Agarwal Float Glass India coming with an IPO to raise Rs 9.20 crore

Agarwal Float Glass India

• Agarwal Float Glass India is coming out with an initial public offering (IPO) of 21,90,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share.
• The issue will open for subscription on February 10, 2023 and will close on February 15, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 4.2 times higher to its face value of Rs 10.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Priyanka Mahirchandani.

Profile of the company

The company is engaged in the business of trading of glass and specialised glass products by procuring quality products from manufacturers and selling it either through its sales managers or directly to its customers, as a wholesaler of glass and glass products. The company’s valued customers are spread across the country and work across varied industry segments such as, office buildings, hotels, institutions, banks, insurance companies, shopping malls, diplomatic residences, etc. The company’s products cater to a range of end use industries including construction, automotive, and industrial sectors, with a variety of applications such as exterior and interior spaces of residential and commercial buildings. The company’s product portfolio largely consists clear glass, different kinds of value-added glass products and processed glass products, of varying thickness. It also trades a range of value added glass products including clear frosted glass, clear sheet glass, mirror, tinted glass, reflective glass which have a wide range of applications. The company also offers processed glass, which includes, toughened glass, frosted glass, frosted design glass, leaguered glass, figure glass, heat- trengthened glass, insulated glass, PVB laminated glass, and bullet-resistant glass and all building glasses among others.

The company is highly dependent upon its suppliers and distributors, namely Saint-Gobain India Private Limited, Sisecam Flat Glass India Private Limited, Gold Plus Glass Industry Limited, Asahi India Glass Limited and Gujarat Guardian Limited, for delivering quality products to its customers. The company is a wholesaler of glass and glass products, and operated from its Registered Office and godowns. The company has devised an extensive supplier selection process in order to identify and evaluate the effectiveness and quality of the products manufactured by the suppliers, reduce purchase risk, maximize overall value to the purchaser, and develop closeness and long-term relationships between buyers and suppliers. The company primarily carried out its business in Rajasthan. Owing to its supplier selection process, it engages with quality manufacturers of glass and processed glass products, in order to stand by its commitments to its customers.

Proceed is being used for:

• Funding the working capital requirements
  
• General corporate purposes

Industry overview

Glass is one of the most useful materials in its daily life. The Indian glass sector is growing across all segments. This growth has been driven primarily by India’s booming automotive and construction sectors which have been key drivers of the economy for the past few years. The glass industry is highly energy intensive and energy consumption is major cost driver. The total energy consumption in Indian glass industry is about 1.17 million tonnes of oil equivalent. The average energy cost as a percentage of manufacturing cost is about 40 per cent. Melting and refining are most energy- intensive portion of the glass making process and accounts for 60-70% of total energy use in the glass industry. Thermal energy consumption contributes to about 80%of total energy consumption in the glass industry.

The glass industry in India is quite old and well established. The Indian glass industry represents one of the largest markets and the manufacturing capacity for glass products in Asia region. The first glass plant in India was set up in 1908. The glass industry remained largely a cottage industry for a long time. From rudimentary mouth blown and hand working processes, the industry in recent years has evolved to adopt modern processes and automation in a large way. However, mouth blown processes and handcrafted glassware continue to play a role in developing innovative designs in decorative and table glassware products that are exported in large quantities. Indian glass industry is involved in the production of different types of glass products.

The Indian glass market was worth about $2.7 billion during 2011-12. The per capita glass consumption was 1.2 kg compared with 8-9 kg in developed countries and 30-35 kg in USA. During the same period the flat glass market was 4500 tpd (tonnes per day) and was growing at 16%. The market for container glass was about 7000 tpd which has a share of 55-60% of overall market share in the country. The market for other glass products such as lighting, bangle, beads, etc. is about 1500 tpd. The Indian glass industry has been growing across all segments. Sheet and float glass have recorded the fastest growth, at nearly 67 per cent CAGR (Compound Annual Growth Rate) between 2001 and 2005. Other glassware such as bottles and fibre glass has recorded more modest growth rates of about 5-6 per cent CAGR, over the same period.

Pros and strengths

Strong balance sheet and financial condition: The company currently possesses a unique balance sheet situation with low debt and high equity. Hence, it can procure the goods by making upfront payments and take benefit of cash discount or can buy in bulk and hold inventory for longer periods thereby improving its profitability. The company has the ability to leverage its balance sheet to take advantage of a favourable business cycle or market opportunity.

Existing client and supplier relationships: The company’s existing relationships help it to get repeat business from its customers. This has helped it to maintain a long term working relationship with its customers and improve its customer retention strategy. The company has strong existing client relationships which generates multiple repeat orders. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

Experienced promoters and a well-trained employee base: The company’s Promoters are experienced in its line of business. The company’s management and employee team combines expertise and experience to outline plans for the future development of the company. Its Promoters, Uma Shankar Agarwal and Mahesh Kumar Agarwal had set up the Agarwal Group in 1997 by setting up a sole proprietorship under the name of ‘Agarwal Glass House’ in Rajasthan for trading of glass and glass products. Its Promoters expanded the Agarwal Group by incorporating the company in 2018 to venture into the processing glass industry.

Risks and concerns

Maximum revenue comes from top few customers: The company’s business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations. While the company typically has long term relationships with its customers, it has not entered into long terms agreements with its customers and the success of its business is accordingly significantly dependent on it maintaining good relationships with its customers and suppliers. The top 10 customers of the company during the preceding six months and the past three years, aggregated to 13.01%, 13.01%, 10.89% and 10.68%, of its total customers, respectively, for the said period. The actual sales by the company may differ from the estimates of its management due to the absence of long term agreements. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows.

Geographical constrain: Currently, the company’s office and business operations are located in Rajasthan and it is carrying its business mainly with market players from Rajasthan itself. 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 its financial condition and operating results may be materially and adversely affected. Geographical and functional expansion of its business domain requires establishment of adequate network. As it seeks to diversify its regional focus it may face the risk that its competitors may be better known in other markets, enjoy better relationships with customers. The company’s lack of exposure in geographical boundaries outside its operating region could impact its future revenues.

Significantly dependent on few suppliers for material requirements: The top 5 suppliers of the company during the preceding six months ended September 30, 2022, Fiscal year ended March 31, 2022, March 31, 2021, March 31, 2020 aggregated to 91%,90%, 90% and 88%, of its total suppliers, respectively, for the said period. Any problems faced by its supplier resulting in delays or non-adherence to quality requirements could adversely impact its ability to meet its customer’s requirements in time and its operations would be affected to the extent it is unable to line up supplies from alternate suppliers.

Outlook

Agarwal Float Glass India is engaged in the business of trading of glass and specialized glass products. The company procures quality products from manufacturers and thereafter sells the same through the sales managers or directly to customers, as a wholesaler of glass and glass products. The company is a crucial part of the Agarwal Group. The Group was set up by Uma Shankar Agarwal and Mahesh Kumar Agarwal in 1997 for trading in glass and glass products. On the concern side, the company is depended on a few customers of its products, for a significant portion of its revenue, and any decrease in revenues or sales from any one of its key customers may adversely affect its business and results of operations. Moreover, its operations are significantly located in the Rajasthan region and failure to expand its operations may restrict its growth and adversely affect its growth.

The company is coming out with an IPO of 21,90,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share to mobilize Rs 9.20 crore. On performance front, the total income of the company for FY22 was Rs 4,216.91 lakh against total income of Rs 3,188.13 lakh in FY21, an increase of 32.27%. This increase was due to expansion of business and marketing in additional/new areas. Moreover, profit after tax for FY22 was at Rs 97.91 lakh as against profit after tax of Rs 23.48 lakh in fiscal 2021, a 316.99% increase due to increase in the prices of the product. Going forward, the company intends to improve efficiencies to achieve cost reductions so that they can be competitive. This can be done through domestic presence and economies of scale. Increasing its penetration in existing regions with new range of products, will enable it to penetrate into new catchment areas within these regions and optimize its infrastructure. As a result of these measures, the company will be able to increase its market share and profitability.