Polycab India, one of the largest cables, wires and electric products manufacturer, plans to raise ₹2,500 crore by issuance of fresh equity and an offer-for-sale by existing investors and promoters through an IPO.
Of the overall amount being raised, the company plans to retain ₹500 crore. It will use ₹300 crore of the proceeds towards working capital, ₹100 crore for repaying short-term debt, and the rest for general corporate purposes.
IFC, an existing investor in Polycab, will sell 7.5 per cent of its 15 per cent holding while the promoters will dilute about 10.12 per cent, accounting for 17.62 per cent dilution through OFS.
The company has debt of ₹800 crore and debt-to-equity of 0.34 per cent. In the last four years, the company’s revenue has grown to ₹6,841 crore from ₹3,994 crore while Ebitda and net profit have jumped to ₹803 crore (₹307 crore) and ₹370 crore (₹89 crore), respectively.
Inder Jaisinghani, Chairman and Managing Director, Polycab, said the company launched the IPO in order to provide an exit for IFC, and promoters are compelled to dilute their holding to meet SEBI’s 25 per cent free float norms. The firm, which has manufacturing facilities across 24 locations, has invested ₹1,100 crore in the last five yeas to enhance manufacturing capacity of wires and cables and consumer electrical goods, besides strengthening market reach through dealer network.
No threats from China
R Ramakrishnan, CEO, Polycab, said the demand for electrical goods is growing steadily and there is no threat of cheap imports from China due to the high quality standards imposed on imports.
With the reduction of GST to 18 per cent from 28 per cent more unorganised players are entering the formal economy as the incentive to remain in the unorganised sector has shrunk, he added.
The firm, which has 18 per cent market share, expects new opportunity in optic fibre cable, electric vehicles and solar energy as it is ramping up the installed capacity for these products. It has manufacturing facility for solar inverters, solar water pumping systems and electron-bean irradiated solar cables. Overall, capacity utilisation at the manufacturing plants hovers at 70 per cent and there is enough headroom for growth, said Ramakrishnan.
The company has about 3,300 dealers and distributors across India and its products are sold across one lakh retail outlets. It has 24 manufacturing facilities, including two joint ventures with Techno Electromech and Trafigura Pte in Gujarat, Maharashtra, Uttarakhand and Daman and Diu UT.