Bedmutha Industries’ IPO is on the expensive side

The revenue growth and profitability of the company depend on successful implementation of its new project, as well as market acceptance of the products. It is not an inexpensive IPO offer due to the competitive market with a presence of large and well-established players

Issue Details

Number of shares: 90 lakh
Price band: Rs95 -Rs102 per share
Issue duration: 28th September-1st October
Issue size: Rs85.50 crore-Rs91.80 crore
Qualified Institutional Buyers allotment: 45 lakh shares
Mutual funds allotment: 2.25 lakh shares
Non-institutional investors' allotment: 13.50 lakh shares
Retail investors' allotment: 31.50 lakh shares
Face value: Rs10 per share
Minimum order quantity: 65 shares
Shares prior to the issue: 1.20 crore shares
Shares post-issue:  2.10 crore shares
Market-cap pre-issue: Rs114 crore
Market cap post-issue: Rs199 crore
Listing: BSE, NSE
Lead book running managers: Ashika Capital Ltd and Keynote Corporate Services Ltd


Based on the FY10 earnings per share (EPS) of Rs10.14 the P/E works out to 9.37 at the lower end of the price band and 10.06 at the higher band. Its competitors like Usha Martin Ltd, Ramsarup Industries Ltd, Rajratan Global Wire Ltd, Odessy Corporation Ltd and Goodluck Steel Tubes Ltd carry an EPS of Rs2.90, Rs12.70, Rs20.90, Rs1.50, Rs8.20 and Rs8.29, respectively. They carry P/E of 23.40, 8.20, 10.00, 101.30 and 3.40 respectively. The issue seems to be priced competitively compared to its peers. The industry composite P/E stands at 16.90.

Business model

Nashik-based steel wire manufacturer Bedmutha Industries Ltd is entering the capital market to raise Rs85.50 crore through a 100% book building issue. Bedmutha started its commercial production in 1992, by setting up the first galvanised wire plant at Nashik with an installed capacity of 3600 metric tonnes per annum (MTPA). It ramped up its production capacity from 3,600MTPA to 26,050MTPA by setting up three additional galvanising lines at the same location. The company presently has four manufacturing units in and around Nashik with combined production capacity of 60,000MTPA. It produces galvanised wires, cable armour wires, Aluminium Conductor Steel Reinforced Wires (ACSRs), wire nails, earth wires, stay wires, spring steel wires, barbed wires, etc to domestic manufacturers and dealers. Its subsidiary Kamalasha Infrastructure & Engineering Private Limited (KIEPL) which carries out turnkey projects has bagged a Rs60-crore contract in Dharangaon Division of Maharashtra State Electricity Distribution Company Limited (MSEDCL) to set up new sub-stations, augmentation in old sub-stations, laying of 33KV and 11KV lines for approximately 600km, installing around 500 distribution transformers, etc. The company is planning to set up a galvanising plant with latest technology with capacity of 48000TPA and manufacturing of aluminium rods and conductors with capacity of about 42,000TPA.

Financial snapshot

Its cash flow was in the red at Rs2.20 crore for the year ended 31 March 2010.

Objects of the issue

The company plans to set up a new plant at Sinnar, Nashik for manufacturing a new product LRPC wire and spring steel wire at a cost of Rs84.94 crore. It has already acquired 15 acres of land to implement the proposed expansion for Rs56.60 lakh.

Analyst's take

Rating agency ICRA Ltd has assigned an 'IPO Grade 2' to the company indicating 'Below Average Fundamentals'. The assigned grading takes into account the company's two decades of track record in the wire manufacturing business, healthy growth in production levels with regular increase in production capacities, strong presence in the western region and a reputed and well-diversified customer profile. The rating agency cites that the grading is constrained by the competition present in the industry due to the presence of several large and well established players in certain product categories and a host of unorganised players in other product segments and the expected decline in return indicators given the large expansion and the resultant equity dilution. Also, the company's operations are working capital intensive, which has impacted the free cash flow generation in the past, resulting in an adverse capital structure. Also, while the demand potential is favourable, the company would face high project implementation risks in setting up the project for LRPC and spring steel wires, especially given the fact that very limited progress has been made in the project so far and its dependence on IPO proceeds for financial closure. ICRA notes that going forward, the overall revenue growth and profitability indicators of the company would remain dependent on successful implementation of its new project as well as market acceptance of the products.


  •  It has an operating track record of over 19 years in the steel wire business.
  •  It produces a wide range of products, from MS wires to Grade 3 Spring wires both coated and uncoated. The products include galvanised steel & MS wire, cable armour, aluminium conductor steel reinforced wire, stay wires, annealed/binding wires, high carbon rope wires etc. Its products are registered and approved with various public sector undertakings such as Power Grid Corporation, Maharashtra State Electricity Distribution Company Ltd (MSEDCL), Gujarat Electricity Board (GEB), and Madhya Pradesh State Electricity Board (MPSEB).
  •  Sales are carried out from various locations like Mumbai, Nashik, Pune, Nagpur, Ahmedabad, Baroda, Bengaluru, Lucknow, Haridwar, Gwalior, New Delhi, Indore, Angul (Orissa). It has serviced clients like Sterlite Industries Ltd, Apar Industries Ltd, Finolex Cables, RPG Cables, Universal Cables, Ravin Cables, Suprajit Industries, Godrej & Boyce, GTL Infrastructure, Ashoka Buildcon Limited, MSEDCL, GEB and MPSEB.
  • It enjoys sales tax benefits under the Maharashtra State Government Package Scheme of Incentives until 2015. The benefit can be extended until 2017 due to its expansion plans.


  • The implementation of the project for which the proposed issue is planned is at a very preliminary stage. A delay in implementation may escalate the cost and affect returns from the project.
  • Its top 10 clients contribute approximately 51.21% of its sales for FY 2010. Any loss of business from one or more of them may affect its revenues and profitability.

Concluding notes
It is not an inexpensive IPO, based on the competitive market with the presence of large and well-established players.



k a prasanna

7 years ago

At Rs 95-102, the issue is priced around 17 times its FY 10 earnings, on post issue capital of Rs 21.02cr. This is expensive compared to the listed peers in the segment like Good Luck Teel Tubes (3.5PE) and Ramsaup Industries (9PE).
While the IPO should enable the company to scale up its revenues, the actual return indicators may decline given the large size of expansion, the significant equity dilution and uncertainty on the company’s ability to get market acceptance for its new product offerings.
The offer is expensive. AVOID. FIRST CHOICE IPO.

Monday Closing Report: Still locked in a range

Adding to Friday's gains, the market opened strong on positive global cues. It touched the day's high in initial trade but pared some gains and gradually drifted lower - near the day's low - and settled off those levels at the end of the session, above the crucial levels.

The domestic market opened higher on positive cues from the global arena. The Asian markets, which were in full strength today were upbeat on encouraging economic data from the US, also lent support to the local market. The key benchmarks touched their intraday highs within minutes of the opening bell but drifted marginally lower to trade in a narrow range. A bout of profit-booking in the post-noon session pushed the indices near the day's low. The market ended at those levels in range-bound trade.

The Sensex closed at 20,134, up 88.89 points (0.44%) today. The index touched a high of 20,268 and a low of 20,182 during the session. The Nifty settled 17.35 points (0.29%) higher at 6,035 after scaling an intraday high of 6,073 and a low of 6,018.

The overall market breadth was positive. The 30-stock Sensex ended with 20 scrips in the green against 10 in the declining list. The Nifty had 27 advancing stocks while 23 ended in the negative terrain. Among the broader indices, the BSE Mid-cap index rose 0.37% while the BSE Small-cap index gained 0.19%.

The top gainers on the Sensex were Hindalco Industries (up 3.33%), Sterlite Industries (up 3.16%), Tata Steel (up 2.57%), NTPC (up 2.51%) and ONGC (up 1.40%). The main losers on the benchmark were HDFC Bank (down 2.11%), Hindustan Unilever (HUL) (down 1.94%) and HDFC (down 0.57%).

BSE Metal (up 2.15%), BSE Consumer Durables (CD) (up 1.64%) and BSE Realty (up 1.23%) were the notable gainers in the sectoral space today while BSE Fast Moving Consumer Goods (FMCG) (down 0.67%) and BSE (IT) (down 0.48%) were the top losers.
The Supreme Court today refused to offer any immediate relief to Vodafone, which has challenged the Bombay High Court order allowing the government to tax the company's $11 billion deal with Hutch. The tax department had raised a demand for Rs12,000 crore as tax on the 2007 deal.

While refusing to stay the high court order, the apex court issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.

Markets in Asia, which were in full strength today after various bourses in the region were closed on different days last week, ended with smart gains today. The rally was boosted by a higher-than-expected rise in US capital goods orders. Meanwhile, investors are awaiting a media release by the governor of the Bank of Japan on news of any additional economic initiatives.

The Shanghai Composite surged 1.41%, Hang Seng advanced 1%, Jakarta Composite jumped 2.07%, KLSE Composite gained 0.93%, Nikkei 225 rose 1.39%, Straits Times was up 0.67%, Seoul Composite was up 0.77% and Taiwan Weighted rose 0.31% at close of trade today.

India's vegetable oil imports are likely to increase to 93-95 lakh tonnes during the next oil year, ending October 2011, according to an expert.

"For the next oil year (November, 2010 to October, 2011), Indian vegetable oil imports will expand further to between 9.3 and 9.5 million tonnes," industry analyst Dorab Mistry said in Mumbai recently.

The country's vegetable oil imports during the current year are expected to amount to around nine million tonnes.

The US markets reported decent gains on Friday on encouraging data, recovering losses of the previous three days. All major indices gained by about 2% for the day after the Commerce Department reported that orders for durable goods excluding transportation rose in August at their fastest pace in five months, and corporate spending rose. In a separate report the Commerce Department showed sales of new homes rebounded 4.3% last month from the lowest level on records.

The Dow gained 197.84 points (1.86%) to close at 10,860. The S&P 500 rose 23.84 points (2.12%) to 1,148. The Nasdaq added 54.14 points (2.33%) to settle at 2,381.22.

Foreign institutional investors were net buyers of stocks worth Rs1,150 crore on Friday. Domestic institutional investors were net sellers of Rs880 crore on the same day.

Biotechnology major Biocon (up 1.21%) has extended its alliance with the Cuba-based CIM for an integrated programme in immunology. The company has strengthened its partnership with the Havana-based Centre of Molecular Immunology (CIM) by joining forces for an integrated anti-body programme in immunology, Biocon said in a statement.

Both Biocon and CIM have collaborated for almost a decade to develop biotechnology products for chronic diseases. Two drugs have already been approved due to this collaboration for medical use in India and other territories, it said.

Shree Renuka Sugars (up 3.77%) today said it has increased its stake in National Commodity & Derivatives Exchange (NCDEX) to 12% by purchasing 26.25 lakh equity shares of the bourse from Crisil for over Rs38 crore.

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Can Bilcare’s non-clonable technology fight counterfeits?

Counterfeit products affect many industries, including pharmaceuticals. Here is a home-grown alternative that can help weed out the menace of fakes in a number of sectors — ranging from automobiles to security services

Counterfeiting and piracy are generally perceived as victimless crimes with 'fakes' simply constituting a 'cheap, alternative' purchase. According to estimates by the World Customs Organisation (WCO) and the Organisation for Economic Co-operation and Development (OECD), about 7%-10% of global trade is derived from counterfeit products.

However, many companies are now coming up with new devices and technologies to fight the counterfeit menace. Pune-based Bilcare Ltd has come up with a non-clonable technology, which it believes can fight against counterfeit products.

Dr Praful Naik, chief scientific officer, Bilcare, told Moneylife that his company's product uses a non-clonable technology, which covers identification, authentication and track-and-trace from origin to point of sale with usage in myriad sectors like pharmaceuticals, security services and agrochemicals.

Bilcare uses material sciences technology. The random physics principle with metal molecules at micro- or nano-structured composites can be embedded in any substance. The randomised millions of molecules are difficult to replicate. Metals have nature that can emit magnetic and optical properties. The digitised image created can be hidden behind a bar code or tags. A specific reader can be connected to a backend computer wirelessly to read the digitised image and authenticate the bar code or tags within seconds.

Comparing this technology with a DNA marker that can stand in a court of law, Dr Naik said that the non-clonable nanotech fingerprints cannot be copied by anyone, including Bilcare. Another advantage is that the non-clonable technology can help manufacturers to track their products throughout the supply chain.

Dr Naik believes that the pharma industry can use the technology to help curb counterfeit and pirated drugs. In the first phase, the companies can use the technology to prove whether a medicine is manufactured by them or not. This will also assure customers that the drug they are buying is genuine.

However, speaking to Moneylife, Dr Naik conceded that it may not be a cake-walk to sell the technology to the pharma industry. The cost of each digitised image stored with a bar code is Rs1.50 and pharma companies are not too keen on spending such amounts of money on this technology. "The reason for apathy is that Indian pharma companies are doing extremely well and are not much bothered with some incidents of 'counterfeits,'" Dr Naik said. However, the National Pharmaceutical Pricing Authority (NPPA) has shown willingness to consider this cost while deciding the ceiling price for a drug, he said.

The technology can even help to make Indian currency notes fake-proof in the future. Indian currency notes are susceptible to counterfeits even after having 17 security features. Bilcare is providing 70,000 non-clonable ID cards for the Delhi police for the Commonwealth Games (CWG). Dr Naik talks highly about the Delhi police approving the product usage for the CWG in a record timeframe, unheard of in government circles.

He told Moneylife that Japanese auto parts manufacturers are using Bilcare technology with great success to prove that they support warranty for only genuine parts and also to have access to the history of the auto part with respect to warranty date and service.

Dr Naik shared with Moneylife information about the diverse nature of clients interested in the product. Some Europe-based museums are interested in using the technology. These museums want to ensure that the antique pieces they put on display at an exhibition are returned in the original. A wine producer in the US has accepted the non-clonable technology. Even the security department of one Asian country has been using this technology for identification.



Narendra Doshi

7 years ago

The cost of Rs1.50 is indeed cheap for the value one gets.Kudos to NPPA for its acceptance to consider while fixing the MRP. Also, kudos to CWG for implementing the decision in a short time frame. Being a marketer for security products in my career, for almost 10 years, I feel this technology has to be exploited by large segments of the counterfeit products, very seriously. The cost has to be related to its future value - over the entire life time of the product & when one sees it in this way, the cost today is indeed peanuts. Very intersting input from Mr. Raj with immense potential in a very large segment of applications.

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