Sealmatic India
Sealmatic India is coming out with a 100% book building; initial public offering (IPO) of 24,99,600 shares of Rs 10 each in a price band Rs 220-225 per equity share.
The issue will open on February 17, 2023 and will close on February 21, 2023.
The shares will be listed on SME Platform of BSE.
The face value of the share is Rs 10 and is priced 22.00 times of its face value on the lower side and 22.50 times on the higher side.
Book running lead manager to the issue is ISK Advisors.
Compliance Officer for the issue is Neha Pinak Chheda.
Profile of the company
The company is engaged in the business of designing and manufacturing of mechanical seals and associated products. Mechanical seals are mainly used in Oil & Gas, refinery, petrochemical, chemical, pharmaceutical, fertiliser, power, mining, pulp & paper, aerospace, marine and other industrial. The cmpany manufactures customised seals to meet the requirement of the client. The company has a complete range of engineered mechanical seals and sealing support systems to cater the needs of customers located all across the globe. The company products are globally recognized as a trusted brand in process industry in over 45 countries, to name a few: USA, UK, Germany, Netherlands, Italy, Sweden, Norway, Switzerland, Denmark, Australia, France, Japan and many more countries.
The company has manufacturing facility at Mira Road (E), Thane. The said manufacturing unit is setup on a lease land in Survey No. 12, Hissa 9A, collectively admeasuring 3,855.86 Sq. Mtrs. The said unit is on rent. The company has also entered into lease agreement for setting up its second manufacturing unit. The said second unit is located at Khindipada Village Vasai East, Thane, which is about 14 Kms away from the existing unit. The said unit when fully functional will increase manufacturing capacity by 60% of the current capacity.
The company has been in the business since more than 12 years and the management has more than two decades of experience in the industry. Over the years, the company has been successful in establishing its name in the industry and company has a strong customer base of domestic as well as foreign clients. The company has about 77% of its total sales from export of its product and 23% from domestic sales.
Proceed is being used for:
Industry Overview
India is one the major market of mechanical seals. Few of the major factors that have led to high demand for mechanical seals in India include, rapid industrialization which has led to high demand for Power and infrastructure sector, one of the other factors is that seals help in reducing leaks and are help in efficiency further reduces cost of maintenance, Thus Indian Oil and Gas, Power sector and other capital-intensive industry has started using mechanical seals for bring efficiency in the process and reducing overall operational cost. Seals help in reducing leaks which leads to significant savings that comes from less waste, reduces pump failure and eases maintenance. One major factor of using mechanical seals by Indian companies in recent years is that it reduces hazards to pump operators and bring associated health, safety, and environment benefits.
The seal system's role in a pump is to minimize leakage of the pumped liquid from the area in the pump where the drive shaft enters or exits the casing. Depending on the type of pumped liquid, leaking fluid can be extremely dangerous, so seal systems help keep pumping equipment operating safely. Adoption of mechanical seals in pumps and compressors reduces the maintenance and operation cost of the system and ensures leakage safety and mitigation of airborne pollution. Increase in acceptability of mechanical seals by processing industries is anticipated to drive the Indian mechanical seals’ market.
The Industrial seals market in India has shown significant growth in the past two decades and is expected to grow moderately in the coming future as well. Industrial Seals market was valued at $12.3 billion in 2020 and is projected to reach $16.5 billion by 2028, growing at a CAGR of 3.6 per cent from 2021 to 2028. Industrial Seals market in India is expected to dominate in the coming years. India is projected to be the leading market in the Asia Pacific region as it is one of the foremost regions in chemical, pharmaceutical and oil & gas sectors. Expansion of these segments will generate demand for various seals during the forecast period. The manufacturing of seals in the shortest possible time from few millimetres to several metres and from single batch to series production has attracted multiple consumers to opt for industrial seals. The customization facility provided by manufacturers is likely to open up a pool of opportunity in the coming future.
Pros and strengths
One of few Indian company registered as vendor with National & International customers: The company has customers from India as well as overseas. Its products are supplied to industry leaders of Oil & Gas, Refinery, petrochemical, chemical, pharmaceutical, fertiliser, power sector, mining. Pulp & paper industry, aerospace. The company is Approved and Registered vendor for companies like Engineers India Limited and Projects & Development India Limited. The company has various Certification & Registrations like API Q1 Specification, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, Certificate of good management practices and many more.
Consistent financial performance with about 30% growth in PAT: The company’s focus on continuous efficiency improvements and Improved productivity has enabled it to deliver consistent financial and operational performance. Its business model is supported by stable and recurring revenues, with a consistent track record of revenue growth and profitability. It has established a track record of growth in financial performance with steady cash flows from its operations. The company has regularly made investments in its R&D.
Optimum utilisation of existing installed capacity & firm plan for expansion: The company has seen a consistent growth in the business over the past years, it has been employing its production capacity and infrastructure at an optimum level. Looking at the current market prospects in the industry, it is expected to grow in coming years and the management has a firm plan for expansion. The company is looking to setup a second manufacturing unit to increase production capacity by about 60% of existing installed capacity. The company has taken space on lease at for second unit at Industrial Gala No. 1to 7, situated on the Ground Floor of the Empire Estate1, Khindipada, Kaman Village Vasai East, Thane. Tenure of lease agreement starts from October 15, 2022. This unit will be ready during financial year 2022-23 and will be partly operational, it will be fully operational in financial year 2023-24.
Risks and concerns
Major revenue from its users in India & Overseas: A major portion of its income from operations is from sales to users in India & overseas. It cannot assure that it can maintain the historical levels of orders from its users and dealers or that it will be able to find new customers or dealers in case it loses any of them. Further, major events affecting its customers includes dealers, such as adverse market conditions, regulatory changes, adverse cashflows, change of management, mergers and acquisitions by customers could adversely affect its business. If any of its customers including dealers become bankrupt or insolvent, it may lose some or all of its business from that customer and its receivables from that customer may have to be written off, thus impacting its cash flows and financial condition.
Significantly dependent on third party transportation: The company uses third party transportation providers for the delivery of its raw material and Finished products. 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.
Labor intensive industry: The industry in which the company operates being labor intensive depends on skilled and unskilled labor force for carrying out its activity. Although it has not experienced any labor unrest so far, but it is not sure that it will not experience disruptions in work due to disputes or other problems with its work force, which may adversely affect its ability to continue its business operations. Any labor unrest directed against it, could directly or indirectly prevent or hinder its normal operating activities, and, if not resolved in a timely manner, could lead to disruptions in its operations. These actions are impossible for the company to predict or control and any such event could adversely affect its business, results of operations and financial condition.
Outlook
Sealmatic India is engaged in the business of designing and manufacturing of mechanical seals and associated products. The Mechanical seals manufactured by the company are mainly used in pulp & paper, Oil & Gas, refinery, petrochemical, chemical, fertilizer, power, mining, aerospace, marine, pharmaceutical, and other industrial spaces. On the concern side, the company derives a major portion of its revenue from its users in India & Overseas. The loss of a major customer or a significant reduction and sales of, or demand for its products from its major customers, may adversely affect its business, financial condition. Moreover, the company’s revenues and profits are difficult to predict and can vary significantly from period to period, which may impact its ability to pay dividend as well as cause the price of its Equity Shares to fluctuate.
The company is coming out with an IPO of 24,99,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 220-225 per equity share. The aggregate size of the offer is around Rs 54.99 crore to Rs 56.24 crore based on lower and upper price band respectively. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. On performance front, the company’s revenue from operations had increased 20.12% to Rs 4254.06 lakh in FY22 as compared to Rs 3541.42 lakh in FY21. The increase in the Fiscal 2022 was due to increase in the sale of products. Moreover, the company’s profit after tax had increased 22.78%, to Rs 841.46 lakh in Fiscal 2022 from Rs 649.76 lakh in Fiscal 2021.
Going forward, manufacturing high-quality sealing systems is all down to exceptional precision, which in turn calls for exact, consistent compliance with the strictest of production standards. The company has consistently invested in upgrading its machinery for delivering best products to its customers. The company does not compromise on product quality and standard quality control mechanism is adopted by the management to maintain high quality of the product and with efficient quality management system offers the product at most competitive price to its customers.
