Thaai Casting
- Thaai Casting is coming out with initial public offering (IPO) of 61,29,600 shares of Rs 10 each in a price band Rs 73-77 per equity share.
- The issue will open for subscription on February 15, 2024 and will close on February 20, 2024.
- The shares will be listed on NSE SME Platform.
- The face value of the share is Rs 10 and is priced 7.30 times of its face value on the lower side and 7.70 times on the higher side.
- Book running lead manager to the issue is Gyrcapital Advisors.
- Compliance Officer for the issue is Rajesh Kumar Samal.
Profile of the company
Thaai Casting is a distinguished automotive ancillary company with IATF 16949:2016 certification, specializing in High-Pressure Die Casting, as well as the precision Machining of both Ferrous and Non-Ferrous materials and Induction heating and quenching. Founded by Sriramulu Anandan, a seasoned professional with extensive expertise in Pressure Die Casting and Machining Processes, its business model is firmly rooted in a B2B approach, catering to leading entities in the automotive components sector. The company’s product portfolio encompasses a diverse range of Automobile components, including Engine Mounting Support Brackets, Transmission Mounts, Fork Shift and Housing, Armature - Steering Wheel, Electrical Connectors, YFG Base Frame (Right-hand drive side/Left-hand drive side), Housing, Top Cover, and more.
In recognition of its commitment to environmental sustainability, it proudly received the MSIL-GREEN Certification from Maruti Suzuki India Limited in 2021. This acknowledgment underscores its dedication to adopting and promoting eco-friendly practices within its operations. In 2022, the company was honoured with prestigious awards from industry leaders such as Hanon and RSB, recognizing its excellence in terms of Best Quality and being a standout Vendor. As it continues to evolve and uphold the highest standards in its manufacturing processes, it remains steadfast in delivering top-notch products and services to its valued clientele in the automotive sector.
Proceed is being used for:
- Meeting out the capital expenditure.
- Meeting out the general corporate purposes.
- Meeting out the issue expenses.
Industry overview
The Indian die casting industry is expected to grow at a CAGR of 15-20% in the next 2 years, driven by factors such as increasing demand from automotive, electronics, and consumer goods sectors. The industry is also expected to benefit from the government's focus on 'Make in India' and ‘Atmanirbhar Bharat’ initiatives. The Indian die casting industry is also expected to benefit from the government's focus on the ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives. These initiatives are aimed at promoting domestic manufacturing and reducing reliance on imports. The government has also taken steps to improve the infrastructure and business environment in the country, which is expected to further boost the growth of the die casting industry. The Indian die casting industry is casting a bright future for itself. With increasing demand from key sectors and government support, the industry is poised for strong growth in the coming years. By manufacturing die-cast components domestically, the industry is helping to reduce India's reliance on imports and boost its manufacturing sector. The Indian die casting industry is truly a casting call for success. With its strong fundamentals and bright prospects, the industry is set to play a leading role in India's economic growth in the years to come.
Aluminium being the metal of the future, the developed world moved in that direction decades ago, to the extent that, on an average, their automobiles use close to 180 kg of it, against India’s 45 kg. In other sectors too, the world has moved ahead, with automotive making up 23% of overall usage, construction 22%, packaging 13%, electrical 12%, machinery and equipment 8.5%, consumer durables 4.5%, and others 4%. There are attributes to the metal that has made the world change from ferrous metals to aluminium. It is lightweight, doesn’t corrode, is strong and durable, conducts heat and electricity, is flexible where needed and impermeable otherwise, and remains highly recyclable. A US study estimates a 6-8% fuel savings for every 10% weight reduction achieved by switching to aluminium in vehicles.
The future is still unclear on the way forward, if it is electric or hybrid and this will significantly change the dynamics of the Aluminum High Pressure Die Casting Industry. The pressure die casting industry in India has experienced remarkable growth, driven by technological advancements, the shift towards lightweight materials, and the expanding automotive sector. This industry offers tremendous opportunities for manufacturers to expand their presence in the global market, diversify into new sectors, and invest in research and development. With its skilled workforce, competitive costs, and technological capabilities, India is poised to become a leading player in the pressure die casting industry. By leveraging these trends and opportunities, Indian manufacturers can unlock new avenues for growth and contribute to the country’s overall economic development.
Pros and strengths
Production scalability: The company has skilled workforce, allowing flexibility in handling different project sizes in aluminum die casting and IHQ processes. This adaptability aims to ensure consistent and high-quality results, believing the company meet the client demands in both aluminum die casting and Induction Heating and Quenching applications.
Advanced inspection systems: The company emphasizes excellence through advanced inspection systems in aluminum die casting and Induction Heating and Quenching (IHQ). The company's facilities feature up-to-date inspection technologies for quality assurance in both aluminum die casting and IHQ processes. The company advanced inspection systems enable thorough scrutiny of each component, ensuring precision, durability, and compliance with industry standards. With a dedicated focus on quality control, the company aims to meet customer expectations, believing itself as a reliable partner for clients seeking high performance in aluminum die casting and Induction Heating and Quenching applications.
Specialized talent retention: The company retain specialized talent in the business sectors of aluminum die casting and Induction Heating and Quenching (IHQ). The company attributes its success to advanced technology and investment in a skilled workforce. It gives priority to recruiting and retaining specialized talent, fostering an environment that encourages continuous learning and professional growth. Through competitive benefits, ongoing training programs, and a collaborative workplace culture, the company aims to ensure that its team members remain knowledgeable in aluminum die casting and IHQ. This commitment to specialized talent retention positions the company as an employer contributing to its success in both aluminum die casting and Induction Heating and Quenching applications.
Risks and concerns
Dependent on certain suppliers for procurements of raw materials: The company procures aluminium alloy ingots of following grades ADC 12, LM6, LM24, LM 25 and K14, from certain suppliers and use them as per their requirements. Percentage of the top ten suppliers of the company for seven-month period ended October 31, 2023 and FY 2023, 2022, 2021 are 90.69%, 90.44%, 84.69% and 66.83%. Any delays, disruptions, or failures in the supply of raw materials from these entities may significantly impact its operations. Consequently, it may face the risk of losing customers and incurring liabilities for failure to fulfill orders, which could potentially have a material adverse effect on its business and financial condition.
Geographical constrain: The company derive a large portion of its revenue from state of Tamil Nadu. State of Tamil Nadu contribute 84.80%, 81.94%, 85.18%, 69.78% and 69.24% of its total revenue for seven-month period ended October 31, 2023, four-month period ended July 31, 2023 and financial year ended on March 31, 2023, 2022 and 2021, respectively. If there is change in policy by Government of Tamil Nadu regarding automotive industry or economic conditions of State of Tamil Nadu become volatile or uncertain or the conditions in the financial market were to deteriorate, or if there are any changes in laws applicable to its industry or if any restrictive conditions are imposed on it or its business, there will be a severe impact on the financial condition of its business. Further, the ultimate customers located in this geography may reduce or postpone their spending significantly which would adversely affect its operations and financial conditions.
No long-term agreement with customers: The company does not have firm commitment long-term supply agreements with its customers and instead rely on purchase orders to govern the volume and other terms of its sales of products. Many of the purchase orders it receives from its customers specify a price per unit and delivery schedule, and the quantities to be delivered are determined closer to the date of delivery. However, such orders may be amended or cancelled prior to finalisation, and should such an amendment or cancellation take place, it may adversely impact its production schedules. Further, where it has contracts with customers, such contracts do not bind its customers to provide it with a specific volume of business and can be terminated by its customers with or without cause, with little or no advance notice and without compensation. Consequently, there is no commitment on the part of the customer to continue to place new work orders with it and as a result, its sales from period to period may fluctuate significantly as a result of changes in its customers’ vendor preferences. Further, it may not find any customers or purchasers for the surplus or excess capacity, in which case it would be forced to incur a loss.
Outlook
Thai Casting is an automotive ancillary company specializing in High-Pressure Die Casting, as well as the precision Machining of both Ferrous and Non-Ferrous materials and Induction heating and quenching. The company offers a wide range of automotive components, such as engine mounting support brackets, transmission mounts, fork shift and housing, steering wheel armatures, electrical connectors, YFG base frames (both right-hand and left-hand drive side), housing, top cover, and more. On the concern side, the company’s revenues are highly dependent on its operations in geographical region of state of Tamil Nadu. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and results of operations. The company is heavily dependent on certain suppliers for procurements of raw materials. Any disruption of supply from such entities may affect its business operation.
The company is coming out with an IPO of 61,29,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 73-77 per equity share. The aggregate size of the offer is around Rs 44.75 crore to Rs 47.20 crore based on lower and upper price band respectively. On performance front, the total income of the company for fiscal period 2023 was Rs 4911.64 lakh against Rs 3841.94 lakh total income for Fiscal period 2022, an increase of 27.84% in total income. This increase was due to increase in production and sales. Moreover, profit after tax for the Fiscal 2023 was at Rs 503.71 lakh against profit after tax of Rs 115.40 lakh in fiscal 2022, a 336.48% increase.
The company has in house Research and Development facility located in its manufacturing and registered office. It places a strong focus on R&D, with an emphasis on lean design and continuous improvement in product performance, cost and reliability, to enhance its product range. It has invested in Specialized Testing Equipment and General Testing Equipment Scope in its R&D centres for each of its product segments. Through its investment, the company has developed strong product design capabilities, which allow it to develop new products and service its customers effectively and in a timely manner. Its R&D capability allows it to reduce the testing and validation workload that its customers need to undertake on its products.
