0:00 Hey everyone, welcome to primary market chatter brought to Sunday investing. This is our July 2nd week IPOs edition. We thought of starting half an hour early today because this will be a long space because we have quite a few companies to cover but then due to technical glitches we are back like we are 10 minutes into it and we haven't started but yeah uh quickly starting before I actually start just want to set up a few things that are regular housekeeping uh items. One, we are not say registered research analyst. Whatever we say is not qualified opinion. Please do your own due diligence and only basis that take a call. We are wrong often. We have been wrong. We will probably be wrong in the future as well. What we are discussing here is just what we feel with respect to the companies. No way is it what will
0:48 happen because we don't understand your situation. uh so definitely consult your uh financial analyst etc and then take a call basis that second thing if you haven't joined our YouTube channel please go ahead and do that link is in the pinned comments uh we are very close to 7900 followers subscribers there so if you could help us reach there that would be helpful uh uh the idea is after every space we kind of put it there and then we also do a lot of promoter interactions etc which we put there uh one thing we'll We we spoke with the promoter of Milworks uh Mr. Achara Gi whom we'll be putting tomorrow. So definitely follow the channel to uh hear about uh Mil works as well from the promoter directly.
1:34 Uh then in terms of the order for the day, we'll probably start with Happy Steels, then go to Laser Infra, then do then do uh Milworks and then finally close with SBA fund management. So a mix and match not really uh allmemes and once and then all main board simply because the order could only be done that way but yeah we'll try and cover everything per se. Uh other than that if you have any suggestions for us please go ahead and put them in the chat box as well. And if you have any questions as well definitely uh post them in the chat box as well. We'll kind of uh take questions and if you can't hear us for some reason please go ahead and join again uh like drop and join again should get better. Um um yeah with that let me setting set up happy steals uh
2:21 incorporated in 1996 company is a integrated manufacturer of safety critical for and machine transmission and drive line components catering to on highway off highway electric vehicles and defense applications. So um drive components forging or machining company in terms of the IPO setting up the IPO it's a very small IPO 25 cr IPO all of which is a fresh issue it's coming at a market cap of 94 crores FI 26 financials about their top line was 96.5 crores 100 crores top line which is good bottom line was 7.1 crores Seven bottom line 15 times 14 times per company
3:06 in terms of the LM is share India and master capital services. So over to Sachin to talk about Happy Steels. >> Uh am I audible? >> Yeah. >> All right. So uh Happy Steels as it was already mentioned that they make these drive line components and they are doing uh it from the very start to the very finish like they are doing forging etc. Also they are doing heat treatment, precision mach machining also they are doing cutting etc. All of this they are doing in their own facility and from from start to end they are making these components. So which components like axel shaft they are making that generally powers the engine to make those wheels run so that your vehicle runs in and some components they are making like spindles and brake shafts
3:53 etc. Some components they are also making for steering wheels etc. So all of these components they are uh they are making for this for their OM clients and it takes around maybe two to five years to get into these OEM clients and get those certific certifications etc to come into their books and then generally start manufacturing in their current revenue split around 59% comes from these agriculture tractors which are these offhighway uh vehicles uh and the rest 32 to 33% comes from these trucks and buses which runs on those highways and uh they have now slowly ventured into exports as well like from FI24 they have started exports and now slowly they have ramped it up to around 18 to 19%. Uh some of the key customers are Ford Motors, TA uh and Tata Motors etc. Volvo
4:41 Aishare uh Escorts etc. So these are some of the key customers and they are one of the single suppliers for this Kubota and Cummins in some of the components that they mentioned. So that reduces dependency on one of the uh customers for them. Uh these guys are also related to uh one one of the listed companies like happy forgings. So say in relation I mean that happy forging is into upstream forging uh components like they are doing it for larger peers Excel carriers etc. These guys are generally uh doing it for the OEMs and especially for these drive line parts and so generally there is no what do you say overlap between the products that happy forgings makes and happy steals make this there is uh there is a family
5:26 connection present etc but no such overlap and competition that is present between these two. Uh now coming to their financials from 80 CR around in FI24 they have reached to around 95 CR in FI26. FYI 25 was a bad year for them. So some of the management changes and some export orders were hit for them. So because of that the growth was not very much in FI25 and that and that spillover came into FI26 but not very much. So, so that was the reason that you look at the top line it remains flattish around from 80 to 94 CR. Uh margins uh in aida terms have been around 14% in FI24. Then the uh
6:12 drop of FI25 to around 10% and now finally in FI26 it has again ramped up to 16%. uh one thing on the uh PAT that is bottom line in FI24 there was a one time sale of uh of uh one of the lands for this company so around 4.6 6. Yeah. So that looks optically high. That was not present in FI24. So the margins got dropped and when the business finally ramped up in FI26. So the P is grown to around 7CR in FI26. But maybe one of the around 1 CR key policy. So if we normalize all of these things on FI26 basis around 6 CR in compar value valuing it on TTM basis. uh this
6:59 is mentioned in their RSP and this was also mentioned in one of the interviews as well. Uh now coming to the IPO from IPO they are using around uh 13 13 CR for uh increasing their capacity. Uh they are adding some CNC machines etc and from some some they have added already from their internals and some they are adding from the IP proceeds etc. So they're looking to ramp up these forging and machining capacity to more than 50 to 60% they are looking to ramp up and they're saying that we would generally come live from in the last quarter or FI27 yeah maybe in FI21 FI28 first quarter maybe live uh they're saying that we already have one order book around 150 CR and they say that the in this automotive OEM business
7:46 generally 12 to 18 months time span for these order books. So you can assume that they would likely uh complete these orders in the next 12 to 18 months. So that would be the forward guidance that we take forward. Now some of the things that works well for happy states is the exports are ramping as well. They have good partnerships with all of these companies big secret blue lines Kubota com etc. And the uh uh this facility is also coming in uh there where they are expanding uh in their machining and forging components. Uh the past earnings volatility is one factor like normalize then the price to earnings multiple will looks somewhat optically high also the
8:32 business has some debt of around 45 CR. IQ say they are repaying around 4CR but it's not very enough but they say that we would generally manage these from internals and whatever the cash business generates. So for now that should not be a concern but let's see how it goes going ahead also they are mentioning that we are trying to enter into some defense and EV component some artillery shells etc but that is not the primary focus of the business for now. So for now we treat this as one one of the that OEM ancillary business as well only. So basis if you try to value it it it is around 15 times on TDM FI26 basis and whatever they projecting it could be around 11 uh 10 to 11 times FI27
9:18 uh peers may they have shown GNA XL's cross M4 M force I don't think is a right peer for them but they have shown but normally we see that in theme these guys generally trade around 18 to 20 times uh these auto auto OEM uh uh business companies. So that would be the ideal range for these guys to trade. Uh lead manager is share India. So OK record they have some hits and had some misses as well. So decent enough lead manager not very excited about them. Uh anchor book was also okayish. Uh PSB fund was there. One new fund has come in Secur. So probably their first anchor allocation
10:04 in this IPO and science star is also there. So they are known for their SMA anchor allocation. So for the final view I think that uh business is good generally solid business OEM partnerships we have decent export is also coming in but that aggressive uh hunger you say to grow and to grow fast in that business. So I don't think is present now in this business also normalize though it's not very uh what you say cheap on DTM basis so can be applied given that many issues are present around soci once or decent enough listing pop that's all
10:50 >> got it thanks Achan now uh we had spoken with the promoter we really liked some of the clarity in his mind like he said his pat was that everyone just asked about order book and what are you doing in defense but it's a solid business in terms of what he's doing uh like Sachin said growth is a slight concern for investors but uh short-term I probably can get slightly rerated but uh long-term growth will be a concern like because there are so many thememes that people tend to ship very fast right and there are better options available per se so this will probably be slightly lower on my list as such but yeah that is with respect to the first company um happy steals there's one question which is um are there any related party
11:36 transactions with happy uh forging how are they uh involved with them but I think you already answered that those are slightly up in the >> no related party transactions both are separate business and both both have different product lines so no related party >> got it Perfect. Yeah, with that moving forward. The second company we'll cover is laser power in infra. Setting up laser power incorporate 1988 companies of Kolkata based integrated manufacturer of power cables, conductors and other specialized products and components to the power transmission and distribution industry. So power so in terms of IPO 742 IPO out of which 542 cr is fresh issue 200 crs
12:23 market cap 34 crores FI26 financials about 2348 top line and 152 crores bottom line so just direct FI26 20 times but there is some other income angle is probably Tanme will cover when he's speaking about it. In terms of the LM, the LM is IFL and ICICI security. So with that over to TM to talk about laser power. >> I'm audible. >> Yeah. So laser power and infra limited is a Kolkata based integrated manufacturer of power cables, conductors and specialized products for the power transmission and distribution industry. The company has also entered DPC segment in which uh they do projects into the
13:09 power distribution, substations and transmission segment. Uh about the revenue breakup 73% of the revenue comes from the manufacturing which is your cables, conductors and the allied products and about 27% revenues are getting generated from the EPC. Now uh the company is also one of the largest uh you know player in the eastern India in terms of manufacturing capacities of power cables and conductors which stand at 85,448 metric tons peranom. Their manufacturing operations are supported by backward integration through inhouse production of aluminum wire rods and PVC uh PVC compounds. So
13:57 basically uh when when you make these conductors uh and cables especially the conductors your you know the raw material I won't say the raw material but the first stage of conversion is your aluminium rods uh so they have also done a backward integration you know few years back and that is so they're one of the very few players with the whole backward integration coming the company has entered into a strategic agreement with TS conductor corporation uh which is an American globally renowned company for their transmission technology. Post the agreement the laser infra laser power would be uh you know manufacturing conductors using uh you know TS corps
14:42 advanced composite core technology you know so the portfolio will be expanded uh into the AECC HLTS uh ECO AL59 A and ACSS conductors coming on the IPO size the company is raising about 742 crores out of which 542 crores is a fresh issue and 200 cr is an is done by the promoters. Uh in the fresh issue uh they're repaying about a 490 cr sort of a debt and about rest 52 crores will go into the GCP. uh so earlier the company was looking to raise I guess around 1100 cr uh you know and but then they have reduced their issue size uh you know you know pertaining the market sentiments coming on their financial
15:28 24 they did about 1,178178 cr of a top line with a pat of 40.4 4 crores. So about a 3 and a half% of sort of a pat margin. F25 they did about 2570 cr topline and about 106.8 cr pat uh you know which was a very healthy growth over FI24 but but in FI2 the revenue fell by around 5% to 2326 cr but the PAT jumped from 106.8 to 151.6. So in this 151.6 6 cr sort of a pat uh 32.8 cr were generated from an exceptional gain uh due to the sale of subsidiary. So if I just want to make it as an adjusted pet the number comes at around 118 or 119
16:15 crores of a pat. So margins have been slightly again 04 know 40 bits uh you know better uh which was supported by uh the start of their know ramping up of their capacities and uh the capacities of aluminium robots also getting expanded. Uh now coming on their uh you know forward numbers uh so so like the management was asked about the numbers and uh you know uh they have reported about they have said key we do expect around 20% plus cgr coming forward and we expect our revenues growing uh to 3,000 crores uh you know in FI2 uh 8 sorry 4,000 crores in FI29 was is what
17:02 he was saying. So, but if if I just consider uh you know around a very pretty normalized growth for FI27 and around management guided FI28 uh you know numbers and the growth the numbers go this way uh FI27 they should do around 2750 to 2800 cr uh topline which is around a 10% growth but I do expect this to go up but if I just compare it on FI26 the growth is uh around 20%. uh and a PAT of around 180 to 200 crores. Now this this jump in PAT margins from 120 to 180 to 200 should be viewed this way. Uh they're repaying around a 490 cr debt and they should save around a 35 38 cr annually. But if you just account for about a 6 or 8 months the number comes
17:48 to around 1820 crores you know because they also have got some short-term debts which uh you know will will have more spiked up interests in interest cost in the H2. uh so so that should save around 20 22 odd cr is is is a fair assumption. Second thing is uh the capacity ramp up. So any capacity uh above above 75 to 80% starts very high operational efficiencies and I feel it is at the arc. So for 20 27 should see lot of margin accretion coming in also the backward integration will is now fully in into the place the even the uh EPC segment which in which company operates will see the captive conductors being used which should save margins. Another thing they are doing is they're also installing power you know this uh
18:35 solar uh power plant which should again reduce their uh you know electricity and power costs in FI28. So these are a couple of things and also so like FI28 I I expect around 3200 3300 cr sort of a top line and around a 250 cr pat. Uh the PAT numbers should go exponential. Reason is pretty simple. uh the uh new technology of this you know TS conductor should should increase their gross margin by around 100 1.5%. And that whole 35 35ish cr 37ish cr interest payment should come up and their short-term loans also should go. So this should lead to that sort of a margin. Now coming on the multiples the company you know coming at a market cap of 3,3
19:21 cr uh which is uh you know around a 25 times adjusted pad fi 26 around 15 16 times fi 27 and around 12ish fi28 now coming on the peer competitors the company has shown about four or five companies as their peers few like first would be polycap second would second one would be ki third they have shown is dynamic cables fourth they have shown is universal cable Now if if I want to talk on these four players, Polycap and KI are less sort of a comparable reason is pretty simple. Uh not for that EPC portfolio. Polyap has got 10% revenue from the EPC segment. So that is not a point of concern but uh polycap has got its own brand name and it's a it's a B2C you know player and
20:07 laser is basically a fully B2B player. uh but a good thing is uh there were sort of concerns on the working capital and even actually the working capital and trade distributables have been spikeed up like anything in FI26 uh but the revenue split if you just see 50% 55% is about a government revenue which sometimes used to be that 70 80% mark and rest is a private segment and they are saying uh you know the the cycle should be more than normalized in FI27 and I'm assuming uh due to some sort of uh government you know the elections coming up that is all you know nonsense we all we know uh which has exactly happened in Rajasthan too you know all the state governments delay the payments like anything when in the year of elections
20:53 so uh that has led to that spiked up working capital cycle even in Bihar uh the the work has been pretty good for the company the also you know segment is growing now coming on the valuation part if you just compare these four players So, Polycap and KI trade at about about a 40 time uh you know FI 207 PAT uh 28 PAT sorry uh and dynamic and universal trade at about a 15 time 15 17 15 16 time pattern. Uh now I feel this is this company uh has the closest competition in terms of at least the qualitative uh factors to dynamic because uh they are into a similar sort of a product portfolio. I have even compared their conductors and cables sort of a similar portfolio and even uh I I was pretty
21:41 surprised you know TS conductor has done a tie up with dynamic uh you know so so even that is a pretty comparable company even that that company has a decent EPC portfolio sort of a comparable that company trades at about a 21 times FI26 and but but the company is growing pretty slow you know about a 10 10 12 15 14 15% sort of a growth so I expect around 14 15 times no not 14 15 16 times F 28 on the pat number. So uh this company uh you know stands in a in a lot of tailwind as as such you know uh there are two things to it three things to it. First in the geography they operate you know this company is actually the largest but as I said one of the largest but I I was looking at the numbers they're the largest player in in the West Bengal as a whole. uh and
22:27 I'll give a number uh there's a there's a you know uh number to it key how much bulbs are used uh you know in a in a kilome density population in a 1 one kilometer so I'm not exactly saying you those words but there's some sort of a you know number uh in in north and south India the number stands at around 1 1700 1800 odd bulbs in eastern India it stands at about 500 obviously there is a uh you know inclusion of Northeast which which fairly uh you know has got a population scarcity as well but if you just even look at West Bengal as a whole that number stands at about 700. So I feel that is a number which should grow to around 11 1200 in maybe a 3 4 years down the line. So you can just see uh if
23:13 you just extrapolate the numbers the poverty and the substation segment in that geography should grow around a two to two and a half times of the whole country's power and the you know capix outlay and the caggr going forward which is it should be around in the in the mid-range of 20 to 25% or in the worst case should be around 80% 18%. So uh the second thing is the government change. I feel uh you know post the government has changed in last two months we're seeing lot of you know uh schemes getting revived and also new schemes getting uh you know developed and also uh there are lot of pending uh things which are coming up. So I feel that topography as a whole should see a lot of growth coming up from this segment and as laser being the top player it is among in that
24:00 tailwind. Uh coming on there again again again there are two more things which which are very important to be discussed. There is another company which has already filed an IPO called as lumino industries. Uh it is about around 1200 cr IPO and if I just uh look at that company uh the promoter group is same. So there's a promoter family who is running uh the same business uh from know two different entities but uh I was pretty negative when I read about it you know but then I understood the nuance what exactly has happened. So there has been split in the family and lumino has been taken over by you know a different the same family but from a different promoter group and laser has been separated and there was a winter party that has know came down from about a 20 30% to about a 2%. and Lumino's
24:49 operations in Assam and Tamil Nadu is also being taken over by laser which would eventually reflect in the efficiencies. There is one more small point to it which I feel no one is talking about which I feel I don't understand what exactly is this. There is a entity called as Akshhat builders which is a real estate company which was demmerged from Lumino in 2024 if I'm not wrong and that has been included in laser power. So I was looking at you know things so and there is there is a soft loan given to that that entity. So you should also expect some sort of a real estate you know development happening in even laser power and they also hold lands. So I don't know this is a positive or negative or how the things are going to ramp up but uh this is a I won't say point of concern but this is a point everyone should know key this is just
25:35 currently it is a manufacturing plus EP segment even that small a very maybe you know real estate portion is also coming going to come in maybe FI28 I'm pretty sure about it 3 4% revenue all the old land holdings I don't know whether this is into laser or there's some other arrangement to it but there is some land holding also at the group level in in which Hakshhat operates. Uh another uh thing would be uh the anchor book. So uh very very very exponentially good anchor book. Uh extremely good quality names. I wasn't expecting but I'll say from start to the end there was not a single name which was average. It was a pretty good anchor book. Another thing would be you know so like
26:22 how do I view this as a company and how do I value this? I feel this should be valued at about a half of what KI plus polycap does at an average level which is around a 40 times a 28p. So this should easily trade at 20 times and around a 20% premium to dynamic uh just because of the simple reason uh around one and a half times to 2x growth the geography it operates uh and the IPO coming up and I feel uh this company can go to a different scale in maybe 3 or 5 years down the line you know reason is pretty simple it's a market leader in its geography and that a state as a whole is going through a lot of underdevelopment and I feel that should get revived is what the expectation is and even the promoter had said in in open inter in a public interview that we do expect a lot of inflows coming in you
27:07 know from that particular geography in which they are very strong at. So I feel laser power is a slam dunk you know I feel it is one of those companies which can do very well post listing and as well as can deliver a decent sort of a listing pop like I personally expect it to deliver at you know 15 or 20% sort of a pop and also uh do very decently in the medium to long term because I feel at around 12 13 times if 27 around 16ish times f 26 20 sorry 16 times f 27 around 123 time f 28 there is nothing much to lose and if you just look at the numbers management has said said openly on CNBC we expect 4,000 cr revenues in
27:53 fi 29 if that sort of a numbers are realistic even if they do 3500 the numbers I have projected are pretty conservative because I am I'm showing about a 3200 3300 in fi 28 so if that happens the numbers should go crazy uh I know and you should expect uh the company uh company's current valuation at around 11 times uh 11 11.5 times FI28 PAT so it is it is an apply from my end there is no second thought to it a good company good promoter uh there is sort of you know this this family split which has been sorted I feel sorted obviously there can be some issues but at least settlements is pretty sorted the is a small thing positive negative either ways but currently it is zero in one and
28:40 a half year it should be about a 2 3 4% of the revenue is what is a fair assumption good apply good good backing I feel it should do well got it thanks yeah so this IPO is coming at an opportunate time right like when probably the first IPO from the state after the election and the government change right so probably everybody's looking at it as a positive and at the valuation doesn't seem to uh like price it high. They have left some space on the table but how do you see the EPC piece 30% is EPC right? So >> uh 27%. >> Uh and will that change over time like uh >> I was looking at that no so like there
29:27 is one minute discussion here. uh so if you just split the order book it is around a 3200 cr order book if I'm not wrong out of which around 1,400 cr 1450 cr is an EPC and rest 17800 cr is a conductor if you just look optically it looks about a 40 60% but you need to also understand there are two things to it first is there are very regular billings of the private sector you know which are on demand so generally order because that's sort of a regular delivery order they don't consider key you know the second part would be the captive thing so I feel this 2773 can be 3070 down the but it shouldn't be beyond that range and second part to it is actually the segment is fairly marginative
30:15 because they do complex they don't do very normal rural electrification thing uh you know they do fairly complex things and also in-house conductors they have got so I feel that is a margin accrative business actually uh obviously it stretch the working capital but company I feel is poised to get to not a big big deal I feel >> got it so if anything that's positive right >> correct correct is positive but got it understood that's helpful and the anchor book was also good from what I could see right like all good name for the market cap and the size of the company and also uh earlier this was a
31:01 1100 cr IPO at around 4,500 cr valuation 1150ish which uh now they have came to 3,000 which is a decent scope got it that is with respect to laser please take your decision accordingly I would probably be applying uh with that uh moving to the third company the third company we'll cover is Davson catalyst before that if you haven't joined our YouTube channel or have joined the space in between we'll also put the recording on our YouTube channel where you can listen to all of these reviews at your own leisure. So please follow the YouTube channel in from the pinned comments. Uh with that moving to the third company. Third company we'll cover is the catalyst setting it up. Uh company's indigenous manufacturer of catalyst absorbance and ceramic balls used as a raw material in various
31:47 industrial processes. So catalyst bat you'll try and understand what catalysts are and how they are used in industrial processes like hydrocarbons etc. But in terms of the IPO it's a 42 cr IPO 39 cr fresh 3 crores FS market cap 160 crores per company. So minimum dilution FI26 financials about 57 crores top line 12.5 crores bottom line so they are coming at like 13 times FI26 which seems decent. Uh in terms of the LM the LM is JJ IPO advisor. So with that over to you Sachin to talk about the catalyst. >> Am I audible? Yeah. >> Yeah. All right. So, uh Davson Catalyst probably is one of those few companies that have all of these uh what do you
32:33 say products in their kitty be the catalyst be this absorbent be this ceramic balls. So catalyst chemical reaction that is needed into the refineries like crude petrol and diesel and other products or you say you have to derive these products from this raw crude. So catalyst is important and absorbance also. So that helps remove these impurities from all of these chemicals that go into these different processes. Be it for any industry be it chemical industry, petrochemical industry etc. And ceramic balls are usually small spears refinery. They are used to protect these refineries and in internal walls etc. Protect these components are used. So
33:19 for this D catalyst it is probably one of the few that has all of this. So that is one thing with respect to what their mode is because you if you see that what other players that generally have this all of these uh products into their package that is mostly M andC's like clarient Honeywell venture there is BSF Johnson Matthy etc. So mostly this market is uh controlled by MNC's and India generally imports around 2800 CR of these catalyst per year. So Deson is probably one of the few that is coming into this indigenous of indigenization of these catalyst from India. Now coming
34:05 to what so I just explained what we actually do between this catalyst and absorbance and ceramic poles. Now coming to their utilization of capacity, they are utilizing around 87 to 90% of their capacity currently and they are using some of the IPs to increase their facil uh uh this capacity. Uh currently they are also exporting to around 20 plus countries. So that is one scope that comes in for DSON. So they can probably increase their clients overseas like they already have uh good relationship with with the likes of uh BPCL, Reliance, Naira uh from uh ADNO etc. uh in the Abu Dhabi and UAE they also have good relationship and they're also venturing into uh these uh Saudi Arabian clients Saudi
34:50 Aramco etc. So for all of these they have got the approvals and they're slowly trying to ramp up this u uh the export side of the business. Now there is a good entry barrier to why other players can't come in and what this is currently doing. So it usually takes around 3 to 5 years uh per product or you can say perh customized formulation that uh these catalyst are designed for. So there is substantial amount of time that is needed for approval. uh and these big players generally don't switch overnight. So if Davson has been with one of the few players, they generally go with Dson in the long run as well. So that is one advantage with Dson as well. So these are some of the few uh things that help to sustain their so-called
35:38 mode in this industry. Uh now coming to the financials for the uh they have uh made till 55 uh cr in revenues by FI26 from 43 cr in FI24. So steady uh decent jump uh in the revenues. Um margins on the beta level have been around 15% in FI24 and then the slowly uh capacity utilization and everything ramped up. So they have now close to around 27 28% in FI26. Similarly, PAD margin has also grown to around 22% in FI26. But here also there are some onetime uh gains in other income as well. So if you factor that in around 20% is the sustainable PAT margin for this kind of business. Uh they
36:24 generally are not trading into any of these catalyst or etc. But in FI245 they got one large order. So because of that you if you look at that FI25 growth uh in terms of revenue it was decent but uh some of the part was acrewed to trading as well and in FI26 there since that trading component was not present the revenue didn't grow much but the bottom line was grew good enough because of this uh what do you say operating leverage they got to that was benefit why we see this good margins in FI26 and the management is saying that these are sustain sustainable margins. So now coming to the IP proceeds apart from that OFS uh they are using to ramp up
37:11 their new facility around 18 CR they are using for capix and they are uh increasing the uh this catalyst uh facility around uh 200 to uh 300%age more than 200 percentage you can say. So and ceramic balls may they not trying to increase the capex. So clear they have already done from internal exist is the main capex that they are coming with and they're saying that we have already tried to secure advanced orders for the new facility that is coming in. So generally 5 to 6 months that one backlog is present or that timeline is present. So for for that they are already started to pitch in clients or most of they have
37:56 already started to venture and they're saying that uh we can uh uh fully utilize this capacity by FI28 to FI29. So that is the point when we can see that this DESON hit that 200 250 CR revenue mark if all goes well. So that is with respect to their new facility and IPO. Uh now uh coming to some of the risk like these are PSU clients. So tender tries to pitch in plus pricing pressure always remains in tender. So slight issue uh how fast and how in time this new facility will ramp up. So that is one uh another issue uh with this uh dson. Now uh coming to uh this valuation in
38:43 terms of valuation by F if you look at FI26 uh on TTM basis it's around 13 times and if you just uh see what they're projecting for FI27 and maybe in FI28 they are projecting around 30 35% CH for every year. So on that basis they it is below 10 times. So there is decent enough value if we just look at Dson and if we try to value it um along with some other uh uh big players especially on the chemical companies that are being valued. So with Dson and if we put uh so if we put in and to value of this DESON around 20 22 times so basis there is a good good amount of scope left uh for this div uh
39:30 even on the IP price and even if we factor in whatever the GMP is running in so basis the pricing is decent enough and now uh now coming to the lead manager uh JJ IPO is uh their lead manager and this is the first uh public uh mandate. So let's see how they do. Uh market maker is Eminem stock broking. Uh ankle list was good. We saw India max was there. Uh some of the new funds like invests were also and then some known names like meu and widget. So decent enough anchor book and actually better than what we see what we saw in happy steals. So that is another factor that is in benefit to this diction. So uh coming to the final
40:16 view I think that FI25 and FI26 stagnation so that is done away with facilities coming up and FI26 industry wars and war etc disruption that is gone away with so spillover should help in FI27 as well and they these guys are one of the few players that is providing all of these three components into the package. So that uh valuation and that positive uh thing is also with them. So I think it's uh must apply on the IP price as well and if you can get it decent when it actually lists so from there also you can track it post listing. So that's all for >> got it thanks. So I'll tell you there's
41:03 a TAM is very big right like catalyst uh used it's a very big market right and most of it is >> imported >> uh imported from MNC's right now so this is a company which is coming up and uh there is a reluctance inertia to switch once they have found a vendor in India right and JM portal has really helped them in order to find their backing so that's a good thing about the company so TAM is very big so growing as such would should not be super difficult for them and they should be able to also hopefully protect their margins like protecting the margins is important but at least it seems to be in the right place at the right time where because of Indianization a lot of these uh Indian refineries are buying from them and they had mentioned that you look at any refinery they are our customer um so
41:52 excited about this company somehow reminds me a bit about monolithic how like it's a SAS product end of the day right catalyst you don't really like It's such a small ticket item compared to the all the consumables that the company uh that any refinery would spend on that once they have found a vendor they'll not change right uh so this company because of that should probably do well is what I think >> yeah similar view similar views but even if the catalyst and etc whatever they are producing it value like the per item value is very less but it's such a necessary and what do you say mandatory product to go etc. So >> and and what is the split between cat
42:38 and absorbent? Absorbent are rather like regular items, right? Catalyst are the ones which have very good margins something like that, right? If I'm not wrong. >> Yeah. Catalyst absorbance you can say around 5 to 10% whatever they're producing. Then comes the ceramic balls and catalyst is their manufacturing part of the business and that is the high margin. So they're slowly ramping Uh understood. Uh with that is with respect to Dian. Maybe with that now we'll move forward and talk about the fourth company. Uh the fourth company we'll cover is Milworks Technologies.
43:26 It's a hot SM IPO that is up. Uh so before I actually set up the company, just want to highlight that we have also spoken with the management of Milworks and we feel uh it will help with respect to just understanding the business. We'll try and put it live tomorrow or day after on our YouTube channel. So if you haven't followed our YouTube channel, please go ahead and do that in the pinned comments. We'll put the management interaction of milworks there. But let me set up the company. Incorporate in 2021. Company specializes in the design, development and production of high precision components and assemblies for the railway, aerospace, defense, metro, drone and semiconductor industries. So a lot of hots in there and precision components. We'll try and understand. In terms of the IPO, it's a 160 cr IPO. Very big SM IPO. All of which is a fresh issue. It's
44:12 coming at a market cap of 583 crores. So around 600 crores Map F26 financials about 153 crores top line 37 crores bottom line. So very good PAT margins like 24 25% PAT margins u which is not unheard of in this industry because of the tailwinds and how uh supply is so choked right now constraint. uh but in terms of like it's coming at 15 times FI26 in terms of the LM the LM is G capital advisor so over to you Rohit to talk about Milworks technologies thanks Mish uh so as you mentioned they are sitting at this confluence of so many buzzwords uh so they are firstly a precision engineering company so they make high precision machine components
45:00 uh for sectors like aerospace defense railways and semicon uh of this railways has been their bread and cutter. This is how they kind of scaled up when they started. But over the last few years, they have shifted that mix heavily towards defense and then aerospace. It's a very blurred line between uh defense and especially military aerospace. So they have also internally combined this as one segment and they have a very small uh portion of others which is also very interesting but it's not a segment or or at least it showcases their capabilities but it is not a you know going not going to be very large for them for the moment but I I I will touch on this as well. Uh now when you come to precision CNC machining it all comes down to you know tolerances at a micron level and these guys can make their
45:47 components uh you know up to like 5 to 10 you know with a tolerance of up to 5 to 10 micron at these at these tolerances literally the error sometimes comes just from the measuring of the micron. So if they have a certain error rate that is often because the measuring was wrong and not because the product was faulty. Uh so these are very difficult parts to make and this is something that they this is their specialization focus. Now what is again interesting is who they supply to. They have amazing clients. This is uh they have all I think they work with some six or seven different uh uh teams within the uh or segments within HL itself. They work with a whole host of uh you know Israeli uh defense companies which is obviously in focus given what is
46:33 happening in in the Middle East. Uh Elbit systems uh Israel aerospace industry. So a bunch of them they work with a bunch of other uh uh railway you know top railway uh companies as well. Uh and they export to I think 15 16 countries um many uh obviously Israel many European countries and so on. Uh the other interesting thing about this business given that they're like you know given their size and they're currently anme is that about 70% of their business is built to print which is where the customer will give you an uh the exact drawing and say make this for me. U 30% of their business is built to spec which is where the customer will just give you some specifications. You have to make the drawing you have to design it prototype it and then you have to uh
47:20 uh you know deliver it. So that is that means they've gone even deeper into the capability stream. So this is a very good sign. I I I mean I'll come to a comparison with some of the other listed companies, but there aren't any SMMES that I I think can claim this today. Uh and this is a mix that they want to go, you know, even more a 50/50 kind of mix for this over time. And this is something that will really help with uh margins. Um I I I mentioned that their uh you know business mix is about 65% aerodyn semiconductor. I just touched the semiconductor thing. Uh the parts that they make here is for ASM technologies which is one of the I think it's almost like a one-off company that uh uh makes the machines that make semiconductors
48:06 and they are the company that sells to like TSMC and all of these people globally. So even if they are selling a single component to an ASM technologies, there is something in what these guys do that has got them you know qualified for them there is this is not a focus area they have said that semicon is not a space they want to focus on for now aerody defense is a much bigger hotter theme for them but I thought I'd just mention that uh as per them they expect you know aerodyn 7 75% of the business railways to be maybe 20% of their business and semicon to be that single low single digit you know going forward um Now these guys have a very very high margin. Uh they operate at about 35 37% AIDA margin. But it is not unusual in this segment because firstly capabilities the engineering capability
48:53 the kind of certifications and qualification that it takes to get here. You have you tend to have very high repeat business here and they've also as I mentioned they also have a lot of this build to spec work. So I think this is not uh these are not unreasonable kind of numbers. uh if I look at their numbers and what they say they can do for FI27. So FI26 they did about 150 odd cr 150 something cr uh they did about 37 cr pack the expectation is for them to maintain a very high pace of growth for FI27 also based on a couple of large and this is based on a couple of interviews that they have done based on a couple of uh you know key triggers that are coming for them in FI27. uh there is a large order that they're
49:39 expecting uh you know on the missile carrier assembly side uh for Elbit systems which I think in the next two three months they should know for sure they're getting it. I think they're uh undergoing trial orders currently and this is a if this happens this will be a I mean this company will trade in in in some other range if this order comes because this is like a 150 200 CR annual opportunity. uh similarly I think they have a large opportunity with HAL as well which could be which is on the fuselage side uh which again could add 50 70 cr of revenue. So there are things to look forward to in this company from an execution where they are currently executing trial orders that could really transform how the market values this company. Uh today they have in terms of
50:27 capacity I think they're operating at a fairly high capacity. They have about 75 odd CNC machines u and they're operating I think 75 80% utilization but they're going to be using the IPO funds to uh add uh a I think 30 odd more CNC machines and also a very specific type of uh you know control temperature facility which will allow them to take that uh the the micron tolerance from that 5 to 10 to the low single digits like two three micron kind of tolerance which is what is needed if you want to get into servicing a Boeing or an Airbus which is like probably the holy grail you know commercial aerospace is the holy grail for a lot of these people uh so if they're able to you know set this up with the IPO capix and uh IPO funds and and deliver this again there's a lot
51:13 of upside uh at least the way the market is valuing this stuff today now a few um um let's say okay let me let me say there are a bunch of questions that people have about this company when you just look at say their balance sheet or if you look at certain things you know I've been seeing on WhatsApp groups and stuff there are some questions people have I'll try and address them based on so I have just you know in interest of transparency I have visited this company's facility as well uh and I have seen the products and I've seen what they make so I'm telling you from that perspective too uh these guys so the first question is on this uh related party transaction with this company called quickpay which is this drone company drone startup company uh based Noa that actually has a fairly large
52:01 order book directly from the ministry of defense. Uh it's a very young company but they do have I think FI20. So the their results are there I think till FI25 but in FI26 they I think started servicing a very large order of I think 200 drones. These are suicide drones. I've seen the product. I've actually seen the drones also in the facility. So the the products are definitely real. Uh they started delivering this in FI26. These guys h also have some equity stake in this company. So it comes as a rel it's a very small singledigit percentage. So it comes as a related party transaction. But these guys are making some of the uh you know components and doing some of the sub assemblies for this uh for this company. So that is why suddenly there is this uh
52:46 you know chunk of revenue that is coming from quickpay and the management actually expects that to continue and they expect that to be a big tailwind for them over the next you know year and FI27 FI28 and maybe beyond as well. So that's one clarification that I wanted to mention. The second thing that looks like a red flag and you know it actually is a red flag but again have to understand how the business works is u they have a crazy high receivable cycle right now. I think as of FI26 it is almost like 10 or 11 months I don't remember the number but it was very very high uh again this has a lot to do with two things one is they did bill a lot of revenue in FI20 like right in March of this year u that money is not stuck but it got delayed because of the war a lot
53:31 of these are Israeli clients or it goes indirectly whether it is you know directly with these Israeli clients or indirectly because of the war a lot of that money was stuck and as for management in more recent interviews they have said that uh you know a lot of that money started to come back there will always be a high working capital cycle here when you deal with the government like if you deal with H and so on you've got to assume that this segment will have a high working capital cycle uh but you will also see the kind of margins that they're seeing just because of that so I feel both of these like especially the receivable thing is spiked a little too much because of this whole Israeli conflict u and these guys are trying to figure out ways I They're saying that any new order from Israel will come with a 30% advance. Uh they're making sure the Israeli clients at least airlift their components so that there
54:18 is no uh you know further delay. Otherwise these things the the receivables comes only after the product reaches the client. Once it reaches the client then the receivable starts uh or the the the timer starts ticking. But if these products are stuck now because hormones was closed and whatever you can imagine why things have gotten delayed. So it it is like it seems to be more of you know right here right now kind of issue. Um one more thing I'll just mention is uh which I don't know you know something I just noticed and I thought I'll again address it is these guys have a so they've done about 37 cr pat of which about four odd CRS from other income their other income is all foreign forex gains which is basically they built something at let's say $85 and then on March 31st dollar is now 95 rupees uh it's not 85 rupees to the
55:05 dollar that time and now it's 95 rupees so you gave you you you booked that extra as a other income gain. Uh so should you count that in your PE calculation or not? At least from all the other export oriented uh physician manufacturing companies in the listed market whether you look at Azad, you look at Omnitech, anyone who's got a high amount of exports, they all have this very high if you see in Mars they'll have this high other income which is all because of this reason only. Uh so and and you know people are giving it 120 100 whatever crazy P multiples nobody's subtracting that and doing the math. So, so don't bother about that. The company has done 37 PAT this I think the market will look at this as you know it is coming at 15 16 what 15.7 times. Um now in terms of
55:50 peers I think in theme we just had a recent listing which is a company that we ourselves you know if I just put my other hat RMS has backed absisom uh it is a very very very similar pier there are some small differences I would say Absis is probably even more you know capable in terms of its engineering they make even more you know complex and niche parts but conversely these guys actually have gotten into subasssemblies they've gotten into some of these other segments also. They they're into slightly higher volume, lower value, but the volume is also an advantage which is why they've grown so fast. So I wouldn't really I mean I'd say apps is a very good pier uh to compare with and abs is doing very well in the market. Uh even somebody like an OBSC perfection which is I'm just looking at SM peers. OBSC
56:36 has also done well again precision machining not even in aerospace or just barely getting into aerospace uh and you know maybe that whole Tesla story or whatever but that is also trading at like 60p. uh this is a segment in mainboard theme that without fail trades at a very high multiple because there is a lot of there is a very high mo and a high barrier to entry uh it takes a lot of time to build this business and then suddenly you can grow very fast uh and and all of these guys are promising very good growth uh so I am obviously I mean you don't even have to think from an application of the IPO you're getting an aerospace precision component manufacturer making you know with the best of the clients and making very very difficult to manufacture parts growing at an insane speed at 15 times. It is
57:24 pardon me but it's just looting the promoter honestly for whatever reason it has come at this price. It is great for any investor who gets uh you know who gets this uh uh who gets this allocation. Uh the main risk is just watch for the receivables. you know he he's promised in some interviews that especially by July August a lot of the receivables will come knocking and anything that doesn't is mostly just you know government this the kind of receivables that will come just maybe delayed but will come and that's why you kind of need working capital uh so I you know fully if I had to predict again none of this is a recommendation but if I had to predict this stock will will hit a very you know I mean it could triple in no time uh from the IPO price it can do more than that also there's
58:10 every chance it'll go even beyond that the stock probably deserves to trade at those multiples and then it will settle at a fairly high multiple and then you know execution will come in but I think this is a this is a gem uh very good very decent promoter also uh at least from what we we we spoke and we met uh so yeah I I I think if there any questions Manisha anyone please or anything in the chats let me know if I've missed anything but yeah it's a fairly obvious supply and don't sell on listing at 90% also. >> Thanks Rohit. Uh not much questions. You have kind of covered the company should be applied. Uh we'll see. Um one question that the re the company seems to be bringing IPO when their revenue
58:57 has really shorted up and they're bound revenue is bound to drop mostly by 30 40%. But I didn't see anything why the revenue will drop right like >> no no no that revenue will not drop they already I think have an currently unexecuted order book for this year of some 150 cr which has to be delivered in this fi itself and this is as of now uh June and then I told you there are those other orders of I think 200 CR uh if it comes of course that is a TBD uh the the Israeli order for those missile carrier systems uh there is the h stuff so there's there's enough visibility anything for them to do 200 plus 220 250 you know anything is possible uh and I I I believe so again just a small thing when we had spoken to them last year I
59:43 think he was internally looking at you know well north of 250 uh but of course the IPO has been delayed uh working cap is a very big big driver of growth for him so I don't expect that much but I think he should do you know 220 to 250 if things go well so I think the market will also assume that there's enough visibility for him to do 200 plus for sure. >> Got it. And how is his technical capability like the machines that he has etc. are those like 5xs CNC machines etc. How do you >> So if I'm not mistaken majority are three axis he has some four axis and five axis. So that's why I mentioned that the the intricacy of the parts that he makes if you see his facility and
1:00:29 Abs's facility which is say a privilege I've had uh Absis will definitely be making even more complex parts like the when you look at the part you will realize wow this is uh how how has a machine manufactured these parts uh whereas if you see uh uh Milworks he's actually got a much much wider range of products like you'll see so many different components right like from say landing systems to like different parts of landing systems to different parts of say the wing and the fusel like there's so many different pieces that he makes uh so he's that's his strength the strength is not necessarily in making the most complex parts which maybe have uh you know its own challenges and its
1:01:14 own advantages his this thing is okay I don't make those parts leave that to somebody like an absis but I make my I have my own niche where I do really really well. So I don't think it is a problem or anything. It's just a slightly different way to approach the same industry. Uh what he makes ultimately given that he has those clients and those certifications and those relationships and repeat orders and all that is the testament to what he's built in my view. >> Got it. >> Perfect. Yeah. With that we have covered. I I would like to know put in two sort of a concerns which investors have. I just saw a social media post on Milworks you know on a negative end. So there are two concerns which are I would like to address because I took took an
1:02:01 interview about uh you know today afternoon. So I pretty know the answers and that is also going to public very soon. So uh that one one of that concern is the working capital you know thing and the trade receable part. So uh if you just look at the DRP numbers and the RSP numbers in DRSP the numbers are given for about 10 months and in RSP it is for 12 months. If you just look at that 2 months that 2 months I have been 40 to 45% of the whole revenue know annual revenue. So can just thinking February which is around 8 months out of a cycle and it should get extended another 30 to 45 days due to the issues with the uh shipments I know and there are two good
1:02:49 things to it is first a company has been on the track key whatever parts we're going to make that should compulsorily go through the air route uh which has been already implemented and he has spoken it very explicitly. The second part is now obviously Rohit has covered that uh 30% uh I know is is going to be paid up front by especially the Israeli and few European you know railway company compan companies which is I guess also this should be uh this should actually improve things and I feel he also said it clearly this month and we have seen lot of no cash getting flowed. uh the second the which is the most concerning thing is about quick pay uh I guess
1:03:34 about 40 45% of the revenues come from that single entity uh which is pretty small and people are saying they have got some cross equity investment in that company as well so that given some debt to quick pay and now that has been converted to equity and actually also had a pre I won't say preiq round but a funding round about 2 months back so that company has bagged around a 200ish cr sort of a government ministry of defense order and the drones and also they're likely to win one more. So this company Milwork works you know is combining their machining capabilities with that company and then that things are going forward and uh he's saying he uh that should have around 9 10 month sort of a cycle uh so so that is one thing uh and I had a
1:04:19 question key you know quick pay is pretty small how do you see uh you know the things getting capitalized on that end because that that company doesn't have that sort of a you know balance sheet to pay uh that sort of a revenue 47% for about this year's turnover is pretty But they are saying we should receive about 45 month 45 days about the cycle. We should receive the money and also there are some MSM rules. Uh so they have to pay it. Uh so so I feel these are two pretty you know large concerns which everyone is having and I'm seeing some uh social media posts making you know all this uh all this highlight. So I I feel those are need to be highlighted. Got it. Yep, those were covered. But
1:05:04 yeah, I think at least at IPO price there is absolutely nothing to think can be thought about. All these issues can be thought about after applying for IPO and then you can probably think but yeah there's not a lot to lose at IPO price, right? Uh with that we'll move forward and talk about one last company before I actually start SBI funds management. Again want to highlight that if you haven't followed our YouTube channel please go ahead and follow it. We'll post the interview of Bill Works as well there. With that uh moving forward talking about one last company SBI funds management and it's a company which everybody probably wants to listen. Uh setting up the company established in 1922. It is the largest AMC in India based on AUM. Uh so mutual funds
1:05:50 so SBI is a known player in that. Uh it manages the well-known SBI mutual fund. It is a joint venture between State Bank of India and Amundi. Uh so yeah company in terms of IPO it's a 9,813 cr IPO all of which is OFS was bigger but then they did a preip as well of around 1,800 crores market cap company 1 lakh 17,000 crores. uh in terms of the financials crazy operating leverage which could be understood for AMC 5,000 crores topline 3,000 crores pat insane 60% pat margins which is just brilliant uh but yeah 3,000 1 17,000 pair so it's coming at like 39 times we'll try and understand where to
1:06:36 place it uh but it would be a large cap on day one probably uh the way it is going in terms of LM the LMS is COCH XS, Bofa HSBC ICICI Jeff GM Motilal SBI gaps. So with that over to Tan to talk about >> Yeah, I'm audible. >> SB fund management. >> So I feel you know I would like to you know touch all the pointers and look like to break down the company and I feel it should be a decently large discussion we should have for SB funds management. So SBF funds management limited popularly known as SBM mutual fund or SBI AMC was established in 1987 which was India's first mutual fund after unit trust of India. In 2004 they did a JV with society general uh where society general
1:07:22 37% stake. uh in 2011 uh MMD which is uh which is based out of France the Europe's largest fund manager and the AMC had taken over that 37% stake of society general and continued that JV uh the SBI uh MF is the largest asset management company by quarterly average asset under management which you also you know popular as Q Aum which has got an QAUM of about 12.51 lakh crores and and a mutual fund market share of about 15.3%. Uh their QA aum caggr of between fi 24 to f26 has been around 14.2% and their mutual fund quarterly aum cag has been
1:08:07 around 17%. The company has got a customer base of about 1.8 8 cr all are the unique customers you know about this I'll come
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