Shankara Building IPO review – Worth your money ?

Shankara Building Products Ltd is retailers of home improvement and building products in India. They serve home owners, professional customers (such as architects and contractors), and small enterprises, through their retail stores. They are going to introduce their initial public offer which will hit the primary market on 22^nd March 2017 and closes on 24^th March 2017. The company aims to raise around Rs.345 crore by offering shares at Rs.440-Rs.460 per Equity Share.

About Company

Shankara Building Products Ltd was originally incorporated as Shankara Pipes India Private Limited on October 13, 1995 at Bengaluru, Karnataka. The firm operates under the trade name Shankara BuildPro. As on December 31, 2016, they operated 103 Shankara BuildPro stores spread across 9 states and 1 union territory in India.. They serve different end-user segments in urban and semi-urban markets from their multi-channel sales approach, processing facilities, supply chain and logistics capabilities.

Their retail operations are usually settled for growth in housing demand, large market for home improvement, and increasing customer involvement in home solution. Under retail operations, they offer a range of products like structural steel, cement, TMT bars, hollow blocks, pipes and tubes, roofing solutions, welding accessories, primers, solar heaters, plumbing, tiles, sanitary ware, water tanks, plywood, kitchen sinks, lighting and other allied products. They also provide delivery and facilitate installation services for select product categories.

They used to serve home owners, professional customers (such as architects and contractors), and small enterprises, through their retail stores. In the semi urban markets, they serve specific agricultural requirements of individual customers and small enterprises. They are able to serve multiple sectors, including, housing, general engineering, automotive, renewable energy, agriculture, construction and infrastructure.

They carry third party brands such as Sintex, Uttam Galva, Uttam Value, Futura, APL Apollo and Alstone. And they have their own brands also such as Century Roof, Ganga and Loha at retail stores.

Business Revenue Segments

They have the following business segments through which they operate and derive revenues:

1. Retail sales
2. Channel and enterprise sales.

Retail Operations

They primarily cater to three customer groups:

• Home owners – This customer group comprises of home builders who make purchases for personal consumption in carrying out new installations or for retrofit requirements.
• Professional customers – This customer group primarily comprises of architects, contractors, electricians, plumbers and other third party professionals or service providers who are engaged by individual home owners.
• Small enterprises – This customer group primarily comprises of small entrepreneur driven companies and fabricators who buy products as input materials and process them further into end-use products.

Qualitative Factors

They believe that the following business strengths allow them to successfully compete in the industry:

• Providing customers a unique experience by offering a comprehensive range of home improvement and building products
• Strong vendor network and relationship built over two decades
• Their presence across the entire value chain
• Robust back-end infrastructure ensuring efficient supply chain management
• Strong track record and financial stability
• Experienced and dedicated management team

Strategies

• Scaling retail presence
• Enhancing product offerings
• Increasing presence in bespoke products
• Further strengthening value chain
• Focus on brand equity and marketability in the home improvement and building space

Objects of the Issue:

The object of the issue are:

1. Repayment or pre-payment of loans of the Company and VPSPL
   2. General corporate purposes
   3. Receive the benefits of listing of the Equity Shares on the Stock Exchanges
   4. Enhancement of Company’s brand name and creation of a public market for the Equity Shares in India.

Financials

For the financial year ended March 2016, the company posted a net profit of Rs 65.56 crore against Rs 34.54 crore in the previous financial year ended March 2015. It had posted a net profit of Rs 42 crore, Rs 47.76 crore and Rs 44.75 crore in FY14, FY13 and FY12, respectively.

At the upper price band, the IPO is priced at 20.7 times its FY17 annualised earnings. There are no comparative company in public domain, so we will not be able to provide you multiples of already public companies.

Find out about the allotment status of Shankara building IPO here.

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