DCG Cables & Wires IPO is a fixed-price offering totaling Rs 49.99 crores, comprising entirely of fresh issue shares amounting to 49.99 lakh.

The IPO subscription opened on April 8, 2024, and will conclude on April 10, 2024. Allotment is anticipated to be finalized by Friday, April 12, 2024, with listing on NSE SME tentatively scheduled for Tuesday, April 16, 2024.

Priced at ₹100 per share, the minimum application lot size is 1200 shares, requiring a minimum investment of ₹120,000 for retail investors and ₹240,000 for HNIs.

Interactive Financial Services Ltd serves as the book running lead manager, with Bigshare Services Pvt Ltd acting as the registrar. Nikunj Stock Brokers operates as the market maker for the IPO

The present Public Issue 49,99,200 Equity Shares at an issue price of Rs. 100.00/- per Equity Share.

Company proposes to utilize the Net Proceeds:

1. Capital Expenditure for building construction.
2. Working capital requirement.
3. General Corporate Purpose.
4. Meeting Public Issue Expenses.

Building Construction: The Company has decided to shift all the three manufacturing units at Bavla near Ahmedabad. The Company had taken on lease the land admeasuring 8308 Sq. Mts for 7 years at a monthly rent of Rs. 20,000 from Devang H. Patel, the promoter of the Company. The total cost of the building to be constructed will be R. 610.29 lacs and out of that the Company had spent 73.98 lacs upto November 30, 2023.

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About DCG Cables & Wires Limited

A manufacturer of copper cables and wires. The company primarily focuses on manufacturing different types of copper cables which finds application in Transformers. The product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica), multi-paper-covered copper conductors, Bare Copper Wires and Strips, copper submersible wires, Copper Tapes and Fiber Glass Copper.

The company majorly supply its products to the transformer manufacturing companies in India. Since the promoters have been in the industry since 2008 leads them to healthy relations in the industry.

The company has 3 manufacturing units, 1) Odhav, Ahmedabad 2) Kubadthal, Ahmedabad and 3) Waghodia, Vadodara. Having a combined installed capacity of 5,868 MT for manufacturing bare Copper wire & Strips, 1,404 MT for Paper Covered Copper Strips & wire, 1,512 MT for Cable Wires, 5,760 MT for Copper Rods, 10,080 MT for Copper Flats, 972 MT for Submersible Wires and 540 MT for Fiber Glass Covered Copper Strips.

But the company is in the process of setting up a new manufacturing plant (8308 sq. mtrs) at Bhayala, Bavla, Gujarat, to increase manufacturing capabilities. The aim of the company is to consolidate all the 3-manufacturing unit at one place.

Manufacturing is emerging as an integral pillar in the country’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors.

Manufacturing exports have registered highest ever annual exports of US$ 447.46 billion with 6.03% growth during FY23 surpassing the previous year (FY22) record exports of US$ 422 billion. India has the capacity to export goods worth US$ 1 trillion by 2030 and is on the road to becoming a major global manufacturing hub. With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy.

The manufacturing sector of India has the potential to reach US$ 1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of US$ 3.4 trillion along with a population of 1.48 billion people, which will be a big draw for investors.

India has very limited known reserves of copper ore exploitable for copper production. The total resources of copper ore in the country as on 1.4.2015 are estimated at 1511.50 million tonnes with about 12.16 million tonnes of copper metal. Demand of copper is increasing due to progress of implementation of electric vehicle worldwide with associated charging infrastructure, decarbonization policy push by US and EU and more and more emphasis on green energy to mitigate climate change. Copper being the green metal has been considered as a core driver for moving the global economy toward net zero emissions. Copper has been termed as new oil.

Risk to the issue:

Dealer finance SG Finserve Limited of Rs. 300 lacs: State Bank of India had sanctioned the working capital limit of Rs 1500.00 lacs and as part of primary security the entire current assets of the Company. But now the company has raised another Rs. 300 Lakhs from SG Finserve without the approval from State Bank of India. The bank may recall the entire working capital loan and term loan from the Company for breaching the terms and conditions of the bank insisting for closure of the loan account with SGFL.

2 factories are on rental basis: Factory at Kubadthal and Waghodia are on leases basis. Kubadthal factory is on lease bases for a period of 11 months and 29 days w.e.f. April 01, 2023 and Waghodia factory is taken on lease basis for a period of Seven years w.e.f. September 01, 2022. Company has applied for the Factory licenses for Our Waghodia factory in the month of October, 2023.

Limited number of suppliers & Customers: Top 10 suppliers hold 98.81% share in raw materials in the sub period ended on 29^th Feb’24. Otherwise 80%-90% share is held by the top 10 suppliers. The same is with customers. Top 10 customers hold 75.79% share in revenue for the sub period ended on 29^th Feb’24, which was 81.92% in FY23.

No intellectual property rights over corporate logo: The same is not registered with the Trade Marks and patents Authority. The company have applied for registration of the same with the Trade Marks and patents Authority.

Third party transportation service: The company is dependent on third party transportation service providers for the delivery of raw material to company from suppliers and delivery of its finished products to the customers. Uncertainties and risks can affect the business.

Operations are limited to the state of Gujarat: The revenue from Gujarat is 100%, 99.98%, 95.00% and 95.23% in the FY21, FY22, FY23 and for the stub period ended on February 29, 2024 respectively. Looking to the good quality of products, company will be able to sale entire production within Gujarat.

Volatility in raw material prices: Copper is the basic and one of the major raw materials for manufacturing process. The copper prices are being governed by the international forces. Prices prevailing at Landon Metal Exchange is one of the effective key factors affecting the prices of copper i.e. the raw materials required by company.

High working capital requirements in competitive business environment: Company is subject to high working capital requirements and inability to fund these requirements in a timely manner may adversely impact its financial performance. Growing competition in the domestic market from domestic organized and unorganized players and/or the international players, makes the company subject to pricing pressures and require them to reduce the prices of products to retain the existing customers and/or attract new customers, which may have a material adverse effect on revenues and margins.

Labor-intensive industry and continuous need of power and fuel: During monsoon season, a majority of our labor force go to their hometowns/villages to assist their families in farming and harvesting of crops, resulting in a temporary labor shortage which may affect the production in manufacturing facilities. It also require substantial power and fuel for manufacturing facilities, and energy costs represent a significant portion of the production costs for operations.