Hi-Green Carbon coming with IPO to raise Rs 52.80 crore

Hi-Green Carbon Ltd. | Carbon Black | Chemicals & Fertilizers | BSE: 0 | NSE: HIGREEN

20 Sep 2023 Evaluate

Hi-Green Carbon

Hi-Green Carbon is coming out with an initial public offering (IPO) of 70,40,000 shares of Rs 10 each in a price band Rs 71-75 per equity share.
The issue will open for subscription on September 21, 2023 and will close on September 25, 2023.
The shares will be listed on NSE Emerge.
The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.50 times on the higher side.
Book running lead manager to the issue is Beeline Capital Advisors.
Compliance Officer for the issue is Sagar Dhirubhai Siyani.

Profile of the company

Hi-Green Carbon is engaged in the business of waste tyres recycling. Its manufacturing plant operates on continuous pyrolysis process. It is an uninterrupted working method with continuous feeding and discharging system controlled by the program logic controller system. The process is fully automatic and requires almost no human intervention. Following continuous pyrolysis, the company processes the end-of-life tyres (ELTs) pieces to produce energy components and raw materials. Its major products are Recovered Carbon Black (rCB) and Steel Wires under Raw Material Category, Fuel Oil and Synthesis Gas under Energy components category. In order to utilise the energy in efficient manner, the company utilises said synthesis gas, produced as by product of the pyrolysis process, for also manufacturing sodium silicate commonly known as raw glass.

The company follows the highest quality practice and compliant with Highest Environmental, Health, and Safety (EHS) in recycle industries. The company has modern, Supervisory Control and Data Acquisition (SCADA) operated in integrated recycling plant at its manufacturing plant situated in Rajasthan. Its production facility at Rajasthan is installed with capacity of recycling of 100 MT waste tyres per day. The company has been certified with Environmental Management Measures with ISO 14001:2015, Occupational Health & Safety Management standards with ISO 45001:2018, Quality Management Standards with ISO 9001:2015, Good Manufacturing Practice (GMP) and RoHS. Its product is REACH complied in terms of sustainability standards.

The company is proposing a new manufacturing plant in Dhule district of Maharashtra, with capacity of recycling of 100 MT waste tyres per day. The company has already acquired land admeasuring 21,500 sq. meters for the said purpose. The said expansion will add to the company’s existing tyre processing capacity.

Proceed is being used for:

Setting up of new manufacturing unit at Maharashtra
Meeting working capital requirements
General corporate purpose
Meeting public issue expenses

Industry overview

The carbon black market has been experiencing continuous growth. One of the main factors contributing to the rising sales of disposable carbon black at the moment is the automotive sector's explosive growth. As a crucial component in the production of automotive parts including tires, belts, and hoses, carbon black plays a crucial role in the automotive supply chain. The development of electric vehicles (EVs) has increased demand for carbon black, which is used to make specialty tires and rubber parts. An increasing demand for autos is also being caused by a number of causes, including rising disposable income levels, expanding urbanization, and improved infrastructure, which is in turn boosting market expansion.

The market in India is primarily driven by an enhanced focus on infrastructure development, such as road construction, bridges, and buildings. This can be attributed to the rapid urbanization, along with the growing population levels in the country. In addition to this, due to the remarkable physical properties of carbon black, such as reduced thermal stress and increased strength and longevity, there is an increasing demand for the product in the manufacturing of rubber used as a filler in tires, which is impacting the expansion of the market nationwide. In line with this, considerable growth in the manufacturing sector in India, particularly in plastics and textile industries, is propelling the demand for carbon black across numerous industrial applications.

Moreover, the increasing demand for specialty carbon black, including conductive carbon black and high-performance carbon black in the electrical and electronics industries, is also acting as a significant growth-inducing factor for the market. Apart from this, favorable initiatives undertaken by the Indian government to support industrial growth and attract investments is creating a positive outlook for the market. Some of the other factors contributing to the market include the growing export opportunities, rapid industrialization, the rising sales of automobiles, the advent of renewable carbon black products manufactured using industrial-grade plant-based oils, and extensive research and development (R&D) activities.

Pros and strengths

Strategic location of manufacturing facilities: The company’s manufacturing facility is located at industrial district Bhilwara in state of Rajasthan. The manufacturing facility is located within 100 KM radius of National Highway No 79. The manufacturing facility is well connected with National Highway 8 of India which connects to Delhi, Maharashtra and passes through Delhi, Rajasthan and Gujarat. The Industrial estate enjoys good infrastructure facilities like electricity, water, roads, easy procurement of labour, raw material suppliers and market for finished products. With this, the company is concentrating on expanding the production capacity. The region surrounding its manufacturing facility has highest Cement plants, Ceramic and Textile manufacturing units. Fuel oil manufactured by the company is used as fuel for such manufacturing plants, allowing it a ready market.

Permanent demand and wide application of product: Two basic products are produced from tyres recycling process namely, fuel and recovered carbon black. Product is always in demand due to it varies application like fuel for energy and carbon black for plastic process, Tonner, tyre and rubber products etc.

Innovative technology: The company’s manufacturing plant operates on continuous pyrolysis process. It is an uninterrupted working method with continuous feeding and discharging system controlled by the Program Logic Controller system. The process is fully automatic and requires almost no human intervention.

Risks and concerns

Maximum revenue comes from top 10 customers: Top ten customers of the company for FY2022-23, FY2021-22 and FY2020-21 contributed for 63.87%, 57.91% and 53.63% respectively of its sales. The company is engaged in the business of waste tyres recycling. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on the business and results of operations.

Geographical constrain: The company derives its revenue from domestic as well as international regions. However, for its domestic business, the company derives a large portion of its domestic revenue from state of Rajasthan. State of Rajasthan contribute 79.73%, 68.09% and 70.84% of its total domestic revenue for financial year ended on March 31, 2023, 2022 and 2021, respectively. If the economic conditions of State of Rajasthan become volatile or uncertain or the conditions in the financial market were to deteriorate or if there are any changes in laws applicable to the industry or if any restrictive conditions are imposed on the company or its business, there will be a severe impact on the financial condition of the business.

Significantly dependent on few key raw material suppliers: The company is highly dependent on its major raw materials and a few key suppliers who help it to procure the same. The company has not entered into long-term agreements with its suppliers for supply of raw materials. In the event the company is unable to procure adequate amounts of raw materials, at competitive prices its business, results of operations and financial condition may be adversely affected.

Outlook

Hi-Green Carbon is engaged in the business of waste tires recycling. Following pyrolysis process, the company processes the waste tyre pieces to manufacture Recovered Carbon Black, Fuel Oil and Steel wires. It also manufactures sodium silicate from the additional energy that is produced as by product of the pyrolysis process. On the concern side, the company is dependent on few numbers of customers for sales. Loss of any of this large customer may affect its revenues and profitability. Moreover, the company’s revenues are highly dependent on its operations in geographical region of state of Rajasthan. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and results of operations.

The issue has been offered in a price band of Rs 71-75 per equity share. The aggregate size of the offer is Rs 49.98 crore to Rs 52.80 crore based on lower and upper price band respectively. On performance front, the company’s total revenue from operations for the year ended on FY23 was Rs 78.52 crore as compared to Rs 51.11 crore during the FY22. Revenue from operations mainly includes revenue from sale of products like Carbon Black, Recycled Low Sulphur, Sodium Silicate Glass and Steel Scrap & others. Moreover, the company recorded an increase of 194.82% in its profit for the period from Rs 3.68 crore in the year ended on March 31, 2022 to Rs 10.85 crore in the year ended on March 31, 2023. Meanwhile, business of the company is customer oriented and always strives to maintain good relationship with the customers. Leveraging its market skills and relationships is a continuous process in its organization and the skills that it imparts in its people give importance to customers. The company aims to do this by leveraging its manufacturing as well as marketing skills and its industry relationships. The company provides effective follow-ups with customers which ensure that the customers are satisfied with the product and do not have any complaint. The company is also focused on improving its cost efficiency by optimizing the effective sourcing of raw materials and value added product through production process which it has ensured, as a business strategy, over the last several years.

Hi-Green Carbon Share Price

Not Listed

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Peers

Company Name	CMP
PCBL Chemical	296.40
Himadri Speciality	484.50
Goa Carbon	425.00
Hi-Green Carbon
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Name of the IA registered with SEBI:	The Alchemists Ark Pvt. Ltd.
Logo:
Trade/Brand Name of IA:	MoneyWorks4Me Investment Advisers
Brand Logo:
SEBI Registration Number:	INA000013323 Validity - May 16, 2019 - Perpetual
Registration:	Non-Individual
BSE Enlistment No:	1187
Address:	B-101, Signet Corner Building, Balewadi Phata, Baner, Pune, Maharashtra 411045
Compliance officer Details:	Name: Shrikant Jagtap Email: shrikant.jagtap@moneyworks4me.com Telephone: +919860359463 Address: Same as IA
Grievance Officer Details:	Name: Mukta Vaze Email: mukta.vaze@moneyworks4me.com Telephone: +91 98609 19463 Address: Same as IA
Principal Officer Details:	Name: Atharva Bhide Email: atharva.bhide@moneyworks4me.com Telephone: +91 91758 99463 Address: Same as IA
Standard Warning:	Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Disclaimer:	Registration granted by SEBI, enlistment with exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Hi-Green Carbon coming with IPO to raise Rs 52.80 crore

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