Royal Arc Electrodes Limited, established in 1996, is a prominent manufacturer of welding consumables in India. The company specializes in producing welding electrodes, flux-cored wires, MIG/TIG wires, and strip cladding. Additionally, they trade ancillary products such as abrasive wheels, welding flux, and special TIG/MIG wires.The company is launching its Royal Arc Electrodes Ltd IPO with the following details:
Key Details:
- IPO Opening Date: February 14, 2025
- IPO Closing Date: February 18, 2025
- Listing Date: Expected around February 21, 2025
- Issue Size: The IPO comprises a fresh issue of 30.00 lakh shares, aiming to raise ₹36.00 crores.
- Price Band and Lot Size: As of now, specific details regarding the price band and lot size have not been disclosed.
Bipin Sanghvi, Tarulata Sanghvi, Hardik Sanghvi, and Swagat Sanghvi are the promoters of Royal Arc Electrodes Ltd.
The funds raised from this IPO will be utilized for expanding the company’s manufacturing facility in Zaroli, Umbergaon, Valsad, Gujarat, meeting working capital requirements, and general corporate purposes.
Investors interested in applying for the Royal Arc Electrodes Ltd IPO can do so through various online platforms, including the BlinkX app. Ensure that your KYC details are updated, select the IPO, enter bid details, and submit your application.
About Royal Arc Electrodes Ltd
Established: 1996
Headquarters: Valsad, Gujarat, India
Industry: Manufacturing (Welding Consumables)
Overview
Royal Arc Electrodes Ltd is a leading manufacturer of welding consumables in India. The company specializes in producing:
- Welding Electrodes
- Flux-Cored Wires
- MIG/TIG Wires
- Strip Cladding
Apart from manufacturing, the company also trades in welding-related ancillary products, including:
- Abrasive wheels
- Welding flux
- Special TIG/MIG wires
Royal Arc serves both domestic and international markets, catering to industries such as automotive, infrastructure, construction, shipbuilding, oil & gas, and heavy engineering.
Manufacturing & Expansion
The company operates a manufacturing facility in Zaroli, Umbergaon, Valsad, Gujarat. The upcoming IPO will help expand this facility and enhance production capacity.
IPO & Future Plans
The company is launching an IPO from February 14 to February 18, 2025, to raise ₹36.00 crores. The funds will be used for:
- Expanding manufacturing facilities
- Meeting working capital needs
- General corporate purposes
Utilization of IPO Proceeds:
The funds raised will be allocated towards:
- Expanding the manufacturing facility in Zaroli, Umbergaon, Valsad, Gujarat.
- Meeting working capital requirements.
- General corporate purposes.
Industry Outlook:
The welding consumables industry is integral to sectors like construction, shipbuilding, and energy. With ongoing infrastructure development and industrial projects, the demand for welding products is anticipated to grow, potentially benefiting companies like Royal Arc Electrodes Ltd.
Investment Considerations:
Prospective investors should evaluate the company’s financial health, competitive position, and growth strategies. It’s also essential to consider industry trends and potential risks associated with the business. Consulting with financial advisors or conducting thorough due diligence is recommended before making investment decisions.
Royal Arc Electrodes Ltd IPO Lot Size
Here is the Royal Arc Electrodes Ltd IPO Lot Size details:
| Application | Lots | Shares | Amount |
| Retail (Minimum) | 1 | 1,200 | ₹1,44,000 |
| Retail (Maximum) | 1 | 1,200 | ₹1,44,000 |
| HNI (Minimum) | 2 | 2,400 | ₹2,88,000 |
Key Notes:
- Minimum Investment: ₹1,36,800 (at ₹114 per share)
- Maximum Investment: No defined upper limit for HNIs (High Net-worth Individuals)
- Retail Investors: Must apply in multiples of 1,200 shares per lot
Royal Arc Electrodes Limited Financial Information
| Period Ended | 30 Sep 2024 | 31 Mar 2024 | 31 Mar 2023 | 31 Mar 2022 |
| Assets | 55.69 | 52.25 | 43.85 | 42.48 |
| Revenue | 46.06 | 100.99 | 98.03 | 64.82 |
| Profit After Tax | 3.18 | 11.93 | 9.57 | 2.12 |
| Net Worth | 45.45 | 42.27 | 30.35 | 20.78 |
| Reserves and Surplus | 36.15 | 32.97 | 28.53 | 18.96 |
| Total Borrowing | 2.02 | 0.2 | 1.42 | 7.81 |
Key Financial Metrics Explained:
- Revenue: Total income generated from the company’s operations.
- Net Profit: Profit after all expenses, taxes, and interest.
- EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization (a measure of operating performance).
- EPS (Earnings Per Share): Net profit divided by the number of outstanding shares.
- Debt-to-Equity Ratio: Measures the company’s financial leverage (total debt divided by shareholders’ equity).
- ROE (Return on Equity): Measures profitability relative to shareholders’ equity.
- Total Assets: Everything the company owns.
- Total Liabilities: Everything the company owes.
Key Performance Indicator
| KPI | Values |
| ROE | 32.85% |
| ROCE | 37.73% |
| RoNW | 27.21% |
| PAT Margin | 11.95 |
| Price to Book Value | 2.64 |
Royal Arc Electrodes Ltd IPO Objects of the Issue
1) Expansion of Manufacturing Facility
- The company intends to utilize a portion of the proceeds to enhance its production capacity at its existing manufacturing unit located in Zaroli, Umbergaon, Valsad, Gujarat.
- This expansion aims to meet the increasing demand for welding consumables and improve operational efficiency.
2) Funding Working Capital Requirements
- A significant part of the IPO proceeds will be used to finance working capital needs to support business growth.
- This will help the company maintain smooth operations by ensuring adequate inventory levels, raw material procurement, and other operational expenses.
3) General Corporate Purposes
- The company will allocate funds for general business operations, including brand building, marketing, administrative costs, and future strategic initiatives.
These objectives aim to strengthen Royal Arc Electrodes Ltd’s position in the welding consumables industry and support its long-term growth strategy.
Royal Arc Electrodes Ltd IPO Growth
According to recent financial data, Royal Arc Electrodes Ltd has shown significant growth in recent years, with a substantial jump in both revenue and net profit, particularly between FY22 and FY23, highlighting a positive trend in their business operations; however, some analysts raise concerns about the sustainability of this rapid growth and potential overvaluation in their upcoming IPO due to the large leap in earnings compared to previous years.
Key points about Royal Arc Electrodes Ltd growth:
1) Revenue and Profit Growth:The company has reported a considerable increase in total income and net profit over the last few fiscal years, with the most notable jump occurring between FY22 and FY23.
2) Recent Performance:In the first half of FY25, Royal Arc Electrodes has maintained a strong performance with a significant increase in net profit compared to the previous year.
3) Potential Concerns:Some analysts express caution regarding the recent rapid growth, questioning whether it can be sustained in the long term and suggesting potential “window dressing” to enhance IPO valuations.
4) Market Segment:Royal Arc operates in the welding consumables market, which presents opportunities for expansion due to growing industrial demand.
Strengths of Royal Arc Electrodes Ltd IPO:
Sector Demand:
- If the company operates in the electrode manufacturing sector, the demand for electrodes is likely tied to industries like steel, construction, and heavy engineering, which are typically strong and growing.
Innovative Products/Technology:
- If the company has unique or technologically advanced electrode products that give it a competitive edge, it could provide strong growth potential.
Expanding Market:
- If the company is expanding into international markets, particularly emerging economies where infrastructure development is booming, it could benefit from significant growth in demand for its products.
Experienced Management Team:
- The presence of an experienced leadership team with a solid track record could enhance investor confidence and execution ability.
Growing Infrastructure Sector:
- A strong link to the infrastructure, construction, or industrial sectors means the company could see continued demand for its products if these sectors are growing.
Risks of Royal Arc Electrodes Ltd IPO:
Market Volatility:
- As with any IPO, market conditions can be volatile. A downturn in the broader stock market or economic instability could negatively affect the IPO price or post-IPO performance.
Dependence on Key Clients:
- If a significant portion of the company’s revenue comes from a small number of key clients or industries, the loss of one or more of these customers could impact performance.
Operational Risks:
- Risks related to manufacturing or supply chain disruptions, especially in industries dealing with raw materials and production, could affect profitability.
Regulatory Risks:
- Regulatory changes, particularly in environmental or industry-specific regulations, could introduce additional costs or restrictions on the company’s operations.
Competition:
- Strong competition from established industry players could limit market share growth, especially if Royal Arc Electrodes Ltd is a newer company or is trying to scale up.
Debt or Liquidity Issues:
- If the company has high levels of debt or faces liquidity challenges, this could pose risks to financial stability, especially if market conditions worsen.
How to Assess the IPO:
To get a comprehensive understanding of the IPO’s strengths and risks, it’s crucial to look at the company’s IPO Prospectus, which will include details like:
- Financial Performance (revenue, profitability)
- Business Model and Growth Plans
- Risk Factors (specific to the company)
- Use of IPO Funds (how the raised capital will be used)
Once the IPO prospectus is available (typically in the week leading up to the IPO launch), it will provide more concrete information for evaluating strengths and risks.
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