August 16, 2023 (MLN): With plans to raise an impressive sum exceeding Rs3 billion, Fast Cables Limited is all set to issue 83.5 million ordinary shares at a floor price of Rs36 per share, offering a Price-to-Earnings (PE) multiple of 7.81x through Initial Public Offering (IPO), the second IPO of FY24 at local bourse.
The Issue of 83.5mn Ordinary Shares having a face value of Rs10 per share each comprises 25.01% of the total Post-IPO Paid Up Capital of the company. Initially, 75% of the Issue size i.e., 62.625mn ordinary shares will be allotted to Successful Bidders and 25% of the issue i.e., 20.875mn ordinary shares will be offered to Retail Investors.
Unsubscribed shares, if any, of the General Subscription portion will be allocated to Successful Bidders of the Book Building portion on a pro-rata basis. The Book Building Portion has been underwritten by Arif Habib Limited.
The principal purpose of the Issue is to invest in capacity enhancement, specifically in buildings, plants, and machinery. Additionally, a portion of the funds will be allocated towards repaying loans taken for building construction and machinery imported.
New land will be acquired for the above-mentioned purpose, buildings will be constructed and new plant & machinery with advanced technology will be installed.
The newly added capacity will be utilized for the manufacturing of the existing product portfolio, which includes copper and aluminum products. Additionally, this increased capacity will cater to the production of special cables tailored to the specific requirements of customers who place customized orders, as mentioned in the draft prospectus available on the PSX website.
The proposed expansion will improve cost efficiencies, increase capacity to cater to the growing demand for cables and conductors, and will thereby generate additional profits that will help fund future business opportunities.
With regard to the financial performance of the company, over the last four years, Fast Cables showcased consistent growth in its revenue base. The gross margins have remained range bound throughout the period, and gross profit in absolute terms has witnessed a notable hike at a CAGR of 47.49% from FY18 to FY22 on the back of a strong customer base which includes institutional and non-institutional customers.
Pertaining to the sales, Fast Cables Limited sales grew at a compounded annual growth rate (CAGR) of 43% and gross profit grew at a CAGR of 47% while the profit after tax of the company grew at a CAGR of 86% during the same period.
The steady and consistent growth is owing to the company’s innovation, market development, extensive distribution reach, capacity expansion, and expanding product portfolio.
Risk associated with the business:
In a comprehensive demonstration of transparency and due diligence, Fast Cables has formally apprised potential investors of the inherent risks associated with its impending IPO.
Operational risk, negative cash flow, fuel and power risk, liquidity risk, high leverage, pending legal proceedings, raw material supply risk, delay in implementation risk, and risk related to the change in Custom/Regulatory Duties are some of the risks that can affect the profitability of the company.
Copyright Mettis Link News
Posted on: 2023-08-16T12:13:28+05:00
