Rishabh Instruments Limited IPO

About the company:

Rishabh Instruments Ltd. is a global energy efficiency solution company focused on electrical automation, metering and measurement, precision engineered products, etc. with diverse applications across industries including power, automotive and industrial sectors. The company supplies a wide range of electrical measurement and process optimization equipment, and is engaged in designing, developing and manufacturing, and sale of devices significantly under its own brand across several sectors. It also provides comprehensive solutions to its customers looking for cost-effective ways to measure, control, record, analyse and optimise energy and processes through its array of products. It also provides complete aluminium high pressure die casting solutions for customers requiring close tolerance fabrication (such as automotive compressor manufacturers and automation high precision flow meters manufacturers), machining and finishing of precision components. Rishabh Instruments is a global leader in manufacturing and supply of analog panel meters, and is among the leading global companies in terms of manufacturing and supply of low voltage current transformers.

Objects of the Offer:

The company intends to utilize the net proceeds from the fresh issue towards the following objects:
- Financing the cost towards expansion of Nashik Manufacturing Facility
- General corporate purposes

Key Strengths and Opportunities:

- Vertically integrated operations, backed by strong manufacturing capabilities: Rishabh Instruments has geographically distributed manufacturing facilities which make it among the leading global companies in terms of manufacturing and supply of low voltage current transformers and its vertical integration makes it a cost and time efficient supplier of its products to the customers. Additionally, all its manufacturing facilities are vertically integrated with end-to-end product development capabilities from concept design to prototype testing, along with dedicated R&D units.

- Diversified product portfolio: The company is a global leader in manufacturing and supply of analog panel meters, and is among the leading global companies in terms of manufacturing and supply of low voltage current transformers. It has a product portfolio of over 145 product lines and 0.13 million stock keeping units as of May 31, 2023.

- Wide customer base: The top 10 global customers accounted for only 31.92% of global sales revenue in Fiscal 2023, respectively, and the top 20 global customers accounted for only 42.70% of global sales revenue. The company has a wide customer base and is not dependent on any specific customer for its total revenue from operations.

- Global engineering solution provider operating in large addressable markets and well positioned to benefit from mega industrialisation trends: As a global energy efficiency solution company providing electrical measurement and process optimization equipment, and engaged in the designing, development and manufacturing of devices primarily across power and industrial sectors, the company is well positioned to leverage its market position to tap the opportunities from the mega industrialisation trends.

Risks:

- The business of Rishabh Instruments is dependent on its manufacturing facilities, and is subject to certain risks in its manufacturing process. Any slowdown or shutdown in its manufacturing operations could have an adverse effect on the business, financial condition and results of operations.

- The company sources components and other inputs, including microcontroller semiconductor chips used in its manufacturing operations, and in certain cases from suppliers identified by the OEM customers or, directly from its OEM customers. Some of the products it manufactures requires components that are only available from one manufacturer. In such cases, supply shortages substantially curtail production using a particular component such as semiconductors. A supply shortage may increase its costs if they are forced to pay higher prices for components or raw materials or both, or if they have to redesign or reconfigure products to accommodate a substitute component. Shortages in the supply of semiconductors have had, and may continue to have, a material adverse effect on the results of operations and financial condition.

- The company proposes to utilise a substantial portion of the Net Proceeds of the Offer towards Expansion of Nashik Manufacturing Facility I. However, it has not entered into any definitive arrangements to utilise certain portions of the Net Proceeds of the Offer. The funding requirements and deployment of the net proceeds of the offer are based on management estimates, a cost assessment report from architect, certificate from a chartered engineer and has not been appraised by any bank or financial institution or other agency. The deployment of the Net Proceeds will not be monitored by a monitoring agency. The proposed expansion plans relating to Nashik Manufacturing Facility I are subject to the risk of unanticipated delays in implementation and cost overruns.

- Most of the customers do not commit to long term contracts, and may cancel their orders, change production quantities, delay production or change their sourcing strategy. Due to the possibility of orders not being placed, cancellations or changes in scope and schedule of orders, which is typically at the discretion of customers, or problems it encounters in order execution or reasons outside its control or the control of its customers, the company cannot predict with certainty when, if or to what extent a project will be performed or that purchase orders will be in one period as consistently as they have been in prior periods.

Financial Snapshot: