DCG Wires & Cables coming with IPO to raise Rs 50 crore

DCG Wires & Cables 

• DCG Wires & Cables is coming out with an initial public offering (IPO) of 49,99,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share. 
• The issue will open for subscription on April 8, 2024 and will close on April 10, 2024.
• The shares will be listed on NSE SME Platform.
• The share is priced at 10.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Shwetal Maliwal.

Profile of the company

The company is manufacturers of copper cables and wires. Its primarily focus is on manufacturing of different types of copper cables which finds application in Transformers. Its product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica) Bare Copper Wires and Strips, Copper Tapes and Fiber Glass Copper. At DCG, it takes pride in offering a wide range of copper products. Its products include bare copper strips, conductors, and wires, ensuring optimal conductivity for various applications. It also provides paper-covered copper conductors in both rectangular and round shapes, as well as multi-paper-covered copper conductors and connection cables designed specifically for transformers. For added durability, it offers fiber glass-covered copper strips and wires.

Additionally, its copper submersible wires and strips are perfect for submersible applications. It also supplies twin and triple bunched paper-covered copper strips and bunch conductors. It majorly supplies its products to the transformer manufacturing companies in India and its main marketing strategy is to develop and maintain good relationships with its customers. Its promoter has been in this industry since 2008 and his relationships with the customers / clients have been very helpful for the growth of its business.

The company has three manufacturing units. Its manufacturing facilities are equipped with the latest required machineries that enable the company to offer products as per the specific requirements of clients along with low production cost. It is currently in process of setting up a new manufacturing plant at Bhayala, Bavla, Gujarat, in order to increase its manufacturing capabilities. The land on which the said plant is being constructed comprises of over 8308 sq. mtrs. area and is obtained by the company on lease from its Promoter Director, Mr. Devang Patel for a period of 7 years from November 20, 2023. As and when needed, it is gradually planning to consolidate and shift all three existing manufacturing facilities to this new manufacturing facility for better administration, efficiency and cost optimization.

Proceed is being used for:

• Capital expenditure for building construction
• Working capital requirement
• General corporate purpose
• Meeting public issue expenses

Industry overview

India has the capacity to export goods worth $1 trillion by 2030 and is on the road to becoming a major global manufacturing hub. With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025. India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.

India has potential to become a global manufacturing hub and by 2030, it can add more than $500 billion annually to the global economy. As per the economic survey reports, estimated employment in manufacturing sector in India was Rs 5.7 crore in 2017-18, Rs 6.12 crore in 2018-19 which was further increased to Rs 6.24 crore in 2019-20. India's display panel market is estimated to grow from around $7 billion in 2021 to $15 billion in 2025. As per the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), capacity utilisation in India’s manufacturing sector stood at 72.0% in the second quarter of FY22, indicating significant recovery in the sector.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of $3.4 trillion along with a population of 1.48 billion people, which will be a big draw for investors. The Indian Cellular and Electronics Association (ICEA) predict that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to $100 billion by 2025 through policy interventions.

Pros and strengths

Exceptional product quality: It focuses on quality of its product and for that reason its cables and wires are known for their excellent conductivity, durability and reliability, making them a preferred choice for industries where performance is critical. In the process of manufacturing of its product, it ensures that every product meets or exceeds industry standards. The company invests in cutting-edge testing equipment to guarantee the consistency and reliability of its products.

Customization expertise: The Company boasts an engineering team that possesses proficiency in the art of cable and wire customization. This team's capabilities are a cornerstone of the company's success, enabling the company to offer clients tailor-made cable solutions that precisely align with their specific project requirements. This level of customization is a distinguishing feature of the company and a testament to its commitment to meeting clients' unique needs. Whether clients require cables of a specific length for structured cabling installations, varying lengths for intricate network setups, or precise measurements for any other purpose, the Company can accommodate these demands with unparalleled precision.

Competitive pricing: The Company has cultivated strong, long-term relationships with their suppliers. These relationships are built on trust, reliability, and mutually beneficial terms. By negotiating favorable terms and maintaining a good rapport with suppliers, the company can secure raw materials and components at competitive prices, further contributing to their ability to offer attractive pricing to clients. Further, for clients who anticipate ongoing cable needs, it offers the option to enter into long-term contracts. These contracts provide clients with a consistent and reliable supply of copper cables at stable prices over an extended period. As on date due to volatility of the price of the raw material, no client has entered into long term contracts with the Company to get the benefit of price fluctuations.

Risks and concerns

Operations are limited to the state of Gujarat: It is supplying its products to the customers spread over with the state of Gujarat. The revenue from Gujarat is 100%, 99.98%, 95.00% and 95.23% in the FY 2020-21 FY 2021-22, FY 2022-23 and for the stub period ended on February 29, 2024 respectively. Looking to the good quality of its products, it is able to sale its entire production within Gujarat. It is supplying its products to the few customers only. Yet it has not developed market for its product other than Gujarat state. It is in the process of developing online market that provides the 24X7 business opportunity to all the clients spread over across the country. This will also provide the opportunity for direct sale to the end users of its products and this will provide opportunity for the sales against payment, which will help the company to smoothening of its liquidity requirement.

Any failure in quality control and procurement process: It is a practice of the Company to purchase the standard quality required raw materials for its manufacturing process, since it has a direct impact on the quality of finished products. It has implemented quality checks for raw material that it procures, on the basis of internal and international quality standards. In case of poor quality, its customers may lose faith in the quality of its products and could in turn refuse to further deal in its products, which could have a severe impact on its revenue and business operations. It may faces the risk of legal proceedings and product liability claims being brought against the company by its customers for low quality products sold. 

Operate in competitive business environment: It faces significant competition in its business from other manufacturers and suppliers of cables and wires products. It operates in a highly competitive business environment. Growing competition in the domestic market from domestic organized and unorganized players and/or the international players, it is subject to pricing pressures and requires the company to reduce the prices of its products in order to retain the existing customers and/or attract new customers, which may have a material adverse effect on its revenues and margins. Some of its competitors may be increasing their capacities and targeting the same products in which it is dealing at a lower price. There can be no assurance that it can continues to compete effectively with its competitors in the future, any failure to compete effectively may have an adverse effect on its business, financial condition and results of operations.

Outlook

DCG Wires & Cables is engaged in the business of Manufacturing of copper strips, Wires, Cables products. Its primarily focus is on manufacturing of different types of copper cables which finds application in Transformers. Its product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica) Bare Copper Wires and Strips, Copper Tapes and Fiber Glass Copper. On the concern side, the Cables and Wires Industry is extremely competitive where the key factors of competition primarily comprise of product quality, cost, delivery, development and management. In this highly competitive industry, it competes with other manufacturers and suppliers in the world and in India. Some of its competitors have better penetration in some of the geographical locations that it operates in. 

The company is coming out with an IPO of 49,99,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share to mobilize Rs 50 crore. On performance front, the Company’s total revenue was Rs 5452.47 lakh which is increased by 96.90% in compare to total Income from operations of Rs 2769.16 lakh in F.Y. 2021-22. Profit after Tax (PAT) is Rs 172.11 lakh for the F.Y. 2022-23 in compared to Rs 37.13 lakh in F.Y. 2021-22. The PAT was 3.15% of total revenue in F.Y. 2022-23 compared to 1.34% of total revenue in F.Y. 2021-22. Meanwhile, the company intends to focus on adhering to the quality standards of the products. Quality of the product is very important for the company for getting its selves registered as approved vender with clients. Continuous quality review of products and timely corrective measures in case of quality diversion are keys for maintaining quality standards of the products. Providing the desired and good quality products help it in enhancing its clients’’ trust and maintaining long term relationships with them.