Bharat Wire Ropes IPO – Should you Invest?

Bharat Wire Ropes IPO ReviewBharat Wire Ropes IPO – Should you Invest?

Maharashtra based, Bharat Wire Ropes IPO would open for subscription on 18th March, 2016. Bharat Wire Ropes Ltd is engaged in specialty wire ropes company. The company posted over 2% margins in last 5 years. It is coming to IPO mainly to set-up plant to increase capacity at Chalisgoan in Maharastra. What are the positive factors in Bharat Wire Ropes IPO? What are its hidden factors in Bharat Wire Ropes IPO? You should read complete review of this IPO before taking any investment decision on this IPO.

About Bharat Wire Ropes Limited

Bharat Wire Ropes Limited is a wire rope and wires manufacturing company established in the year 1986. They are engaged in manufacturing and sales of wire ropes, structural strands, slings and wires which find its application in in general engineering, fishing, elevators, cranes, material handling, power transmission, suspension bridges, onshore / offshore oil exploration, ports and shipping, mining, defence, railways etc. Company is also engaged in the business of trading of the steel related products. Its existing steel wire ropes manufacturing facility with an installed capacity of 12,000 MTPA is located at Atgaon, they also have a Pyrolysis plant with an installed capacity of 1,260 MTPA at Chalisgaon, Maharashtra for production of oil, which is used as fuel in our current manufacturing process. They are proposing to further enhance its capacity to manufacture wire ropes, structural strands and slings by setting up a fully integrated manufacturing facility with an installed capacity of 66,000 MTPA at Chalisgaon, Maharashtra.

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Issue details of Bharat Wire Ropes IPO

  • IPO opens: 18-March-2016
  • IPO closes: 22-March-2016
  • Face Value: Rs 10 per share
  • Issue price band: Rs 40 to Rs 45 per share
  • Issue size: Rs 70 Crores
  • Lead Managers: Intensive Fiscal Services Limited.
  • Listing: BSE and NSE
  • Download Bharat Wire Ropes IPO Prospectus from SEBI Website at this link

Purpose of the IPO

1. To set up a proposed project of 66,000 MTPA wire ropes at MIDC Zone, at Chalisgaon, Dist: Jalgaon, Maharashtra

2. To meet General Corporate Expenses ; and

3. To meet Issue Expense

Company Financials (reinstated)

  • Company generated revenue of Rs 76.99 Crores for the year ended Mar-11 and Rs 76.72 Crores for the year ended Mar-15. For 8 months ended Nov-15, it generated revenue of Rs 43.74 Crores.
  • Company posted a profit of Rs 1.77 Crores for the year ended Mar-11 and profit of Rs 1.97 Crores for the year ended Mar-2015. For 8 months ended Nov-15, it generated a profit of Rs 1.08 Crores.
  • Its restated EPS for FY 2015 is Rs 0.67 and last 3 years average EPS 0.59

Bharat Wire Ropes IPO - Financials

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Reasons to invest Bharat Wire Ropes IPO

  • Nil

Reasons not to invest in a Bharat Wire Ropes IPO

  • Revenues are in declining mode. Its FY15 revenues (Rs 76.72 Crores) shown negative growth compared to FY14 revenues (Rs 82.29 Crores). In the last 5 years, revenues are stagnant (FY11 – Rs 76.99 Crores Vs FY15 – Rs 76.72 Crores).
  • It generates thin margins of 2% in last 5 years.
  • Bharat wires manufactures specialty ropes which are available from china market with 30% to 70% discounted prices.
  • Underutilization of capacity of its Existing Manufacturing Facilities or Proposed Project may adversely affect its business, results of operations and financial condition.
  • In the event there is a shortfall in receipt of issue proceeds from this Issue, the company may be unable to meet the equity requirement for the Proposed Project at Chalisgaon which may have a bearing on the completion of company Project on time.
  • The Proposed Project is appraised by an appraising agency and the contents of the appraisal report are withheld. Company’s management was changed in 2010 and hence company promoters have limited knowledge and records of litigations, disputes etc. of company.
  • Company Proposed Project will be operated on lands which have been taken on long lease basis from M.I.D.C.
  • Company Promoters do not have the experience of operating in the wire ropes sector.
  • There are certain outstanding legal proceedings involving company, company Promoters and company Directors. Failure to defend these proceedings successfully may have an adverse effect on company business prospects, financial condition, results of ongoing operations and reputation.
  • Litigations / Proceedings filed against the Company.
  • Company derives a significant portion of its revenues from top 10 (ten) customers. The loss of, or a significant reduction in the revenue company receive from, one or more of these customers, may adversely affect company business.
  • Some of its Group Companies have incurred losses in the past years. Sustained losses by Group Companies could adversely affect company Promoters’ financial condition company have experienced negative cash flows in previous years.
  • Other risk factors (Internal and external) can be viewed in draft prospectus from Page no. 17 onwards.

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Recommendation / Investment strategy

  • On the upper band of issue price of Rs 45 and on FY15 EPS of Rs 0.67, P/E ratio works out to be 67x. Similarly, on last 3 years EPS of 0.59, P/E Ratio works out to be 79x. Means company is asking issue price of Rs 45 at 67x to 79x P/E Ratio. There are no listed peers to check whether the issue is highly priced or reasonably priced.
  • Company revenues are in declining mode. In FY15, it generated negative revenue growth compared to FY14. It generates thin margins of 2%. There is nothing exciting in this company. On top of this, it is asking high issue price of Rs 45 per share. Investors should avoid such IPO.

Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.

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Bharat Wire Ropes IPO Review


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