Yash Highvoltage BSE SME IPO review (Apply)

•    The company is engaged in the manufacturing and marketing of wide range of transformer bushings. It enjoys niche place in the segment.
•    It has creamy clientele that give them the repeat business of over 96% in its total revenues.
•    The company marked steady growth in its top and bottom lines for the reported periods.
•    Based on FY25 annualized earnings, the issue appears fully priced. 
•    Investors may park funds for the medium to long term.

ABOUT COMPANY:
Yash Highvoltage Ltd. (YHL) is engaged in the manufacturing and distribution of wide range of transformer bushings - Oil Impregnated Paper [OIP] condenser bushing, Resin Impregnated Paper [RIP] / Resin Impregnated Synthetic [RIS] condenser bushing, High Voltage and High Current bushing, OIP Wall bushing and Oil to Oil bushing. The Company also undertakes repairing, retrofitting and replacement services of old bushings. Through its team of experienced engineers, it provides on-site/off-site bushings technical testing, analysis and repairing services.

The Company was originally incorporated as "Yash Highvoltage Insulators Private Limited" in 2002 by a group of technocrats to manufacture Fiber Reinforced Polymer Cylinders and high-current bushing products. With the change at the helm, its name was changed to current one, and expanded its product offerings.

Its manufacturing facility has an annual installed capacity to produce 7,000 bushings bifurcated into 3,700 units of OIP Bushings, 3,000 units of RIP Bushings and 300 units of High Current Bushings. The factory is fully equipped with in-house quality testing facilities. The Company is on the approved vendor list of various Indian Government Enterprises and large private companies engaged in Power sector.

The Company is a dominant market player in manufacturing OIP condenser bushings up to 245kV and high current bushings up to 25,000 Amperes. It has pioneered the localization of explosion-proof and advanced RIP/RIS bushings through a technology partnership with a Switzerland company who pioneers in the field of solid insulation. YHL imports RIP/RIS bushing cores from Switzerland and use them to produce similar branded bushings for regional markets. The Company has developed and supplied transformer bushings that meet IEEE standards for the US market. This showcases its first-mover advantage and strong market position.

Its distinguished clientele base is a testament to unwavering commitment to quality, innovation, and reliability in the manufacturing of bushings. Trusted by industry leaders in India and overseas, it has built strong partnerships with major utilities, OEMs, and power companies who rely on its products for critical high-voltage applications. This network not only reflects YHL's technical expertise but also underscores competitive strength, as it continues to meet the evolving needs of a demanding and dynamic market. The company gets on an average above 96% of its revenue from repeat orders from creamy customers. As of November 30, 2024, it had 157 employees on its payroll and is also hiring contract workers as and when needed.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 7535000 equity shares of Rs. 5 each to mobilize Rs. 110.01 cr. at the upper cap. The IPO consists of 6405000 fresh equity shares worth Rs. 93.51 cr. (at the upper cap), and an Offer for Sale (OFS) of 1130000 shares (worth Rs. 16.50 cr. at the upper cap). It has announced a price band of Rs. 138 - Rs. 146 per share. The issue opens for subscription on December 12, 2024, and will close on December 16, 2024. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.39% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 70.34 cr. for setting up of new factory for manufacturing RIP/RIS transformer condenser graded bushings, and the rest for general corporate purposes

The IPO is solely lead managed by Indorient Financial Services Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Alacrity Securities Ltd., is the Market Maker for the company.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 70.00 - Rs. 77.43 per share between March 2017 and March 2019. It has also issued bonus shares in the ratio of 8 for 1 in February 2018, 7 for 5 in April 2024, and 1 for 2 in July 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 8.69 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 11.07 cr. will stand enhanced to Rs. 14.28 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 416.85 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 65.38 cr. / Rs. 8.71 cr. (FY22), Rs. 90.61 cr. / Rs. 11.42 cr. (FY23), and Rs. 109.12 cr. / Rs. 12.06 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 3.13 cr. on a total income of Rs. 27.78 cr. It posted steady growth in its top lines but bottom line remained stagnant for the reported periods. 

According to the management, due to ongoing investment in expansion of capacities and other products, its provision for interest, depreciation etc. translates into stagnancy in the bottom line, but otherwise, its gross margins are improving. The company has an order book of Rs. 220+ cr. indicating its near term prospects. Once the new plant starts operations, its top and bottom lines will improve further.  

For the last three fiscals, the company has reported an average EPS of Rs. 5.10 and an average RoNW of 36.71%. The issue is priced at a P/BV of 7.14 based on its NAV of Rs. 20.44 as of June 30, 2024, and at a P/BV of 3.00 based on its post-IPO NAV of Rs. 48.61 (at the upper cap).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 33.33, and based on FY24 earnings, it stands at 34.52. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 13.39% (FY22), 12.64% (FY23), 11.12% (FY24), 11.32% (Q1-FY25), but RoCE margins data is missing.

DIVIDEND POLICY:
The company has paid a dividend of 84.4% for FY22 and 106% for FY23. It has adopted a dividend policy in June 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown CG Power, and Hitachi energy, as their listed peers. They are trading at a P/E of 134 and 257 (as of December 06, 2024). However, they are not truly comparable on an apple-to-apple basis. These peers compare appears to be an eyewash.

MERCHANT BANKER'S TRACK RECORD:
This is the 7th mandate from Indorient Financial in the last three fiscals (including the ongoing one).  From the 6 listings so far, all listed with a premiums ranging from 0.12% to 51.06% on the listing date.