Royal Arc Electrodes Ltd IPO

The IPO opens on 14 Feb 2025 & closes on 18 Feb 2025.

Royal Arc Electrodes Limited was incorporated in Mumbai, as a 'Royalarc Electrodes Private Limited', certified dated January 15, 1996, issued by the Additional Registrar of Companies, Maharashtra. Thereafter, Company was converted from a Private Limited to a Public Limited Company and upon conversion, the Company name changed to 'Royalarc Electrodes Limited' and a Certificate of Change in Name dated March 31, 2005, was issued by Registrar of Companies, Maharashtra, Mumbai. Subsequently, the name of Company was changed to 'Royal Arc Electrodes Limited' and the Registrar of Companies has issued a fresh Certificate of Incorporation dated June 16, 2023. The Company is engaged in the business of manufacturing of welding electrodes, flux cored wires, MIG/TIG wires, strip cladding, in the welding of tanks, boilers, heavy structures, beams, pipes, cylinders, pressure vessels, etc. which are used in industries like railways, roadways, airport infrastructure, refineries, shipyards, mines, sugar industries, telecom industries, thermal power stations, Pre-engineered Buildings (PEB) sectors, etc. Further, it is engaged in trading of ancillary/incidental products like abrasive wheels, electro slag, welding flux cored wire, saw wire, electro slag strip cladding, saw flux and special TIG /MIG wires. In 2003, the Company expanded the manufacturing capacity by adding state-of the art facility. Apart from expansion, it manufacture its products from copper coated wire, MS Strips, MS wire, SS strip, SS wire, nickel wire, ferro alloy powder, etc conforming to international standards, from highly sophisticated and technically competent manufacturing facility spread over an area of 6.197 acres which is situated at Zaroli, Umbergaon Valsad, Gujarat. The manufacturing facility is also accredited with ISO 9001:2015 certified by DNV - Business Assurance. The key factor in business is the client/consultant certification given the critical application in which products are used. For instances , products are certified by the American Bureau of Shipping (ABS), Indian Boilers Regulation (IBR), Bureau of Indian Standard (BIS) etc. Further, based on client requirements, the inspection and testing of the quality of products are outsourced to inspection agencies that are NABL-accredited laboratories. The Company is planning an Initial Public Offer by issuing upto 30,00,000 Equity Shares, comprising 18,00,000 Equity Shares through Fresh Issue and 12,00,000 Equity Shares through Offer for Sale.

Royal Arc Electrodes Ltd IPO will close on 18 Feb 2025.

<ul><li>Geographically spread distribution network.</li><li>Long-standing relationships with customers across industries.</li><li>Consistent financial performance.</li><li>Experienced promoters and strong management team.</li></ul>

<table class="table"> <thead> <tr> <th>S.No</th> <th>Promoters Name</th> <th>Pre Issue Shares</th> <th>Pre Issue Percentage</th> <th>Post Issue Shares</th> <th>Post Issue Percentage</th> </tr> </thead> <tbody> <tr> <td>1</td> <td>Bipin Sanghvi</td> <td>892717</td> <td>9.6</td> <td>721717</td> <td>6.5</td> </tr> <tr> <td>2</td> <td>Tarulata Sanghvi</td> <td>1763461</td> <td>18.96</td> <td>1640461</td> <td>14.78</td> </tr> <tr> <td>3</td> <td>Hardik Sanghvi</td> <td>2682750</td> <td>28.85</td> <td>2349750</td> <td>21.17</td> </tr> <tr> <td>4</td> <td>Swagat Sanghvi</td> <td>2682750</td> <td>28.85</td> <td>2349750</td> <td>21.17</td> </tr> <tr> <td>5</td> <td>Ami Sanghvi</td> <td>638750</td> <td>6.87</td> <td>518750</td> <td>4.67</td> </tr> <tr> <td>6</td> <td>Pooja Sanghvi</td> <td>638750</td> <td>6.87</td> <td>518750</td> <td>4.67</td> </tr> </tbody> </table>

<ul><li>The company revenue is dependent on the domestic market since, it contributes significantly to its total revenue from operations. Any adverse changes in the conditions affecting domestic market could adversely affect its business, results of operations and financial condition.</li><li>The company operates only one manufacturing facility and therefore, any localized social unrest, natural disaster, or breakdown of services, in and around its manufacturing facility or any disruption in production at, or shutdown of the company manufacturing facility could have a material adverse effect on its business and financial condition.</li><li>The company may faces several risks associated with the proposed expansion in its existing manufacturing facility, which could hamper the company growth, prospects, cash flows and business and financial condition.</li><li>The company depends on outside parties for adequate and timely supply of raw materials at commercially acceptable prices. Any disruptions, delay or increase in prices of such material may have a material adverse effect on its business.</li><li>The company inability to collect receivables and default in payment from its customers could result in the reduction of the company profits and affect the company cash flows.</li><li>The company has significant working capital requirements. If its unable to borrow or raise additional financing or furnish bank guarantees or performance bank guarantees in future, it would adversely impact its business, cash flows and results of operations.</li><li>The company is dependent on limited number of suppliers for its raw materials required in the company operations. Further, its top 10 (ten) suppliers constituted amounting Rs. 2354.20 Lakhs, Rs. 4,948.28 Lakhs, Rs. 3,998.30 Lakhs, Rs. 2,800.64 Lakhs representing 68.36%, 71.81%, 64.36%, and 57.08%, respectively of total purchases during the six months period ended September 30, 2024, Fiscal 2024, Fiscal 2023, and Fiscal 2022 respectively. Its business is dependent on the company continuing relationships with its suppliers and any deterioration in the company relations with any of them could materially and adversely affect its business, results of operations, cash flows and financial condition. </li><li>The company derives a significant portion of its revenue from a few customers and the loss of one or more such customers, the deterioration of their financial condition or prospects, or a reduction in their demand for its products may adversely affect the company business, results of operations, financial condition and cash flows.</li><li>Commercialization and market development of new products may take longer time than expected and / or may involve unforeseen business risks. Its inability to successfully diversify the company product offerings of may adversely affect its growth and negatively impact the company profitability.</li><li>If the company fails to manage its growth effectively, its may be unable to execute the company business plan or maintain high levels of service and satisfaction, and its business, results of operations, cash flows and financial condition could be adversely affected.</li><li>A significant portion of its domestic revenues are derived from the western and central zone and any adverse developments in this market could adversely affect its business.</li><li>Under-utilization of the company manufacturing capacities and an inability to effectively utilize its expanded manufacturing capacities could have an adverse effect on its business, future prospects and future financial performance.</li><li>None of its Directors have any prior experience of being a director in any other listed company in India.</li><li>The company Promoter has extended personal guarantee in connection with some of its debt facilities to the company. There can be no assurance that such personal guarantee will be continued to be provided by its Promoters in future or can be called at any time, affecting the financial arrangements.</li><li>The Company had negative cash flows during certain fiscal years in relation to its investing and financing activities. Sustained negative cash flows in the future would adversely affect its results of operations and financial condition.</li><li>Certain of its corporate records and filings and instruments of transfer are not traceable. The company cannot assure you that no legal proceedings or regulatory actions will be initiated against it in the future in relation to any such discrepancies.</li><li>There have been some instances of incorrect filings with the Registrar of Companies and other noncompliances under the Companies Act in the past which may attract penalties.</li><li>Its may be unable to sufficiently obtain, maintain, protect, or enforce the company intellectual property and other proprietary rights.</li><li>Its operations are labour intensive and the company manufacturing operations may be subject to unionization, work stoppages or increased labour costs, which could adversely affect its business and results of operations.</li><li>Its Group Company has not the filed the financial statements for the financial year 2024 resulting in noncompliance may have an adverse impact on the company business, results of operations, financial condition and cash flows.</li><li>Its Registered office and other office are on leave and license basis. The company failures to renew the licenses, or obtain a renewed licenses or pay higher license fees under this license agreement could negatively impact its operations.</li><li>The company operations are subject to environmental and health and safety laws and other government regulations which could result in increased liabilities and increased capital expenditures.</li><li>While certain of its trademarks used by it for the company business are registered, any inability to protect its intellectual property from third party infringement may adversely affect its business and prospects.</li><li>The company has in the past entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with its Shareholders.</li><li>The Company, its Directors and its Promoters are party to certain litigation and claims. These legal proceedings are pending at different levels of adjudication before various forums and regulatory authorities. Any adverse decision may make it liable to liabilities/penalties and may adversely affect the company reputation, business and financial status.</li><li>The average cost of acquisition of Equity Shares for its Selling Shareholders may be lower than the Offer Price.</li><li>Restrictions on import of raw materials may impact its business and results of operations.</li><li>Any defect in its products may result in the company orders being cancelled and its could become liable to customers, suffer adverse publicity and incur substantial costs which in turn could affect it adversely.</li><li>The company operates in a competitive and fragmented industry with low barriers to entry and may be unable to compete with a range of unorganized sector.</li><li>The company is dependent on third-party transportation providers for the supply of raw materials and delivery of its finished products and any failures to maintain a continuous supply of raw materials or to deliver its products to the company customers in an efficient and reliable manner could have a material and adverse effect on its business, financial condition and results of operations.</li><li>The company overall margins may fluctuate as a result of the product manufactured by it.</li><li>Unplanned slowdowns or shutdowns of its manufacturing operations could have an adverse effect on the company business, results of operations, financial condition, cash flows and future prospects.</li><li>The company funding requirements and the proposed deployment of Net Proceeds are based on management estimates and have not been appraised by any bank or financial institution or any other independent agency and may be subject to change based on various factors, some of which may be beyond its control. The company has not entered into any definitive agreements to utilise certain portions of the Net Proceeds of the Offer.</li><li>Its insurance coverage may not be sufficient or adequate to protect it against all material hazards, which may adversely affect the company business, results of operations, financial condition and cash flows.</li><li>Its Promoters will continue to retain significant shareholding in the Company after the Offer, which will allow it to exercise control over it.</li><li>Its ability to pay dividends in the future will depends on the company earnings, financial condition, working capital requirements, capital expenditures and restrictive covenants of its financing arrangements.</li><li>In addition to normal remuneration or benefits and reimbursement of expenses, some of its directors and key managerial personnel are interested in the Company to the extent of their shareholding in the Company.</li><li>There is no guarantee that its Equity Shares will be listed on the Stock Exchanges in a timely manner or at all.</li><li>The company is exposed to foreign currency exchange rate fluctuations, which may adversely affect its results of operations and cause the company quarterly results to fluctuate significantly.</li><li>The company employees may engage in misconduct or other improper activities, including non- compliance with regulatory standards and requirements.</li><li>The company has incurred borrowings from commercial banks and any non-compliance with repayment and other covenants in its financing agreements could adversely affect the company business and financial condition.</li><li>If there are delays in setting up the Proposed Expansion and cost overruns related to the Proposed Expansion or installation of Solar Power project are higher than expected, it could have a material adverse effect on its financial condition, results of operations and growth prospects.</li><li>Any material deviation in the utilization of the Net Proceeds as disclosed in this Red Herring Prospectus shall be subject to certain compliance requirements, including prior approval of the shareholders of the Company.</li><li>The audit reports for its audited financial statements for the certain Financial Years include references to certain emphasis of matter paragraphs.</li><li>The success of its business depends substantially on a number of key management personnel, management team, and on its operational workforce. The company inability to retain them or to recruit highly skilled technical personnel that are necessary for its business could adversely affect the company businesses.</li><li>There are certain discrepancies and non- compliances noticed in some of its financial reporting and/or records relating to filing of returns and deposit of statutory dues with the taxation and other statutory authorities.</li><li>If the company does not continue to invest in new technologies and equipment, its technologies and equipment may become obsolete and the company cost of processing may increase relative to its competitors, which may have an adverse impact on the company business, results of operations and financial condition.</li><li>The company requires certain approvals, licenses, registration and permits for its business, and the failures to obtain or renew them in a timely manner may adversely affect its operations.</li><li>Any adverse change in regulations governing its products and the products of the company customers, may adversely impact its business, prospects and results of operations.</li><li>In the twelve months prior to the date of filing the Red Herring Prospectus, the Company had Offered Equity Shares at a price, which may be lower than the Offer Price.</li><li>Any failures on its part to effectively manage the company inventory may result in an adverse effect on its business, revenue from manufacturing operations and financial condition.</li><li>The Company may not be successful in penetrating new export markets.</li><li>The shortage or non-availability of power facilities may adversely affect its manufacturing processes and have an adverse impact on its results of operations and financial condition.</li><li>Information relating to the current and historical installed capacity of the plants in its Manufacturing Facility included in this Red Herring Prospectus are based on various assumptions and estimates.</li><li>Any failures of the company information technology systems could adversely affect its business and the company operations.</li><li>The company has certain contingent liabilities that have been disclosed in its financial statements, which if they materialize, may adversely affect the company results of operations, cash flows and financial condition.</li><li>The Company has availed unsecured loan from related parties, which are repayable on demand. Any demand for repayment of such unsecured loans may affect its cash flows and financial condition.</li><li>In the event there is any delay in the completion of the Offer, there would be a corresponding delay in the completion of the objects / schedule of implementation of this Offer which would in turn affect its revenues and results of operations.</li><li>Any future issuance of Equity Shares, or convertible securities or other equity linked securities by us and any sale of Equity Shares by its Promoters may dilute your shareholding and adversely affect the trading price of the Equity Shares.</li><li>Industry information included in this Red Herring Prospectus has been derived from industry sources. There can be no assurance that such third-party statistical, financial and other industry information is complete, reliable or accurate.</li><li>There is no monitoring agency appointed by the Company to monitor the utilization of the Offer proceeds.</li><li>The company Industry is sensitive to general economic downturn.</li></ul>

The Issue type of Royal Arc Electrodes Ltd is Book Building - SME.

The minimum application for shares of Royal Arc Electrodes Ltd is 1200.

The total shares issue of Royal Arc Electrodes Ltd is 3000000.

Initial public offer of 30,00,000* equity shares of face value of Rs. 10/- each ("Equity Shares") of Royal Arc Electrodes Limited ("The Company" or the "Issuer") for cash at a price of Rs. 120 per equity share (the "Offer Price"), (including a premium of Rs. 110 per equity share), aggregating to Rs. 36.00 crores ("The Offer"), comprising a fresh issue of 18,00,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 21.60 crores (the "Fresh Issue") and an offer for sale of 12,00,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 14.40 crores by selling shareholders (as defined below), comprising an offer for sale of 3,33,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 4.00 crores by Hardik Sanghvi, 3,33,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 4.00 crores by Swagat Sanghvi, 1,71,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 2.05 crores by Bipin Sanghvi, 1,23,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 1.48 crores by Tarulata Sanghvi ("Promoter Selling Shareholders") and an offer for sale of 1,20,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 1.44 crores by Pooja Sanghvi, and of 1,20,000 equity shares of face value of Rs. 10/- each aggregating to Rs. 1.44 crores by Ami Sanghvi ("Promoter Group Selling Shareholders") (together with the promoter selling shareholders, "Selling Shareholders" and such equity shares offered by the selling shareholders, the "Offered Shares"). The 1,53,600 equity shares of face value of Rs. 10/- for cash at a price of Rs. 120 each aggregating Rs. 1.84 crores will be reserved for subscription by market maker to the offer (the "Market Maker Reservation Portion"). The offer less market maker reservation portion i.e. net offer of 28,46,400 equity shares of face value of Rs. 10/- each for cash at a price of Rs. 120 per equity share, aggregating to Rs. 34.16 crores is here in after referred to as the "Net Offer". The offer and the net offer will constitute 27.03 % and 25.64 % respectively of the post offer paid up equity share capital of the company. The face value of the equity share is Rs. 10 each. The offer price is 12 times the face value of the equity shares.