and Medium Calorific Value to High Calorific Value. The company’s core business activity is trading in imported coal. However, the company also trades in the Indian coal which is sourced locally, in order to cater the opportunity of market demand for Indian coal. It procures Indian coal through e-auctions conducted by the various subsidiaries of Coal India (WCL, ECL, SECL, CCL, MCL, NCL, SCCL). The coal is procured keeping in mind the quality and quantity requirements of its customers. It prides itself on the ability to provide end-to-end logistics solutions to its clients together with flexibility in payment terms, which bring in a great value proposition.
Proceed is being used for:
Industry overview
India’s domestic coal production increases by 28% as of June 16, 2022. After a record-breaking coal production of 777 million tonnes (MT) in 2021-22, domestic coal production continues to witness an increasing trend in the current financial year as well. The total domestic coal production in 2022-23, as of May 31, 2022, is 137.85 MT, which is 28.6 per cent more as compared to the production of 104.83 MT in the same period of last year. This trend is being maintained in June, 2022 also, the Ministry of Coal said today. The coal production by Coal India Ltd (CIL) is 28 per cent more than the production in the same period of the previous year (as of June 16, 2022). The Domestic coal production target for the current financial year is 911 MT which is 17.2 per cent more than the previous year. The coal imports for blending by the Domestic Coal Based (DCB) power plants have dropped to 8.11 MT in the year 2021-22 which has been the lowest coal import in the last eight years. This was possible solely due to the robust coal supply from domestic sources and increased domestic coal production. The Imported Coal Based (ICB) power plants had imported coal of more than 45 MT per year from 2016-17 to 2019-20. However, coal import by the ICB power plants dropped to the lowest level of 18.89 MT in 2021-22 and the generation from these plants also dropped to 39.82 billion units (BU) in the year 2021-22 as compared to the 100+ BU which these plants have been generating since quite some time. This year too their generation remains very low due to high price of imported coal.
In the last five years, the coal-based power generation has grown at a CAGR of 1.82 per cent whereas the domestic coal supply to power sector had grown at a CAGR of 3.26 per cent. Thus, coal supply to power sector has outpaced the growth in coal-based power generation and continues to do so in the present year too. In the year 2021-22, coal supply from CIL to the DCB power plants has been more than the supply required to be made under Fuel Supply Agreement (FSA). CIL had supplied 540 MT coal, out of which 483 MT coal was supplied against FSA. This coal was sufficient for the power plants to run at 69 per cent PLF whereas the DCB power plants operated at a PLF of only 61.3 per cent in the year 2021-22. In the year 2022-23, as per FSA, CIL was supposed to supply 120.67 MT coal to its linked power plants (at 85 per cent PLF) whereas CIL had supplied 129.58 MT coal (till 16.06.22). This supply is 7.4 per cent more than the supply required by the plants if they operate at 85 per cent PLF. The plants have operated at about 70 per cent PLF and the CIL coal supply to its FSA-linked plants is 30.4 per cent more than their requirement. With increased production, the rake supply from CIL to the power sector has also been at an all-time high. The rake loading to power sector increased from 215.8 rakes per day in 2020-21 to 271.9 rakes per day in 2021-22, registering a growth of 26 per cent.
Pros and strengths
Strong track Record: The company has successfully executed several large projects for Coal trading in the last two years throughout the length and breadth of the country with particular thrust on the eastern, northern, coastal and the central parts and in the process earned, the Goodwill and confidence of the clients. It provides its services to the customers in Power, Steel, Rolling and other industries. It has an edge over for an effective handling and transportation of the orders facilitated through Sea, Road and Railway transportation.
Repeat business: Customer relationship is a very important pillar on which the business of trading. Meeting customer specific requirements and delivery of orders is key factor for growth. The company has made continuous efforts to ensure customer satisfaction by taking steps for meeting customer specific requirements, timely delivery of orders to its customers as well as maintaining consistency in quality and this has yielded results in the form of repeat orders from its customers. Repetitive business and large client relationships reflect confidence reposed in it by its customers.
Progressive employer: The company is continuously focused on creating an engaging atmosphere for its Employees to learn, contribute and grow. Its nurture a sense of equality among its team members and offer them ample opportunities to pursue their passion and grow. There is an active FUN team that creates opportunities for enjoyment even while working. The company ensures a safe environment, dignity and respect for all its employees irrespective of gender, religion, caste.
Risks and concerns
Fluctuation in prices, non-availability or high cost of quality of coal: Timely procurement of coal, as well as the quality and the price at which they are procured, play an important role in the successful operation of its business. An increase in the price of gold and silver may result in an increase in its income from sales assuming such increases do not adversely affect sales volumes. However, a significant increase in the price gives a negative outlook on future of coal prices could, in the short term, adversely affect its sales volumes and increase procurement costs. The prices and supply of these materials depend on factors beyond its control, including general economic conditions, competition, production levels and regulatory factors such as import duties. However, such increase has not resulted in an increase in its operational cost since any increases in the prices of raw materials are passed on to the customer.
Business is capital intensive: The company’s business requires a significant amount of working capital which is based on certain assumptions, and therefore, any change of such assumptions would result in changes to its working capital requirements. In many contracts, significant amounts of working capital are required to finance the purchase or manufacturing of materials, mobilization of resources and other work on projects before payment is received from clients. Its working capital requirements may increase due to an increase in the size of its operations and the number and size of projects that are required to be executed within a similar timeframe. Its capital expenditure requirements and growth strategy thus require continued access to significant amounts of capital on acceptable terms. It cannot assure that market conditions and other factors will permit future project and acquisition financings, debt or equity, on terms acceptable to it.
Operate in highly competitive industry: As a trader of Coal providing a variety of coal such as South African Coal, Indonesian Coal, India Coal and American Coal to the company’s clients, it competes with a range of organized and unorganized competitors, depending on the nature and location of goods provided. Such competitors collectively compete with the majority of its product. The market for traders in coal is highly competitive with few organized players and localised smaller unorganised players. Important factors affecting competition in the sector include, existing relationship with the clients, reliability, quality, price, past track record. Its competitor’s companies that may have greater financial, marketing or other resources than it does and, therefore, may be better able to compete for new work and skilled professionals. Its competitors may be willing and able to develop and provide product offerings faster or at a lower price than it.
Outlook
Incorporated in 2008, Reetech International Cargo and Courier is a Coal Supplier in India. The company's diversified product portfolio comprises coal from Indonesia, South Africa, Australia and India, among other origins. The company supply the products to customers in various sectors i.e., Power, Steel, Rolling and other industries. An effective handling and transportation of the orders is facilitated through Road transportation and Railway. Initially the Company was engaged in the business of agriculture goods such as Rice Milling, Rice Sorting, Dal Milling, Dal Processing and Agriculture Products. The company has successfully executed several large projects for Coal trading in the last two years throughout the length and breadth of the country with particular thrust on the eastern, northern, coastal and the central parts and in the process earned, the Goodwill and confidence of the clients. It has an experienced management team including its promoters who have more than 12 years of experience in the Company. On the concern side, the company’s business operations are subject to operating risks, such as breakdown or failure of equipment’s used at the project sites, weather conditions, interruption in power supply, shortage of consumables, performance below expected levels of output or efficiency, natural disasters, obsolescence, labour disputes, accidents, its inability to respond to technological advancements and emerging realty industry standards and practices along with the need to comply with the directives of relevant government authorities.
The company is coming out with a maiden IPO of 1114800 equity shares of Rs 10 each at a fixed price of Rs 105 per share to mobilize around Rs 11.71 crore. On performance front, the company’s total revenue increased by Rs 9,846.69 lakh or 534.45% to Rs 11,689.10 lakh for the financial year 2021-22 from Rs 1,842.41 lakh for the financial year 2020-21. The company’s profit after tax increased by 1,286.35% to Rs 417.29 lakh for the financial year 2021-22 from Rs 30.10 lakh for the financial year 2020-21, reflecting a net increase of Rs 387.19 lakh. Meanwhile, the company is looking to start trading of other minerals. Its operation is currently restricted to only one mineral i.e., Coal and it is in the process to expand its current business activity but its focus shall also be to start trading of new minerals. As part of its business strategy, it is focused on attracting and retaining high quality talent as it continue to expand its service offering.
