Rexpro Enterprises Ltd. IPO: Key Details

Rexpro Enterprises

• Rexpro Enterprises is coming out with an initial public offering (IPO) of 37,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 145 per equity share.
• The issue will open on January 22, 2025 and will close on January 24, 2025.
• The shares will be listed on SME Platform of NSE.
• The share is priced 14.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Horizon Management.
• Compliance Officer for the issue is Khushboo Nilesh Rawat.

Profile of the company

Rexpro Enterprises is a growing diversified product manufacturing company based out of Vasai, Maharashtra. It started as a one stop solution to meet the furniture and fixture requirements for retailers and acquired clients across multiple retail segments such as fashion, lifestyle, electronics, grocery, beauty, telecom etc. The company has made complete standalone stores, shop in shops, kiosks and displays for leading global brands and several of large Indian retailers. Further, given its multi-material manufacturing capability for customised products, it has diversified into commercial and institutional furniture for offices, hospitals, government offices etc., and also the growing home segment. Further, it has developed industrial products like racks, cabinets and trolleys.

India has witnessed a high growth in the infrastructure sector in which roads and metros are an integral part. To enter and excel in this sector it is manufacturing sound barriers which are now installed on a few flyovers in Mumbai helping to reduce noise pollution and providing a better environment to the neighbourhood. The company has also ventured into products with high potential such high precision double doors used at Metro stations (platform screen doors) for better safety and prevention of accidents at the stations. These have been conceptualised and manufactured in-house. Given the boom of online retail and growth in the logistics sector, in its subsidiary, it has undertaken the manufacturing of racking systems and fixtures catering specially to the warehousing industry.

The company’s products are mainly made from wood and metal or a combination and it also uses various support materials like laminates, paints, acrylic, prints, solid surfaces, LEDs etc. for accessorising and finishing up to the final products. All processes are in house to ensure quality and adhere to timelines. It also undertakes turnkey projects for end-to-end solution which includes designing, manufacturing and installing all products required and offer such services across India. It has three manufacturing facilities located in and around Vasai, Maharashtra for having an efficient operation. These facilities and warehouses together have around 1,00,000 square feet of area. It has a varied machinery set-up which enables it to do all processes in-house such as designing, prototyping, metal and wood fabrication, moulding, powder coating, cutting, printing, polishing & packaging, etc. The company has dedicated area in its manufacturing plant-I for its registered office. All departments such as sales, accounts, designing etc are based and operate from the registered office. 

Proceed is being used for:

• Purchase of equipment and renovation of factory
• Funding of working capital requirements of the company.
• Pursuing inorganic growth
• General corporate expenses

Industry Overview

The Indian retail sector is highly fragmented with more than 90% of its business being run by the unorganized retailers like the traditional family run stores and corner stores. The organized retail however is at a very nascent stage. In 2022, traditional retail, organised retail and E-commerce segments accounted for 81%, 12% and 8% of the market, respectively, the organised retail market in India has 12% share of the total retail market and has a growth rate of 10% over 2021-32. Increasing demand for organized retail space has helped create a capacity of around 120 million square feet 22 (MSF) in retail space across major Indian cities. Major Indian cities include Delhi (23.7 MSF) and Mumbai (16.7 MSF).

Rapid urbanization has led to increased traffic on roads and bridges, particularly in urban areas. The construction of new flyovers and elevated roads to accommodate this growth has heightened the need for sound barriers to protect communities from noise pollution. The warehousing sector in India has undergone significant transformation in recent years. Driven by the rise of e-commerce, advancements in technology, and policy reforms, organized warehousing space has expanded rapidly. India's warehousing industry is a critical component of the logistics sector, contributing to the efficient storage and distribution of goods. Traditionally, the sector was highly fragmented, dominated by small, unorganized players. However, with the advent of modern supply chain requirements, there has been a marked shift towards organized warehousing. The organized warehousing sector in India was valued at around $12 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 20-25% over the next five years. The total warehousing space across India stood at around 265 million square feet in 2022, with organized space contributing to approximately 30% of this. The organized warehousing space is expected to reach 500 million square feet by 2025.

The future of organized warehousing in India looks promising, with several trends likely to shape its evolution: Increased Investment, Sustainability Focus, Expansion into Tier II and III Cities and Digital Transformation. The organized warehousing sector in India is on a robust growth trajectory, fueled by strong demand from e-commerce, favorable government policies, and technological advancements. While challenges remain, the sector's future is bright, with significant opportunities for investment and expansion in the coming years.

Pros and strengths

Diversified product range: The company has over the years developed a diverse product range with an ability to produce customized products at scale to meet the stringent and growing needs of its clients. It has further developed products which can be made using the same processes but for a very different purpose. This includes products and solutions catering to industrial uses in the form of institutional furniture, engineering items, noise barriers and PSD. With advent of e-commerce and quick delivery reaching out to customers has been possible through very systematic warehouses - an opportunity which it has been able to identify in time and take advantage of the same. These de-risks the company from concentration risk, from sector, from client and from any adverse situation.

Strong quality control and ethical business practices: The company caters to some of the marque retail powerhouses in India who have very stringent requirements for quality, finishing and timely delivery. It also has been expanding at a fast-paced growth across geographies further requiring it to strengthen its supply chain management. The company has a dedicated quality control department which assesses quality at every level. It is majorly divided in 3 main parts; all raw materials once reach the factory are only cleared further for manufacturing once the quality control department gives a go ahead, further there are quality checks when the products are in process of manufacturing and finally the finished products are checked by the quality control department and only dispatched after receiving confirmation from them.

Versatile and multiple manufacturing facilities: The company has three manufacturing plants in Vasai, Maharashtra to cater to the retailing, industrial and infrastructure sectors. Both the plants are well equipped with high end machinery and tools for manufacturing multi material products having a combination of wood, metal and plastic. Further, it also has professional printing machines by which it provides the final products to its customers. The company’s plants are equipped to produce at mass levels based on customized requirements. It has a strong array of machinery for cutting, bending and designing with mixing and matching different materials and in-house painting for durability and quality product manufacturing.

Risks and concerns  

Dependent on various kinds of suppliers: Its business is significantly affected by the availability, cost and quality of the raw materials and bought out items, which it needs to construct, develop and provide for its projects, products and services. The prices and supply of raw materials and bought out items depend on factors not under its control, including domestic and international general economic conditions, competition, availability of quality suppliers, production levels, transportation costs and import duties. Although it may enter into back-to-back supplier contracts or provide for price contingencies in its contracts to limit its exposure, if, for any reason, its primary suppliers of raw materials and bought out items should curtail or discontinue their delivery of such materials to it in the quantities it needs, provide it with raw materials and bought out items that do not meet its specifications, or at prices that are not competitive or not expected by the company, its ability to meet its material requirements for its projects could be impaired, its construction schedules could be disrupted and its results of operations and business could suffer.

Inability to increase prices: It manufactures several diverse products for business verticals such as retail, commercial, institutional and infrastructure. As per its past experience it may continue to experience pressure from its customers to reduce its prices, which may affect its profit margins going forward. If it reduces it prices, it must be able to reduce its operating costs and increase operating efficiencies in order to maintain profitability, it cannot assure that it will be able to do so as much is required and that could result into reduced profitability. As it has diverse product range, supplied to various business verticals, its profitability is dependent in part on its ability to achieve higher sales volume. If it is unable to offset customer price reductions in the future through improved operating efficiencies, new manufacturing processes, sourcing alternatives and other cost reduction initiatives, its results of operations and financial condition may be materially adversely affected.

Dependent on third party transportation providers: The company uses third party transportation providers for supply of raw material and delivery of its goods. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. In addition, goods may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its raw materials may have an adverse effect on its business and results of operations.

Outlook

Rexpro Enterprises is a growing diversified product manufacturing company. Its business model is B2B (Business-to-Business) and it has clients from several business verticals owing to the diverse range of products it manufactures. While its manufacturing is all based out of Vasai, Maharashtra, it services pan India requirements. On the concern side, the industry, in which it is operating, is highly and increasingly competitive due to presence of many small-time players in unorganized sector. Its results of operations and financial condition are sensitive to, and may be materially adversely be affected by, competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins or loss of market share or a failure to grow its market share, any of which could substantially harm its business and results of operations. 

The company is coming out with an IPO of 37,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 145 per equity share to mobilize Rs 53.65 crore. On performance front, revenue from operations contributed Rs 8298.66 lakh for the year ended March 31, 2024 as against Rs 6287.99 lakh for the year ended March 31, 2023. The revenues have grown from 31.98% in FY24 with contribution from full year operations of the subsidiary Progulf Warehousing Solutions LLP contributing to Rs 765.12 lakh. Moreover, Profit after tax were Rs 518.34 lakh for the year ended March 31, 2024 as against RS 63.94 lakh for the year ended March 31, 2023.

Meanwhile, the company has developed innovative products such as platform screen doors, etc. Such innovative products have helped it in growth of its business. In future it would like to continue to do research and development in the infrastructure and retail business verticals which are essential for its growth in future. The company shall continue to identify new sectors for collaboration. Currently it operates at an all-India level in terms of implementation of projects and supply of materials, however, its manufacturing base is based out of the western part of the country. For deeper penetration across the country, the company wishes to have marketing and implementation teams across different areas in the country.