Trom Industries coming with IPO to raise Rs 31.37 crore

Trom Industries

• Trom Industries is coming out with initial public offering (IPO) of 27,27,600 shares in a price band Rs 110-115 per equity share.
• The issue will open on July 25, 2024 and will close on July 29, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 11.00 times of its face value on the lower side and 11.50 times on the higher side.
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Priya Arora.

Profile of the company

Trom Industries is a Solar EPC (Engineering, Procurement, and Construction) company specializing in residential solar rooftop, industrial solar power plants, ground-mounted solar power plants, and solar street lights. The company is engaged in the comprehensive development of diverse solar projects. For residential rooftop installations, it designs and implements solar systems tailored to individual homes. In the industrial sector, the company scales up its operations to design and construct larger solar power plants catering to industrial needs. Ground mounted solar power plants involve the development of solar arrays on open land. Additionally, the company extends its services to include the Supply and Installation of solar street lights for public and commercial areas.

Its business encompasses engineering design, procurement of materials, on-site construction, project management, and adherence to regulatory standards across various sectors. Its solar applications contribute to the growth of sustainable energy solutions across residential, industrial, public domains and government sector. Also, its business operations encompass the extensive trading and distribution of a diverse range of products, including solar panels, inverters, and an array of materials intricately connected to the establishment and functioning of solar power plants. Furthermore, it was also engaged in the trading of all types of footwear to a very small scale during the period. It is actively engaged in the development of green hydrogen projects as a pivotal aspect of its future business endeavors.

Proceed is being used for:

• Funding of capital expenditure requirements of the company towards set up of Solar Power Plant
• Meeting the working capital requirements
• General corporate purposes

Industry Overview

India's energy demand is expected to increase more than that of any other country in the coming decades due to its sheer size and enormous potential for growth and development. Therefore, it is imperative that most of this new energy demand is met by low-carbon, renewable sources. India's announcement India that it intends to achieve net zero carbon emissions by 2070 and to meet 50% of its electricity needs from renewable sources by 2030 marks a historic point in the global effort to combat climate change. The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020.

As of October 2022, India’s installed renewable energy capacity (including hydro) stood at 165.94 GW, representing 40.6% of the overall installed power capacity. The country is targeting about 450 Gigawatt (GW) of installed renewable energy capacity by 2030 – about 280 GW (over 60%) is expected from solar. The non-hydro renewable energy capacity addition stood at 4.2 GW for the first three months of FY23 against 2.6 GW for the first three months of FY22. Solar power installed capacity has increased by more than 18 times, from 2.63 GW in March 2014 to 49.3 GW at the end of 2021. In 2022, till November, India has added 12 GW of solar power capacity. Power generation from renewable energy sources (not including hydro) stood at 16.18 billion units (BU) in September 2022, up from 14.49 BU in September 2021. 

India has set a target to reduce the carbon intensity of the nation’s economy by less than 45% by the end of the decade, achieve 50% cumulative electric power installed by 2030 from renewables, and achieve net-zero carbon emissions by 2070. Low-carbon technologies could create a market worth up to $80 billion in India by 2030. India’s target is to produce five million tonnes of green hydrogen by 2030. The Green Hydrogen target is set at India’s electrolyser manufacturing capacity is projected to reach 8 GW per year by 2025. The cumulative value of the green hydrogen market in India could reach $8 Bn by 2030 and India will require at least 50 gigawatts (GW) of electrolysers or more to ramp up hydrogen production.

Pros and strengths

Strong relationship with customers and suppliers: It focuses on maintaining long term business relations with its customers. It is successful in building a strong client base for its business. Its existing business relations help it in getting repeat business from its customers. This has helped it to maintain a long-term working relation with its customers and improve its customer retention strategy. Its existing business relations with its clients represent a competitive advantage in gaining new clients and increasing its business.

Experienced management team with industry expertise: The industry experience of its management team and their ability to deliver consistent sales growth are its significant strengths. Its Promoter Jignesh Patel and Pankaj Pawar have an experience of years in the field of solar energy. The experience of its management team and their knowledge and its resources will enable it to drive its business in a successful and profitable manner.

Wide Range of Products: The company is engaged in the business of providing wide range of products, including solar products like solar roof top, solar refrigeration, solar street lights etc. Its business operations encompass the extensive trading and distribution of a diverse range of products, including solar panels, inverters, and an array of materials intricately connected to the establishment and functioning of solar power plants.

Risks and concerns

Depend on limited number of customers: At present, it derives most of its revenues from the sale of products from limited number of customers. Any decline in its quality standards, any change in the demand by the customers may adversely affect its ability to retain them. It cannot assure that it shall generates the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its revenues and profitability. However, the composition and revenue generated from these clients might change as it continues to add new clients in normal course of business.

Does not entered into any long-term agreements with suppliers: It does not enter into long term contracts with its suppliers and prices for these items are normally based on the quotes it receive from various approved suppliers. Any unexpected price fluctuations after placement of orders, shortage, and delay in delivery, quality defects, or any factors beyond its control may result in an interruption in the supply of such items which is critical to its business. Any delay, interruption or increased cost in the supply of any items thereof pertaining to its project arising from a lack of long-term contracts could have an adverse effect on its ability to meet its targets and client satisfaction from its service and its business, financial performance and cash flows may be adversely affected.

Working capital requirements: The company is depending on working capital for the purpose of project execution. In its business, significant amounts of capital are required towards financing for day-to-day business expenses like salary, electric expenses, lease rental, security deposit, loan & advances. Its working capital requirements will increase as it seeks to expand its businesses. It may also increase if, in certain contracts, payment terms include reduced advance payments or payment schedules that specify payment towards the end of a tower installation. Delays in progressive payments or release of retention money or bank guarantees from its clients may increase its working capital needs. Continued increases in working capital requirements may have an adverse effect on its financial condition and results of operations.

Outlook

Trom Industries is a Solar EPC company specializing in residential solar rooftop, industrial solar power plants, ground-mounted solar power plants, and solar street lights. The company is engaged in the comprehensive development of diverse solar projects. For residential rooftop installations, it designs and implements solar systems tailored to individual homes. In the industrial sector, the company scales up its operations to design and construct larger solar power plants catering to industrial needs. Ground mounted solar power plants involve the development of solar arrays on open land. On the concern side, the solar industry is highly competitive, posing significant challenges to its operations and financial stability. Its performance and financial health are notably vulnerable to competitive pricing dynamics and other market factors. Intensifying competition may lead to pricing pressures, diminished profit margins, market share losses, or an inability to expand its market presence, all of which could impair its business and financial outcomes.

The company is coming out with a maiden IPO of 27,27,600 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 110-115 per equity share. The aggregate size of the offer is around Rs 30.00 crore to Rs 31.37 crore based on lower and upper price band respectively. On performance front, revenue from operations increased from Rs 2,401.26 lakh in year ended March 31, 2023, to Rs 5,434.88 lakh in year ended March 31, 2024, with a resultant increase of 126.33% in year ended March 31, 2024. Net Profit after tax increased from Rs 28.86 lakh in year ended March 31, 2023, to Rs 572.93 lakh in year ended March 31, 2024. Going forward, it intends to increase its domestic footprints with introduction of new products range and expansion of its business. Further, it intend to enter new geographies in India. Besides, the company constantly endeavours to improve its processes. It regularly analyses its existing process and to identify the bottlenecks areas and improve it.