Beezaasan Explotech Ltd. IPO: Key Details

Beezaasan Explotech

• Beezaasan Explotech is coming out with an initial public offering (IPO) of 34,24,800 equity shares in a price band Rs 165-175 per equity share.
• The issue will open on February 21, 2025 and will close on February 25, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 16.50 times of its face value on the lower side and 17.50 times on the higher side.
• Book running lead manager to the issue is Smart Horizon Capital Advisors.
• Compliance Officer for the issue is Ankita Choudhury. 

Profile of the company

Beezaasan Explotech deals in manufacturing and supplying a wide array of Explosives and Explosive accessories covering mainly cartridge explosives which includes Slurry Explosives, Emulsion Explosives and Detonating Fuse. Its products are manufactured using mixture of nitrate, catering to diverse requirements. Through the expertise of its promoters in diversified field application knowledge, it has designed products that meet the stringent requirements of varied Industries which include cement industry, mining industry and defence industry. It also supplies to Border Roads Organization and Public Sector Undertakings as well. It has its manufacturing units with the technologically equipped Quality Assurance Systems which ensures high standard of inputs and outgoing products.

It has a licensed capacity of 45,000 Metric Ton for manufacturing Slurry Explosives with licensed premises which includes Slurry Explosives Manufacturing plant, 1 Raw Material Stores, 1 Aluminium Store, 1 Blasting Shelter, 1 Destruction yard, 1 Q.C. Lab, 1 Testing Area with connected facilities, 11,400 Metric Ton for Emulsion Explosives with licensed premises which includes Emulsion Explosives Manufacturing Plant 1 & 2 with connected facilities and 51 million Mtrs for Detonating Fuse with licensed premises which includes 1 transit sheds, 1 spinning buildings, 1PETN drying with connected facilities. In authorizing the product in the explosives industry, it need a lab trial certificate in the presence of a PESO Officer at the manufacturing premises and the same is sent to Nagpur PESO Head-quarters for final testing. When approved by the PESO department the product is sent for field trial to different private companies for field application. After the successful field trial, these all documents are then submitted to the PESO department for approval of product authorization and manufacturing. 

Proceed is being used for:

• Funding the Capital expenditure towards civil construction required for Expansion of existing manufacturing unit for Emulsion Explosive-3 Plant, Emulsion Bulk Explosive Plant and Detonating Fuse Plant at the existing Manufacturing facility situated at Bhanthala, Mahisagar, Gujarat
• Funding of Capital expenditure towards purchase of Plant and Machineries for Expansion of existing manufacturing unit for Emulsion Explosive-3 Plant, Emulsion Bulk Explosive Plant and Detonating Fuse Plant at the existing Manufacturing facility situated at Bhanthala, Mahisagar, Gujarat
• Funding of Capital expenditure towards civil construction required for Expansion of additional magazine (Storage) facility required for Emulsion Cartridge Explosives and Detonating Fuse at the existing location situated at Felsani, Gujarat
• Purchase of commercial vehicle
• Repayment/prepayment of all or certain of its borrowings availed of by the company
• General corporate purposes

Industry Overview 

The principal distinction between explosives and blasting agents is their sensitivity to initiation. Explosives are capsensitive, whereas blasting agents are not and therefore requiring a primer. Water gels and slurries may be either explosives or blasting agents. The many industrial and military uses for explosives and blasting agents-ranging from earth moving to seismic wave generation to materials modification to munitions to propulsion-have generated a host of sophisticated and specialized explosives products and delivery packages. However, in terms of overall revenues, markets and products, the business is overwhelmingly dominated by chemical materials based on the intermediate production of nitric acid (principally ammonium nitrate [AN]) that are used by the world’s mining and quarrying industries. Ammonium nitrate consumption for explosives has grown because of its safety advantage over other products such as dynamite. Ammonium nitrate can be shipped and stored and mixed with fuel oil when needed. Ammonium nitrate fuel oil (ANFO) is made of about 94% ammonium nitrate and 6% fuel oil. ANFO is widely used as an explosive in mining, quarrying, and tunneling construction or wherever dry conditions exist.

The largest consumers of explosives in industrial applications are mainland China, the United States, South Asia and Eurasia. In addition to consumption by the mining industry, a significant volume of explosives is also consumed by the construction industry and in miscellaneous applications. Metal mining has overtaken coal mining to become the largest consuming sector for industrial explosives, accounting for 38% of total consumption. Demand growth for this application is estimated at 1.7% per year during 2024-29. Metallic minerals are generally low-grade ores found only in geologically favorable areas of the world. Consequently, the consumption of explosives by this mining sector follows their geographical distribution. 

Coal mining recently becomes the second-largest consuming sector for industrial explosives, accounting for around 36% of total consumption. Coal mining output started to decline several years ago as a consequence of the global effort to reduce carbon dioxide emissions. Coal mining and the use of explosives in this segment is expected to continue stagnating in the forecast period. Production of stone for construction and the production of cement from quarrying operations account for an additional 13% of the world mining market for explosives. Consumption of explosives in quarrying materials is forecast to increase at around 1.1% over the next five years.

Pros and strengths

One stop solution for explosives product: The company offers personalized assistance, tailored specifically to the unique needs and circumstances of each customer, ensuring a customized approach to explosive products based on their specific applications. It provides comprehensive support from providing different types of Explosives and related Accessories to reducing transportation cost, assure timely supplies and performance guarantee. It offers wide range of products to its customers and also has the capability to develop and supply special products as per a customer’s specific requirement approved by PESO.

Continuous focus on developing novel and innovative products: For any company, innovation and technical progress are key factors for its success in the long term. The company constantly encourages its people to innovate and develop new products for catering to demands of its customers. The company is in constant touch with its customers to obtain the feedback with regards to its products so that it can constantly improve its products to provide better performance. This has resulted in the development as well as the production of its revolutionary explosive products and services for the customers in the best possible manner.

Quality products: Its motto from the very beginning has been safety and quality. The testing of raw materials as well as finished products ensures quality of the products performance. This has been achieved by employing qualified and experienced personnel and laboratories that have been provided, where all inputs i.e., both raw and packaging materials are tested and only approved inputs are issued for production. Quality Control personnel also check at each level of production (Intermediates) to ensure that approved manufacturing process is strictly followed. Finally finished product is extensively tested before dispatch to the customers resulting in consistency in quality. 

Risks and concerns

Maximum revenue comes from limited customers: The company’s customer base currently comprises a host domestic companies. It depends on certain customers who have contributed to a substantial portion of its total revenues. The company has garnered 55.38%, 55.59% and 55.93% of its total revenue from top 10 customers in FY24, FY23 and FY22 respectively. Reliance on a limited number of customers for its business may generally involve several risks. These risks may include, but are not limited to, reduction, delay or cancellation of orders from its significant customers, failure to renegotiate favourable terms with its key customers, the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations and future prospects of the company.

Geographical constrain: The company generated its major portion of sales from its operations in certain geographical regions especially, Gujarat and Rajasthan. Such geographical concentration of its business in these regions heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions, which may adversely affect its business prospects, financial conditions and results of operations. It may not be able to leverage its experience in such regions to expand its operations in other parts of India, should it decide to further expand its operations. Factors such as competition, culture, regulatory regimes, business practices and customs, industry needs, transportation, in other markets where it may expand its operations may differ from those in such regions and its experience in these regions may not be applicable to other markets.

Source majority of raw materials from domestic market: The company sources its major portion of the raw materials from domestic market i.e. Gujarat and Maharashtra. This strategic decision allows it to benefit from the geographical advantages, ensuring timely delivery of all materials. For the period ended September 30, 2024 and for the financial years ended March 31, 2024, 2023 and 2022, its raw material procurement from its suppliers situated in Gujarat contributed 66.65%, 52.47%, 72.32% and 69.87% respectively of total Purchase of Raw Material and its suppliers situated in Maharashtra contributed 22.32%, 37.11%, 22.99% and 25.14% respectively of total Purchase of Raw Material as per its Audited Standalone Financial Statements. Such geographical concentration of its business in these regions heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in these regions which may adversely affect its business prospects, financial conditions and results of operations. 

Outlook

Beezaasan Explotech manufactures and supplies a comprehensive range of explosives and explosive accessories. It primarily produces cartridge explosives, including slurry, emulsion, and detonating explosives. The company is primarily involved in the manufacturing of explosives and explosives accessories used in the cement, mining, and defence industries. The company is continuously focusing on development of novel and innovative products. On the concern side, the company is highly dependent on certain key customers for a substantial portion of its revenues and it does not have long term contracts with all of these customers. Loss of relationship with any of these customers may have a material adverse effect on its profitability and results of operations.

The company is coming out with a maiden IPO of 34,24,800 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 165-175 per equity share. The aggregate size of the offer is around Rs 56.51 crore to Rs 59.93 crore based on lower and upper price band respectively. On performance front, the revenue from operations decreased by 18.23%, from Rs 22,791.80 lakh in fiscal year 2023 to Rs 18,635.85 lakh in fiscal year 2024. This decline was primarily driven by a fall in the price of ammonium nitrate, a key ingredient in its products, due to industrial factors. For fiscal 2024, the company reported a net profit of Rs 486.62 lakh, a significant increase compared to Rs 293.57 lakh in Fiscal 2023.

Continuously investing in its manufacturing capabilities is a strategic move for the company. By setting up additional manufacturing facilities and installing, accommodating new automated machines and other additional plant & machineries, it will be able to achieve better operational efficiency. The setting up of new manufacturing units and installation of new machineries will enhance its manufacturing processes and increase its production capacity. Further, as and when the production capacity is increased, a separate premise is required to store the finished products, for which investment in construction of new storage magazines, will help the company streamline its process of dispatch. Hence, right from starting the new production process to increase in supply of explosives and its accessories and to cater to the demands of existing as well as new customers, this strategic move will increase the overall efficiency of manufacturing process and providing seamless deliveries with quality maintenance of the explosives as per the prescribed standards.