Polycab India IPO Review: Why Should you Invest?

Polycab India IPO plans to raise Rs 1,345 crore. The initial public offering (IPO) comprise of the fresh issue of equity shares, aggregating up to Rs 400 crore, and the offer for sale (OFS) upto Rs 945 crore of 17,582,000 shares. The company has already raised Rs 401 crore successfully from 25 anchor investors.

Polycab India Business Profile

• The company is one of the largest companies in the organized cables and wires industry, in which it operates and has a market share of 18%.
• The company has a presence all over India as it has the distribution network of more than 2,800 authorised dealers, about 1,00,000 retail outlets and 30 warehouses. The company also exports its products to over 40 countries
• The company is focusing to come up with new products.
• Polycab is currently setting up a plant with the commodity trader Trafigura at Halol in Gujarat to make copper wire rods. The plant is expected to start production by the end of FY 19 and aims to strengthen the backward integration of the company’s manufacturing to meet a part of its demand for copper.

The objects of the IPO are:

1. The net proceeds are planned to be used for the repayment/prepayment of certain borrowings taken by the company-Rs. 80 crore
2. Working Capital Requirements-Rs  240 crore
3. Offer related expenses and general expenses of the corporates- Rs. 80 crore

Polycab IPO Details

• Issue Open: April 5th, 2019 – April 9th, 2019
• Issue Type: Book Built Issue IPO
• Issue Price: Rs 533-Rs 538 Per Equity Share
• Market Lot: 27 Shares
• Minimum Order Quantity: 27 Shares
• Retail Portion: 35%
• Listing At: BSE & NSE
• Listing Date: April 18^th, 2019

Why Should you Invest?

Polycab has posted strong growth in revenue, operating profit and net profit after reporting a CAGR of 10 per cent, 23 per cent and 42 per cent, respectively, over the time line FY16-18.

Further, the company has low net debt/ equity of 0.2 as on December 2018. For the nine months ended December 2018, the company’s revenue grew by 17% to Rs 5,561 crore. During this period, the net profit has doubled to Rs 360 crore. Polycab India’s EBITDA grew by about 76% over the same period last year to Rs.694 crore, while the EBITDA margin has expanded by 421 basis points to 12.6%.

At the upper price band, the company’s market capitalisation is of Rs 8,000 crore. Return on equity (RoE) of the company stood at 17 per cent in FY18 and return on capital employed (RoCE) at 14 per cent.

Moreover, at the upper price band, Polycab is at a P/E of 21.6 times its FY18 earnings, which is lower than its peers like KEI Industries, Havells India, Finolex Cables Ltd., Bajaj Electricals and Crompton Greaves Consumer.

Since the valuations are lower than its peers and has strong growth, the investors may subscribe to Polycab India IPO for listing gains and long term gains.