Amidst the geopolitical tensions and volatile stock markets across the world, a SME company by the name Shigan Quantum Technologies Limited is coming up with its SME IPO. So let us discuss the company’s business fundamentals in detail.
About Shigan Quantum Technologies Limited
Shigan Quantum Technologies Limited is engaged in the business of designing, developing, and manufacturing of varieties of alternate fuel systems including CNG, LNG, and hydrogen fuel kit systems for original equipment manufacturers and others. The company manufactures alternate fuel systems for heavy duty vehicles, light duty vehicles and off-highway applications.
The company was incorporated in the year 2008. It sources its critical technologies from MNC companies with whom they have long term technology user agreement or manufacturing license. The company imports raw materials from countries like Singapore, USA, Mexico, Switzerland, China, Hong Kong, UAE, Italy, and France. The company exports certain components of CNG fuel systems to countries like New Jersey, Australia, Italy, Sweden, and Canada. As of FY21, domestic sales counted for 97.98% of the company’s revenues, export sales made 0.05%, whereas service charges were 1.97% of the total revenues.
Shigan Quantum Technologies Limited IPO
Following are the details of the company’s IPO:
- The company’s IPO will be open for subscription from February 28, 2022 to March 03, 2022.
- The IPO is a fixed price issue. The IPO price is set at ₹50 per equity share.
- One market lot consists of 3000 shares.
- The company will issue 5.39 lakh equity shares of ₹10 each, aggregating up to ₹22.70 crores.
- The pre-issue promoter holding stands at 100%, which will fall to 73.63% post the IPO.
Objectives of the IPO
Following are the objectives of the company’s IPO:
- The company’s IPO is an entire fresh issuance of shares. The company will receive up to ₹22.69 crores as gross proceeds from the IPO.
- The company will use ₹16.81 crores to meet working capital requirements.
- The company will use ₹3.95 crores for purchase of machinery.
- The company will use ₹1 crore for general corporate purposes.
- Further, the company expects to enhance its credibility and brand image by listing its equity shares on the exchanges.
Following are the key strengths in the company’s business:
- The company has a management team that has experience in the automotive industry as well as finance and marketing functions.
- The company is committed to deliver good quality products in a proper manner at all steps from manufacturing to dispatch.
- The company has cordial relationship with their suppliers for supply of materials, which the company believes can provide them with the competitive advantage of effective and timely sourcing of raw materials.
Following are the key risks in the company’s business:
- As of FY21, the company’s revenues from its top ten customers accounted for 99.86% of its total revenues, which poses a concentration risk.
- The company relies on third-parties for contract labour, transportation and logistics, etc.
- The automotive components industry is a competitive one, with which the company will have to keep pace.
- The company’s business is also dependent on its top ten suppliers, who supplied 75% of the total raw materials procured by the company in FY21.
- The company is prone to fluctuations in foreign exchange rates as it manufactures and also procures certain materials from outside India.
- The company has significant power, water, and fuel requirements.
- There are outstanding legal proceedings against the company and its promoters. Any adverse outcome in relation to these events can disrupt the company’s business operations.
- The company’s business is seasonal in nature.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations grew from ₹69 crores in FY19 to ₹95.65 crores in FY21. For the period ended 31st August 2021, the company’s revenue from operations stood at ₹64.39 crores.
- The company’s net profits increased from ₹26.6 crores in FY19 to ₹35.1 crores in FY21. The company’s profit after tax stood at ₹28.9 crores for the period ended August 2021.
- The company’s total borrowings increased from ₹6.88 crores in FY19 to ₹8.77 crores in FY21.
- The company’s net asset value per share stood at ₹77.90 for the period ended August 2021.
- The company’s earnings per share stood at ₹11.41 for the period ended August 2021.
- The company’s reserves and surplus increased from ₹6.2 crores in FY19 to ₹17.21 crores for the period ended August 2021.
According to its prospectus, the company believes that there are no listed companies that are in a similar line of business as itself, hence a peer comparison is not possible in this regards.
These were the details about the company’s business fundamentals. It is important to note that the company will list itself on the SME platform; hence liquidity can become an issue while trading in its shares. Investors should do their own due diligence before investing in the company’s IPO.