Storage Technologies & Automation Limited (Racks and Rollers) IPO Review
Storage Technologies & Automation Limited, known as Racks and Rollers, is a prominent name in the storage, warehousing, and automation industry. The company was incorporated on March 19, 2010, and is based in Bangalore, Karnataka. It specializes in the design, manufacture, and installation of metal storage racks and automated warehouse systems, catering to a variety of industries such as oil & gas, automotive, aerospace, food & beverages, pharmaceuticals, textiles, retail, and FMCG.
The promoter family behind Storage Technologies & Automation Limited includes Mr. Khasim Sait, Mr. Mohammad Arif Abdul Gaffar Dor, Mr. Hanif A Khatri, Mr. Syed Azeem, Mr. Afzal Hussain, and Mr. Nuumaan Khasim. These individuals have been instrumental in steering the company towards its current success.
The inception of the company was driven by the need to provide innovative and efficient solutions for diverse warehousing needs. The company's commitment to quality and customer-centric approach has been evident since its establishment. It has been ISO 9001:2015 certified, reflecting its dedication to maintaining high standards in its offerings.
Over the years, Storage Technologies & Automation Limited has executed over 2500 projects and served more than 900 customers worldwide, marking its presence in over 30 countries. The company's manufacturing facility in Bangalore spans approximately 56,250 square feet, supporting a streamlined manufacturing process that adheres to the highest quality standards.
The company's journey from its inception to becoming a leader in its field is a testament to the vision and hard work of its founders and the entire team at Storage Technologies & Automation Limited. Their focus on innovation, quality, and providing economically feasible solutions has set them apart in the industry. With a robust order book and a clear vision for the future, Storage Technologies & Automation Limited is poised for continued growth and success in the years to come.
Competitive Strengths
Storage Technologies & Automation Limited, known as Racks and Rollers, stands out in the storage solutions industry for several competitive strengths that position it as a leader in its field. Here's an in-depth look at the factors contributing to its competitive edge:
Revenue, Sales, and Profit
Storage Technologies & Automation Limited, known as Racks and Rollers, is a company that specializes in the design, manufacturing, and installation of storage racking systems and automated warehouses. For the seven months of FY24 ending on October 31, 2023, the company reported a net profit of Rs. 3.59 cr. on a total revenue of Rs. 53.17 cr. This marked a significant increase compared to previous years, indicating a period of substantial growth for the company. The company's order book value as of April 1, 2024, stood at Rs. 21.36 cr., suggesting a strong pipeline of future revenue. The financial growth is attributed to the company's expansive infrastructure and commitment to quality as an ISO 9001:2015 certified entity. The company's financial performance, particularly the bumper profits in 7M-FY24, has attracted attention and raised questions about the sustainability of such earnings. However, the company's strategic business approaches and operational efficiency position it well to meet the evolving needs of its clients.
Distribution Network and Geographical Reach
Storage Technologies & Automation Limited (STAL), operating under the brand name Racks and Rollers, has established a significant presence in the storage, warehousing, and automation industry. With its inception in 2010, the company has expanded its distribution network across India and the Middle East, focusing on supply chain optimization and business performance development. STAL's commitment to providing cutting-edge solutions is evident in its comprehensive range of products and services, which cater to various industries such as food, pharma, chemicals, retail, FMCG, and more. The company's infrastructure supports a streamlined manufacturing process, ensuring quality and efficiency in its offerings. As of 2024, STAL has reported an order book value of Rs. 21.36 crore, indicating a robust demand for its innovative storage solutions. The geographical reach of STAL extends over 30 countries globally, showcasing its ability to serve a diverse international clientele and affirming its status as a leader in the global market.
Unique Features
Specializing in the design, manufacturing, and installation of metal storage racks and automated warehouses, the company caters to a wide array of industries, including oil & gas, automotive, aerospace, food & beverages, pharmaceuticals, textiles, retail, and FMCG. With a commitment to quality and innovation, Racks & Rollers is ISO 9001:2015 certified and operates from a significant infrastructure in Bangalore, Karnataka, which spans approximately 56,250 square feet, supplemented by an additional storage facility of around 20,000 square feet. This infrastructure underpins a streamlined manufacturing process that has enabled the company to complete over 2500 projects globally, serving more than 900 customers across 30 countries. As it prepares for its IPO, Racks & Rollers aims to utilize the proceeds for working capital requirements and general corporate purposes, indicating a forward-looking approach to business expansion and sustainability.
Investment in Research and Development
Storage Technologies & Automation Limited (STAL), operating under the brand Racks and Rollers, has demonstrated a strong commitment to innovation and quality control by investing significantly in research and development (R&D). The company's focus on utilizing cutting-edge technology is evident in its comprehensive approach, integrating sales, design, production, and commissioning to drive growth and development. STAL's investment in R&D is part of its strategic business approach, positioning it to effectively meet the evolving needs of its clients across various industries. This investment is also reflected in the company's recent Initial Public Offering (IPO), which aimed to raise capital to support its expansion and innovation strategies. The IPO details suggest that the company is channeling funds towards enhancing its manufacturing capabilities and infrastructure, which includes a substantial facility in Bangalore. By prioritizing R&D, STAL aims to maintain its competitive edge and continue providing economically feasible storage solutions that exceed client expectations.
Storage Technologies & Automation Limited IPO Details
Issue Date: The issue date in an IPO, also known as the initial offering date, is when a company's stock is first made available for public purchase. This date is a significant milestone in the process of an initial public offering, marking the transition of a company from private to public status. (Issue Date: April 30, 2024 to May 3, 2024).
Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date after processes like share allotment and finalization are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Listing Date: Wednesday, May 8, 2024).
Face Value of Shares: The face value of shares in an IPO, also known as the nominal or par value, is a predetermined fixed price set by the company and mentioned in its memorandum of association. It represents the initial capital contributed by the founders and is used for accounting and regulatory purposes. During an IPO, shares are typically offered at a price higher than the face value, which includes a premium based on market demand and the company's performance indicators. (IPO Face Value: ₹10 per share).
Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: ₹73 to ₹78 per share).
Lot Size: In an Initial Public Offering (IPO), the lot size refers to the minimum number of shares an investor can apply for. It is a pre-determined set of shares that investors must bid for, and applications must be in multiples of this lot size. The lot size ensures a standardized bidding process and helps in the fair allocation of shares among investors. (Lot Size: 1600 Shares).
Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. (Total Issue Size: 3,840,000 shares (aggregating up to ₹29.95 Cr)).
Fresh Issue: A fresh issue in an Initial Public Offering (IPO) refers to the creation and sale of new shares by a company to the public. This process helps the company raise new capital that can be used for various purposes such as expansion, debt repayment, or investment in new projects. Unlike an Offer for Sale, where existing shareholders sell their shares, a fresh issue results in the issuance of additional stock, which can lead to equity dilution for existing shareholders. The funds raised through a fresh issue go directly to the company, providing it with resources to grow and invest in its future. (Fresh Issue: 3,840,000 shares (aggregating up to ₹29.95 Cr)).
Issue Type: The type of an IPO can vary depending on the market and regulatory conditions. Some of the common types of IPOs are, Fixed priced IPO, Auction IPO, Book Building IPO, and Hybrid IPO. (Issue Type: Book Building IPO).
Listing At: The listing of shares in an IPO refers to the process where a company's shares are introduced to the public stock market, allowing investors to buy and sell the shares through a stock exchange. Once listed, anyone with a brokerage account can buy and sell the company's shares on the exchange. (Listing at: BSE SME).
Retail Shares Offered: This refers to the portion of the total shares being made available specifically for individual investors, distinct from institutional investors like banks or hedge funds. Regulatory bodies often mandate a minimum percentage of shares be reserved for retail investors, aiming to promote broader public participation in the capital markets. (Retail Shares Offered: Not less than 35% of the Net Issue).
QIB Shares Offered: QIBs are institutional investors such as banks, mutual funds, insurance companies, pension funds, etc., who have expertise and financial resources to invest in the securities market. They are considered as informed and sophisticated investors who can assess the risks and returns of an IPO. QIBs can bid for up to 50% of the total shares offered in an IPO via the profitability route, or up to 75% of the total shares offered in an IPO via the QIB route. QIBs have to pay only 10% of the bid amount at the time of application, and the rest after the finalization of the basis of allotment. (QIB Shares Offered: Not more than 50% of the Net Issue).
NII (HNI) Shares Offered: NII stands for Non-Institutional Investors, which includes High Net-worth Individuals (HNIs) who bid for shares worth more than ₹200,000. The NII category is reserved for investors who do not fall under the retail or Qualified Institutional Buyers (QIBs) categories. Typically, a certain percentage of the IPO, usually around 15%, is allocated for NIIs to ensure a wider distribution of shares. HNIs within the NII category often have a higher chance of allotment compared to retail investors, making it an attractive option for those looking to invest larger sums in an IPO. (NII (HNI) Shares Offered: Not less than 15% of the Net Issue).
Competitors of Storage Technologies & Automation Limited (Racks and Rollers)
Storage Technologies & Automation Limited (STAL), operating under the brand name Racks and Rollers, is a prominent player in the storage racking systems manufacturing and installation sector. The company specializes in providing a wide array of storage solutions, including metal storage racks and automated warehouses, catering to various industries such as oil & gas, automotive components & aerospace, food & beverages, pharmaceuticals, textiles, retail, FMCG, and more.
The competitive landscape for STAL is diverse, with several key players vying for market share in this niche industry. Based on the latest available data, some of the notable competitors in this field include:
1. JSW Infra: A significant infrastructure company with a strong presence in the market, known for its substantial sales turnover and market capitalization.
2. Bharti Hexacom: Another major entity with a robust sales record and a considerable market cap, primarily involved in telecommunications but also extending its reach into infrastructure.
3. SignatureGlobal: A real estate and infrastructure development firm that has marked its presence in the market with its sales and assets.
4. Juniper Hotels: Operating in the hospitality sector, this company competes in the broader infrastructure market, contributing to the competitive environment that STAL faces.
5. Rattanindia Ent: An enterprise with interests in various sectors, including infrastructure, which competes with STAL for market share.
These competitors, along with others in the market, create a dynamic and challenging environment for STAL. Each competitor brings unique strengths and offerings to the table, making the industry highly competitive. STAL's approach to maintaining its competitive edge involves continuous innovation and a customer-centric focus. The company's commitment to quality is underscored by its ISO 9001:2015 certification and its expansive infrastructure that supports a streamlined manufacturing process. With a total order book value of Rs. 21.36 crore as of April 1, 2024, STAL demonstrates a strong position in the market.
Investors and industry analysts closely monitor the performance and strategies of companies like STAL and its competitors. The financial health, market positioning, and future prospects of these firms are critical for stakeholders who are looking to invest or collaborate in the storage and automation industry.
The competition in the storage racking systems and automation industry is intense, with several established players and emerging firms. STAL, through Racks and Rollers, continues to innovate and provide high-quality storage solutions to maintain its competitive position in this fast-evolving market landscape.
Conclusion
In conclusion, the IPO of Storage Technologies & Automation Limited presents a nuanced investment opportunity. The company's recent financial performance, marked by a significant profit in the months leading up to the IPO, raises questions about the sustainability of these earnings. While the issue may seem fully priced based on the annualized earnings of FY24, it appears exorbitantly priced when considering FY23 figures. Investors are advised to exercise caution and consider the company's inconsistent financial history, competitive market segment, and the potential for 'window dressing' in its recent profit surge. Those with a medium-term investment horizon and a thorough understanding of the market may find this IPO worth considering. However, it is crucial to weigh the risks against the backdrop of the company's order book value and its strategic positioning in the storage solutions sector.
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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing securities, that suit your needs. The performance and returns of any equity stock can neither be predicted nor guaranteed.
FAQs
Q: What is an IPO?
An Initial Public Offering (IPO) is the first time a company offers its shares for sale to the public on a stock exchange. This allows the company to raise capital for growth and expansion.
Q: How can I apply for an IPO?
There are two main ways to apply for an IPO:
Retail Investor: You can apply through your trading broker using a Demat account and ASBA facility (explained below).
Institutional Investor: Large investors like banks and mutual funds have a separate application process.
Q: What is ASBA?
ASBA (Application Supported by Blocked Amount) is a safe and convenient method to apply for IPOs. With ASBA, the funds you bid for the IPO are blocked in your bank account and only debited if your bid is successful. This prevents unsuccessful applicants' money from being tied up.
Q: What is the difference between a fixed-price and a book-building IPO?
Fixed-Price IPO: The company sets a fixed price for the shares offered in the IPO.
Book-Building IPO: The price of the shares is determined based on investor demand during a bidding process.
Q: What are the risks involved in investing in IPOs?
New companies: IPOs often involve young companies with limited track records, so there's a higher risk of their stock price being volatile.
Overvaluation: Some IPOs can be overvalued, leading to a potential drop in share price after listing.
Q: How much should I invest in an IPO?
IPO investments should be a part of a diversified portfolio. Only invest what you can afford to lose, considering the inherent risks involved.
Q: What happens after I apply for an IPO?
The company allocates shares based on the bids received. You will be notified if your application is successful or not. The shares will then be credited to your Demat account after the listing date.
Q: When should I sell my IPO shares?
This is a personal decision based on your investment goals and risk tolerance. Some investors hold for the long term, while others may sell soon after listing to capture potential gains.
Q: Where can I find information about upcoming IPOs?
Many financial websites and brokerage firms provide information on upcoming IPOs, including issue details, timelines, and prospectuses.
Q: What are the tax implications of investing in IPOs?
Short-term capital gains tax applies to IPO shares sold within one year of purchase. Long-term capital gains tax applies if held for over a year, and the rates may vary depending on the country's tax regulations.