ATC Energies System coming with IPO to raise Rs 63.76 crore

ATC Energies System

• ATC Energies System is coming out with an initial public offering (IPO) of 54,03,600 equity shares in a price band Rs 112-118 per equity share.
• The issue will open on March 25, 2025 and will close on March 27, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 11.2 times of its face value on the lower side and 11.8 times on the higher side.
• Book running lead manager to the issue is Indorient Financial Services.
• Compliance Officer for the issue is Kiran Honnaya Shettigar. 

Profile of the company

The company produces and supplies lithium-ion batteries. It provides efficient and low-cost lithium and li-ion batteries by developing a full scale vertically integrated energy storage solutions for various industries and end user such as banking, automobiles etc. Its factories are located at Vasai, Thane and Noida, NCR with latest machines and technology comprising an in-house integrated development and assembling system as well as quality testing infrastructure, wherein a range of customised as well as standardized lithium batteries are made.

The company commenced its business producing mini size batteries (upto 100Wh) primarily catering to the Banking Industry for POS and ATM Machines. Over the years, it has expanded its product portfolio to manufacture batteries of all sizes i.e. large [above 2,000 Wh], medium (751-2,000 Wh), small (101-750 Wh) and mini for a wide range of industries and other end use applications. It has an in-house team for designing, engineering and customising the products to suit the end use of its customers. The scope of its services typically includes designing and engineering the products to suit the end use of its products.

The company is accredited with the following certifications - ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, RoHS [Restriction on Hazardous Substances]. It adheres to strict quality control measures during its processes to extract full life of the products. Alongside its customer-focused approach, its Research and Development team looks for opportunities for next generation and innovative products. The continuous research, development and introduction of latest production technologies of renewable energy storage solutions on a global level by various countries are complementing the company’s future growth story.

Proceed is being used for:

• Repayment and/or pre-payment, in full, of the borrowing availed by the company with respect to purchase of its Noida factory including land and building.
• Funding the capital expenditure requirements towards refurbishment, civil and upgradation works at its Noida factory.
• Funding the capital expenditure requirement towards IT upgradation at its Noida factory, Vasai factory and its registered office.
• Funding working capital requirements of the company.
• General corporate purposes.

Industry overview 

The lithium-ion industry is witnessing healthy demand growth in India backed by rising usage in diversified end user industry. The country’s cumulative lithium-ion battery market in India have grown from 2.9 GWh in 2018 to 22.4 GWh in 2021 and is estimated to have grown further to 49.8 GWh in 2023. Between 2020-23, the market demand is estimated to have grown by 47% CAGR. This expansion is driven by advancements in battery technology, heightened investment in renewable energy infrastructure, and supportive government policies promoting green energy and sustainable transportation. Leading companies in the market are concentrating on increasing production capacity, improving battery efficiency, and ensuring sustainable supply chains to meet the growing demand while addressing environmental and resource-related challenges.

India annual Lithium-ion battery demand is estimated to have grown from 3GWh in 2020 to around 11 GWh in 2022 while 2023 it is estimated to have accelerate further to nearly 17 GWh in 2023. Annually, stationary application and transport application were estimated to have accounted for 43% and 38% share with annual demand of 4.7 GWh and 4.1 GWh, respectively while Consumer Electronics segment was estimated to account for a 19% share, with 2.1 GWh lithium-ion battery consumption.

The Indian government has been actively promoting domestic manufacturing of Lithium-ion batteries as part of its efforts to boost the adoption of electric mobility and reduce the country's dependence on imports. Several policies and initiatives have been introduced to incentivize and support the growth of the EV battery manufacturing ecosystem in India. Some of the key government policies are: National Electric Mobility Mission Plan (NEMMP); Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) India Scheme; Production-Linked Incentive (PLI) Scheme; The National Mission on Transformative Mobility and Battery Storage (NMTMBS); Phased Manufacturing Program (PMP); and Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).

Pros and strengths

Focus on quality and performance: A strong focus on quality and performance of its product offerings is a crucial strength for the company. Emphasizing high standards in product quality ensures reliability, safety, and superior performance, which are essential in critical applications such as electric vehicles, medical devices, and renewable energy storage. Its stringent quality control measures and protocols at each critical step in its processes has not only minimized the risk of product failures and costly recalls but also built consumer trust and loyalty.

Diversified product portfolio: Its diversified and comprehensive product portfolio is a critical strength of its business. While, it commenced its business producing mini size batteries for the Banking Industry, it has established itself as a player providing all sizes of battery cells for a wide range of industry and business end user applications. It has the ability to curate and customise products which can be tailored according to the specific needs and standards of its customers. This adaptability not only enhances market resilience against economic fluctuations in any single industry but also positions the company as a versatile and reliable supplier, capable of innovating and meeting the evolving technological needs of diverse customers.

Stable financial performance: It has demonstrated stable financial performance over the years with growth in terms of revenues and profitability. Over the last three years, it has focused its attention towards expanding its product portfolio which has resulted in an increase in its revenue from operations and profits. The stable growth in revenue, profits, ROCE enables the company to fund its strategic initiatives and pursue opportunities for growth.

Risks and concerns

Do not have long term contracts with suppliers: It does not currently have long term contracts or exclusive supply arrangements with any of its suppliers from whom it purchases the raw materials. The key raw materials needed in making its lithium-ion batteries mainly include lithiumion cells and Battery Management System which are imported. The price and availability of such input materials are subject to, supply side disruptions and are dependent on several factors beyond its control, including overall economic conditions, taxes and duties, the prevailing Indian regulatory environment, foreign exchange rate, production levels and competition. 

Heavy dependence on raw material imports from China: Its business faces a significant risk due to its heavy reliance on imports from China. China holds a dominant position in the global battery market, serving as a primary source for producing raw materials mainly cells and Battery Management System needed for making lithium-ion battery packs. This dependency on Chinese imports exposes the company to various risks that can impact their operations and profitability. Political tensions, trade disputes, or changes in trade policies between China and India can disrupt the flow of its raw materials, leading to supply chain disruptions and operational challenges. Tariffs, export restrictions, or retaliatory measures can increase costs and limit access to critical components, affecting the competitiveness and profitability of battery businesses.

Industry is labour intensive: Its industry being labour intensive is dependent on labour force for carrying out its operations. Shortage of skilled/unskilled personnel or work stoppages caused by disagreements with employees could have an adverse effect on its business and results of operations. Though it has not experienced any major disruptions in its business operations due to disputes or other problems with its work force in the past; however, there can be no assurance that it will not experience such disruptions in the future. Such disruptions may adversely affect its business and results of operations and may also divert the management’s attention and result in increased costs.

Outlook

ATC Energies System, incorporated in September 2020, is dedicated to providing efficient and affordable lithium and li-ion batteries. With factories in Vasai, Thane, and Noida, NCR, the company utilizes advanced technology and quality testing infrastructure. On the concern side, it faces competition globally in its business, which is based on many factors, including product quality and reliability, product design and development, technology, manufacturing capabilities, price and brand recognition. It competes with competitors to retain its existing business as well as to acquire new business. It faces competition from both domestic as well as international players and its inability to compete effectively may have a material adverse impact on its business and results of operations.

The company is coming out with a maiden IPO of 54,03,600 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 112-118 per equity share. The aggregate size of the offer is around Rs 60.52 crore to Rs 63.76 crore based on lower and upper price band respectively. On performance front, the company’s revenue increased from Rs 3,313.54 lakh in Fiscal 2023 to Rs 5120.37 lakh in Fiscal 2024, a hike of 55%. Moreover, the profit after tax grew from Rs 775.57 lakh in Fiscal 2023 to Rs 1,089.16 lakh in Fiscal 2024, a hike of around 40%.

Meanwhile, its primary focus is to improve its operational efficiency at its manufacturing facilities which will lead to cost minimization and better resource utilization. Higher operational efficiency results in greater production volumes and higher sales, and therefore allows the company to spread fixed costs over the increased sales quantity, thereby increasing profit margins of the company. This includes investing in automation, new technology, and better equipment to upgrade its products and improve quality based on what customers want. It strives to achieve economies of scale to gain increased negotiating power on procurement and to realize cost savings through centralized deployment and management of production and other support functions.