Srivasavi Adhesive Tapes
Srivasavi Adhesive Tapes is coming out with an initial public offering (IPO) of 37,80,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 41 per equity share.
The issue will open on February 23, 2023 and will close on February 28, 2023.
The shares will be listed on NSE Emerge platform.
The share is priced 4.10 times higher to its face value of Rs 10.
Book running lead manager to the issue is Shreni Shares.
Compliance Officer for the issue is Nikhil Jain.
Profile of the company
Srivasavi Adhesive Tapes is an ISO 9001:2015 certified company certified by TUV Nord and engaged in manufacturing/ coating, converting and Die cuts of industrial Specialty self-adhesive tapes. The company does customized die cutes of Films, Foams and allied products catering to various industries such as Automotive, Locomotives, Aerospace, Defence, Electrical & Electronics, Renewable Energy, Print & Paper, Food & Pharma, FMCG, White & Brown Goods, Furniture, Retail, Construction, Infrastructure, Sports & Fitness Equipment, Textiles & Leather Industries serves wide range of pressure sensitive adhesive tapes, BOPP tapes, Eco Friendly paper Tapes, Filament tapes, Double Side tapes, Packaging tapes, Specialty Protection tapes, Surface Protection tapes, Masking tapes, Specialty Foams/ Films.
It has two business divisions (i) domestic sales; and (ii) exports. It has presence in 23 states for its domestic market based on sales made for the period ended September 30, 2022. Internationally it supplies products in 13 countries such as Egypt, France, Indonesia, Kuwait, Poland, Qatar, Spain, Australia, Italy, South Africa, Sri Lanka, United State of America and UAE based on sales made for the period ended September 30, 2022.
The company’s manufacturing facilities are well equipped with the required facilities including machinery, other handling equipment’s to facilitate smooth manufacturing process and easy logistics. It endeavours to maintain safety in its premises by adhering to key safety norms, established through its internal health and safety manual, accompanied by regular safety meetings. It is also engaged in manufacturing of its products for third party customers and the same is supplied according to their specific branding requirements. It generally doesn’t enter into a purchase agreement with them but manufacture the same on the basis of specifications received on purchase order.
Proceed is being used for:
Industry Overview
The India Adhesives and Sealants Market is segmented by Adhesive by Resin (Polyurethane, Epoxy, Acrylic, Silicone, Cyanoacrylate, VAE/EVA, and Other Resins), by Adhesives by Technology (Solvent-Borne, Reactive, Hot Melt, and UV Cured Adhesives), by Sealants by Resin (Polyurethane, Epoxy, Acrylic, Silicone, and Other Resins) and by EndUser Industry (Aerospace, Automotive, Building and Construction, Footwear and Leather, Healthcare, Packaging, Woodworking and Joinery, and Other End-user Industries). The report offers the market sizes and forecasts in revenue (USD million) and in volume (kilotons) for all the above segments.
The India adhesives and sealants market is expected to be valued at more than $2,400 million by the end of the year, and it is expected to register an estimated CAGR of over 7% over the forecast period (2022-2027). The country was negatively affected by the COVID-19 pandemic. The adhesives and sealants market in the country also faced a similar situation. But the market has now reached pre-pandemic levels, and it is expected to grow steadily. The India adhesives and sealants market was valued at more than $1,100 million in 2021, and it is expected to register an estimated CAGR of over 8% over the forecast period (2022-2027).
The country was negatively affected by the COVID-19 pandemic. The adhesives and sealants market in the country also faced a similar situation. But the market has now reached pre-pandemic levels, and it is expected to grow steadily. The major factors driving the market are the increasing demand from the packaging industry and the growing construction industry in the country. On the flip side, the slowdown of the automotive industry is hindering the growth of the market. Increasing electronic operations in India and increasing demand for bio-based adhesives are expected to offer various opportunities for the growth of the market over the forecast period.
Pros and strengths
Strong product portfolio: The company’s product mix has evolved over the past several years as it has entered into new product categories. Its product portfolio includes industrial specialty self-adhesive tapes, which are made out of film, foam, foil, fabric and paper, with different kind of adhesive system to suit industrial application and specification oriented adhesive tapes. It makes Filament tapes, Fiber glass fabric tapes, polyester tapes, cotton fabric tapes, Double sided tapes, scrim tapes, reinforced foil tape, reinforced paper tape, high temperature resistant polyester tapes, Aluminum foil tapes, ECO friendly paper tapes, BOPP Packaging tapes, Protection tapes, Masking tapes, Foams Tapes etc.
Customer base across geographies and industries: The company has a customer base across industries and geographies both at domestic and overseas. It follows B2B customer segment catering the requirements of Automotive, Locomotives, Aerospace, Defence, Electrical & Electronics, Renewable Energy, Solar, Print & Paper, Food & Pharma, FMCG, White & Brown Goods, Furniture, Retail, Construction, Infrastructure, Sports & Fitness Equipment, Textiles & Leather Industries. Domestically, the company has its presence over 23 states and internationally it has presence in 13 countries. For the period ended September 30, 2022 and Fiscals 2022, 2021 and 2020 its revenue from exports was Rs 39.45 lakh, Rs 288.58 lakh, Rs 341.55 lakh and Rs 217.85 lakh contributed 1.29%, 4.55%, 6.18%, and 4.74% respectively of its revenue from operations. Its customer base across various industries and at varied geographies reduces its dependence on any one industry or location and provides a natural hedge against market instability in a particular industry or location.
Quality assurance: The company has been accredited with ISO 9001:2015 certified company certified by TUV Nord for Design and Manufacture of Speciality Self Adhesive Tapes & Die Cuts. The company has a culture of the above quality systems, which is not only visible throughout the entire organisation, but also verified through periodic customer audits and also quarterly internal quality audits.
Risks and concerns
Major revenue comes from top 10 customers: The company’s top 10 and top 5 customers contributed 58.10%, 49.32%, 56.40% and 60.58% of its total revenue for the period ended September 30, 2022 and for the financial year ended March 31, 2022, 2021 and 2020, respectively and top 5 customers contributed 47.64%, 61.46%, 43.87% and 47.05% of its total revenue for the period ended September 30, 2022 and for the year ended March 31, 2022, 2021 and 2020. Larger contracts from few customers may represent a larger part of its portfolio, increasing the potential volatility of its results and exposure to individual contract risks. The company cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.
Geographical constrain: The company has manufacturing facilities located at Bengaluru, Karnataka. Its success depends on its ability to successfully manufacture and deliver its products to meet its customer demand. The company’s manufacturing facilities is susceptible to damage or interruption or operating risks, such as human error, power loss, breakdown or failure of equipment, power supply or processes, performance below expected levels of output or efficiency, obsolescence, loss of services of its external contractors, terrorist attacks, acts of war, break-ins, earthquakes, other natural disasters and industrial accidents and similar events. Further, its manufacturing facilities are also subject to operating risk arising from compliance with the directives of relevant government authorities. Operating risks may result in personal injury and property damage and in the imposition of civil and criminal penalties. If the company experiences delays in production or shutdowns at any or all of these facilities due to any reason, including disruptions caused by disputes with its workforce or any external factors, the company’s operations will be significantly affected, which in turn would have a material adverse effect on its business, financial condition and results of operations.
No long term agreements with most of its customers: The company has not entered into any long term or definitive agreements with its customers and instead rely on purchase orders to govern the volume, pricing and other terms of sales of its products. However, such orders may be amended or cancelled prior to finalization, and should such an amend mentor cancellation take place, it may be unable to seek compensation for any surplus unpurchased products that it manufactures. The company’s customers do not, typically, place firm purchase orders until a short time before the products are required from it as a result of which, it does not hold a significant order book at any time, making it difficult for it to forecast revenue, production or sales. Consequently, there is no commitment on the part of the customer to continue to source their requirements from it, and as a result, its sales from period to period may fluctuate significantly as a result of changes in its customers’ vendor preferences.
Outlook
Srivasavi Adhesive Tapes customized die cuts of Films, Foams, and allied products. It caters to various industries such as Automotive, Locomotives, Aerospace, Defence, Electrical & Electronics, Renewable Energy, Print & Paper, Food & Pharma, FMCG, White & Brown Goods, Furniture, Retail, Construction, Infrastructure, Sports & Fitness Equipment, Textiles & Leather Industries. The company serves its customers with a wide range of pressure-sensitive adhesive tapes, BOPP tapes, Eco-Friendly paper Tapes, Filament tapes, Double Side tapes, Packaging tapes, Specialty Protection tapes, Surface Protection tapes, Masking tapes, Specialty Foams/ Films. On the concern side, the company’s top 10 customers contribute majority of its revenues from operations for the year ended March 31, 2022 and any loss of business from one or more of them may adversely affect its revenues and profitability. Moreover, the company has manufacturing facilities located at Bengaluru, Karnataka and any delay in production at, or shutdown of, or any interruption for a significant period of time, in this facility may in turn adversely affect its business, financial condition and results of operations.
The company is coming out with a IPO of 37,80,000 equity shares of Rs 10 each at a fixed price of Rs 41 per share to mobilize Rs 15.50 crore. On performance front, the company’s revenue from operation has increased by 14.80% from Rs 5,525.69 lakh for in FY21 to Rs 6,343.27 lakh in FY22. The increase was mainly due to increase in domestic sales and addition of new products. Moreover, its profit after tax increased by 93.30% from Rs 187.34 lakh in FY21 to Rs 362.12 lakhs in FY22. The increase is in lines with the increase in total revenue of the company.
Going forward, the company intends to increase its production capacity by way of installation of new unit for manufacturing, coating, converting and distribution of Adhesive tapes, die cuts, Films, Foams and allied products. This shall help it to cater to expand its customer base and increase its revenue from operations. Moreover, the company aims to expand and diversify its product portfolio by increasing its product base and introducing new product lines eventually aiming to be a one stop shop for Adhesive Tapes and BOPP Tapes. Maintaining a variety in range of products in its business provides it with an opportunity to cater to diverse needs of different customer segment.
