Akanksha Power and Infrastructure coming with IPO to raise upto Rs 27.49 crore

Akanksha Power and Infrastructure

• Akanksha Power and Infrastructure is coming out with initial public offering (IPO) of 49,98,000 shares of Rs 10 each in a price band Rs 52-55 per equity share.
• The issue will open for subscription on December 27, 2023 and will close on December 29, 2023.
• The shares will be listed on NSE Emerge platform.
• The face value of the share is Rs 10 and is priced 5.20 times of its face value on the lower side and 5.50 times on the higher side. 
• Book running lead manager to the issue is Narnolia Financial Services. 
• Compliance Officer for the issue is Amir Bandubhai Shaikh.

Profile of the company 

The company is engaged in the business of manufacturing of electric equipments, including electrical panels, instrument transformers and vacuum contactors, catering to consumers from institutions, industries and electricity transmission and distribution utilities. The Company is an ISO 9001:2015 certified organization engaged in the business of Design, Manufacturing and Supply of CT-PT, Metering Units and Cubical, Automatic power correction panel (Capacitor Panel), fixed capacitor banks, Motor Control Centre (MCC), Power Control Centre (PCC), Variable Frequency Drive (VFD) Panels, Thyristor switches and Vacuum contactors, Energy Management System and Smart Energy Meters (Advanced Metering Infrastructure), in addition to engineering and execution of electrical turnkey projects.

In addition to production and manufacturing, it is also providing services related to distribution and management of electricity in which its operation includes establishment of electrical infrastructure which involves power quality audit, site analysis, online cloud based multiple monitoring and data analysis for better management to reduce losses in Transmission, Distribution and User level. It is also engaged in managing electrical distribution network for the distribution companies (DISCOMs). Further, the Company is engaged in turnkey projects which involve supply, installation, erection, commissioning, and maintenance of electrical infrastructure up to 33 KV, managing Greenfield LED streetlight; and technical operation and maintenance of one of the electrical division in Odisha.

It collects data from the customer, analysis them and then design a customized/ Bespoke system which cater to the needs of its customers. It undertakes manufacturing and supply of finished products and intermediate stage products for its customers depending upon the demand. The company is engaged in business to business (B2B) segment as well as it also supply its products to end customers. The company caters to engineering projects and products to its various clients in India. It supplies its products to institutional, non-institutional and corporate customers. In addition, it supply its products to power utilities, which primarily includes supply of APFC Panels, Instrument Transformers and other electrical equipments under direct contractual arrangements to electricity boards and power distribution companies, as well as through project contractors.

Proceed is being used for:

• Meeting out the capital expenditure requirement of company.
• Meeting out the working capital requirements of the company.
• Meeting out the general corporate purposes.
• Meeting out the issue expenses.

Industry Overview

In India, access to electricity has been improving significantly, developing a new market in semi-urban and rural for electrical equipment. Tailwinds such as the government’s focus on infrastructure, the revival of the real estate sector and healthy demand visibility across various end-user industries are ameliorating the demand environment for the sector. Various government schemes are focused on the mission of ‘electricity for all’ and reducing transmission loss of electricity. Nonetheless, high levels of inflation and volatility in key raw materials are expected to be major headwinds for the sector in FY23. A rise in power generation from renewable energy sources will also provide new growth levers in the years to come.

According to the International Energy Agency (IEA), electricity demand in India is projected to grow by nearly 5% per year till 2040 as the economy is expected to overtake the European Union in terms of its installed capacity in the next two decades, depending on the progress of the current Stated Policies Scenario (STEPS). This directly translates into more demand for power distribution and transmission infrastructure in the economy along with the need to reduce the gap created between peak load and supply due to power outages. Therefore, a rise in the power generation segment will surely augur well for the sustainable growth of electrical equipment manufacturers.

In the current decade (2020-2029), the Indian electricity sector is likely to witness a major transformation with respect to demand growth, energy mix and market operations. India wants to ensure that everyone has reliable access to sufficient electricity at all times, while also accelerating the clean energy transition by lowering its reliance on dirty fossil fuels and moving toward more environmentally friendly, renewable sources of energy. Future investments will benefit from strong demand fundamentals, policy support and increasing government focus on infrastructure.

Pros and strengths

Strong and unique product technology: By leveraging its core technologies and unique ideas, it continues to provide new value to society. It has tie-ups with global leaders such as TDK-Japan, MATRICA-Russia and JANITZA-Germany. TDK is a Japan based company that offers a wide range of products and services. Power supplies are one of the company's primary business activities, which are mainly designed for industrial applications and include AC-DC switching power supplies, programmable power supplies, DC-DC converters and power supplies for charging storage batteries. It also benefit from the very wide range of components required in Power Quality System products, manufactured by TDK.

Wide range of products and services: It provides a broad range of products to its customers, since its incorporation in 2008, it have significantly expanded its product portfolio from time to time. It also provides a wide range of turnkey services with the help of its trained employees and personnel, which increases the scope of its customers and its ability to cater to a diversified clientele base. Although the technical specifications for its products are largely standardized, it may undertake certain customizations of certain products for its institutional and corporate customers.

Stable customer base: The Company enjoys long-standing relationships with key customers. It supplies its products to various government agencies. For instance, it has executed the green field street light projects in 12 districts of Odisha for 37 ULBs and the project has been completed successfully and on time. These long-standing relationships are the result of its commitment to quality, timely delivery, etc.

Risks and concerns

Do not have long term contracts with suppliers: It generally does not enter into agreements with its suppliers and transact with them on an order-by-order basis and it cannot assure that it will continue to enjoy undisrupted relationships with it suppliers in the future. It cannot assure that it will be able to procure such specific raw materials in a timely manner or at commercially acceptable terms, or at all, resulting in delays in production and delivery of its products. If it is unable to obtain adequate supplies of raw materials in a timely manner or on commercially acceptable terms, the cost of raw material consumption can increase, which could have an adverse effect on its business, prospects, results of operations and financial condition.

Working capital requirement: The Company’s business operations require a significant amount of working capital. In its business, working capital is often required to finance the procurement of raw material and for salaries of employees. In the event, it is unable to source the required amount of working capital, it might not be able to efficiently satisfy the demand of its clients in a timely manner or at all. Even if it is able to source the required amount of funds, it cannot assure that such funds would be sufficient to meet it cost estimates, which could have adverse effect on its financial conditions and results of operations. 

Delays or defaults in client payments: Due to the inherent characteristics of its business operations, it occasionally allocate resources to projects before obtaining payments from its clients that are adequate to cover the expenses incurred during the process. In difficult economic times, some of its clients may find it increasingly difficult to pay invoices for its services in a timely manner. Delays in client payments may require it to make a working capital investment, which could impact its cash flows and liquidity. If a client fails to pay invoices on a timely basis or defaults in making its payments on a project in which it have devoted significant resources, there could be an adverse effect on its results of operations or liquidity.

Outlook

The company is engaged in the business of manufacturing of electric equipments, including electrical panels, instrument transformers, and vacuum contactors, catering to consumers from institutions, industries, electricity transmission and distribution utilities. The company has 2 plants to manufacture the products with emphasis on quality and performance. On the concern side, the Company’s business operations require a significant amount of working capital. In its business, working capital is often required to finance the procurement of raw material and for salaries of employees. Even if it is able to source the required amount of funds, it cannot assure that such funds would be sufficient to meet it cost estimates, which could have adverse effect on its financial conditions and results of operations.

The issue has been offered in a price band of Rs 52-55 per equity share. The aggregate size of the offer is Rs 25.99 crore to Rs 27.49 crore based on lower and upper price band respectively. On performance front, total Income for the Financial Year 2022-23, it stood at Rs 46.44 crore whereas in Financial Year 2021-22 it stood at Rs 52.07 crore representing a decrease of 10.81%. The restated profit after tax for the Financial Year 2022-23, it stood at Rs 2.91 crore whereas in Financial Year 2021-22 it stood at Rs 2.41 crore representing an increase of 20.75%. Meanwhile, the company intends to focus on adhering to the quality of its products. Its manufacturing facilities and its products have been accredited with various national and international quality certifications. This is necessary so as to make sure that it maintains the high-quality standards for its offerings and get repeat orders from its customers. This will also aid it in enhancing its brand value and further increase the business opportunities.