Visaman Global Sales
- Visaman Global Sales is coming out with an initial public offering (IPO) of 37,32,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 43 per equity share.
- The issue will open for subscription on June 24, 2024 and will close on June 26, 2024.
- The shares will be listed on NSE Emerge Platform.
- The share is priced at 4.30 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 Rawal Ankita Harsh.
Profile of the company
Visaman Global Sales is engaged in the business of supply of round pipes, square pipes, rectangle pipes, various specification of structural steels, BGL coils, GP(GI) coils, HR coils, CR coils, colour coated coils, MS sheets, GP and GC sheets, CR sheets, HR sheets and plates, colour coated sheets, roofing PUF panel, wall PUF panel etc. Further, the company also provides the credit facility to its existing customers as value added service. It provides facility to pay later to the existing customers with good financial record in this case if the customers had paid all the outstanding amount in a proper time frame, then it fixes their credit worthiness via fix amount of credit limit and the credit days which varies with customers to customers.
In addition, it provides the facility of customization to meet the specific requirement of its customers with respect to specific size, length, breadth, thickness etc. of its products. It sends the requisition to manufacturer for customization of specified products. Further, in certain cases, if the manufacturer is unable to do the specified customization, then, the same will be get done by the third-party process houses. The Company outsources the process of modification and alteration to the third party. It outsources the process of modification and alteration to the third party. Additionally, it facilitates onsite delivery of its products to the customers. It is one of the dealers of APL Apollo Tubes. It sells its products through a diversified sales & distribution mix viz. Business-to-Consumer (B to C), Business-to-Channel (B to CH) and Business-to-Business (B to B). Its capabilities as a Company include strict quality assurance system and established marketing and distribution relationships. It strives to deliver customized products and provide quality services.
Proceed is being used for:
- Funding of capital expenditure requirements of the Company towards setting up of a manufacturing facility at Rajkot, Gujarat, India
- Funding working capital requirements
- General corporate purposes
Industry overview
One of the primary forces behind industrialization has been the use of metals. Steel has traditionally occupied a top spot among metals. Steel production and consumption are frequently seen as measures of a country's economic development because it is both a raw material and an intermediary product. Therefore, it would not be an exaggeration to argue that the steel sector has always been at the forefront of industrial progress and that it is the foundation of any economy. The Indian steel industry is classified into three categories - major producers, main producers and secondary producers. India is the world’s second-largest producer of crude steel, with an output of 125.32 MT of crude steel and finished steel production of 121.29 MT in FY23. India’s steel production is estimated to grow 4-7% to 123-127 MT in FY24. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour.
In the past 10-12 years, India's steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The capacity for producing steel has grown concurrently, and the rise has been largely organic. In FY23, the production of crude steel and finished steel stood at 125.32 MT and 121.29 MT respectively. In FY24 (until November 2023), the production of crude steel and finished steel stood at 94.01 MT and 88.81 MT respectively. In FY23, crude and finished steel production stood at 125.32 MT and 121.29 MT respectively. In July 2023, crude steel production in India stood at 11.52 MT. In July 2023, finished steel production stood at 10.53 MT. In FY24 (until November 2023), the consumption of finished steel stood at 86.97 MT. The per-capita consumption of steel stood at 86.7 kgs in FY23. In FY22, the production of crude steel and finished steel stood at 133.596 MT and 120.01 MT, respectively.
The steel industry has emerged as a major focus area given the dependence of a diverse range of sectors on its output as India works to become a manufacturing powerhouse through policy initiatives like Make in India. With the industry accounting for about 2% of the nation's GDP, India ranks as the world's second-largest producer of steel and is poised to overtake China as the world's second-largest consumer of steel. Both the industry and the nation's export manufacturing capacity have the potential to help India regain its favourable steel trade balance.
Pros and strengths
Wide range of products: The company offers a wide range of steel products used in various industries. Its product portfolio includes different specification of steel pipes, structural steel, coils, sheets, plates. It also provides facility of customization with respect to specific size, length, breadth, thickness etc., by arranging from its vendors. Its comprehensive range of products and this facility of customization enable it to capitalize on growth opportunities and demand in its industry.
Existing supplier relationship: Its existing supplier relationship protects the business with terms of supply and pricing of the products, the quality of the products offered etc. it, being a small and medium size organization, rely on personal relationships with its suppliers. The company enjoys existing relationship with its suppliers. Further it also leverages the past experience of its promoters and management in maintaining effective supplier relationship.
In depth understanding of customers’ requirements: Its strength lies in understanding the requirement of the customer and its execution capabilities to provide the product as per the client requirements. This involves understanding the technical requirements like the tensile strength of the bars, following the bar bending schedules, permitted levels of tolerances as well the schedule of requirement of the client. It act as reinforcement partners of the client and make the product available of the right quality at the right time to meet their construction cycle requirements. This also helps the clients to plan in advance and use the manpower resources available on site to get the optimal output.
Risks and concerns
Business is high volume-low margin business: Its inability to regularly grow its turnover and effectively execute its key business processes could lead to lower profitability and hence adversely affect its operating results, debt service capabilities and financial conditions. Due to the nature of the products, it sells, it may not be able to charge higher margins on its products. Hence, its business model is heavily reliant on its ability to effectively grow its turnover and manage its key processes including procurement of finished goods from suppliers, timely sales/ order execution and continuous cost control of core as well as non-core activities. The table below gives details of its Operating Margins and Net Profit margin based on restated financials.
Dependent on third party transportation providers: It depends on transportation services to deliver its products to its customers. It outsources the delivery of its products to either third-party logistics companies or as mutually agreed shipment terms as decided with the customers. Transportation strikes could have an adverse effect on its ability to deliver its products to its customers. In addition, transportation costs in India have been steadily increasing over the past several years. Continuing increases in transportation costs or unavailability of transportation services for its products may have an adverse effect on its business, financial condition, results of operations and prospects.
Working capital requirements: Its business demands on working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects. It intends to continue growing by expanding its business operations. This may result in increase in the quantum of its current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of fund, in a timely manner, or at all, to meet the requirement of working capital could adversely affect its financial condition and result of its operations.
Outlook
Visaman Global Sales is engaged in the business of supply of round pipes, square pipes, rectangle pipes, various specification of structural steels, BGL coils, GP(GI) coils, HR coils, CR coils, colour coated coils, MS sheets, GP and GC sheets, CR sheets, HR sheets and plates, colour coated sheets, roofing PUF panel, wall PUF panel etc. Further, it also provides the credit facility to its existing customers as value added service. In addition, it provides the facility of customization to meet the specific requirement of its customers. It outsources the process of modification and alteration to the third party. On the concern side, it operates in a highly competitive industry with a number of other distributors that deals in competing products. As a result, to remain competitive in the market it must continuously strive to reduce its distribution costs and improve its operating efficiencies and expand its products offering. If it fails to do so, it may have an adverse effect on its market share and results of operations.
The company is coming out with an IPO of 37,32,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 43 per equity share to mobilize Rs 16.05 crore. On performance front, revenue from operations has increased by 16.05% from Rs 32,403.96 lakh in Fiscal 2022 to Rs 37,603.46 lakh in Fiscal 2023. This increase was due to increase in sales of products during the year. The company reported a net profit of Rs 113.33 lakh in Fiscal 2023 as compared to a net profit of Rs 94.66 lakh in Fiscal 2022 which increased due to growth in companies operations. Meanwhile, the company intends to expand its business operations by entering into segment of processing of slitting and processing of Hot Rolled (HR) coils. Presently the company is engaged in the supply of various specifications and sizes of steel pipes, structural steel, steel coils and sheets. It also provides products to its customers post modification and alteration of steel strips/coils into various customized sizes/ shapes as per their requirements.
