DCG Wires And Cables Limited

DCG Wires And Cables Limited is manufacturer of copper cables and wires. The primarily focus is on manufacturing of different types of copper cables which finds application in Transformers. The product portfolio consists of Copper Strips, Paper Covered Copper Strips and Wires (Kraft/Crepe/Nomex/Mica) Bare Copper Wires and Strips, Copper Tapes and Fiber Glass Copper.  As on the date of this Prospectus, they have three manufacturing units – 1) Odhav, Ahmedabad 2) Kubadthal, Ahmedabad and 3) Waghodia, Vadodara,  Having a combined installed capacity of 5,868 MT for manufacturing bare Copper wire & Strips, 1,404 MT for Paper Covered Copper Strips & wire, 1,512 MT for Cable Wires, 5,760 MT for Copper Rods, 10,080 MT for Copper Flats, 972 MT for Submersible Wires and 540 MT for Fiber Glass Covered Copper Strips. Company is currently in process of setting up a new manufacturing plant at Bhayala, Bavla, Gujarat, in order to increase the manufacturing capabilities. The land on which the said plant is being constructed comprises of over 8308 sq. mtrs. area and is obtained on lease from the Promoter Director, Mr. Devang Patel for a period of 7 years from November 20, 2023. As and when needed, they are gradually planning to consolidate and shift all three existing manufacturing facilities to this new manufacturing facility for better administration, efficiency and cost optimization. As per financial performance, DCG Wires And Cables Limited has posted total income / net profits of Rs 14.62 Cr / Rs 0.10 Cr (FY21), Rs 27.70 Cr / Rs 0.37 Cr (FY22), Rs 54.55 Cr / Rs 1.72 Cr (FY23) and Rs 76.39 Cr / Rs 8.47 Cr (29.02.24 FY24). So as per previous financials data, company has shown very good growth, but sudden rise in net-profit just before IPO raises doubts. Company has posted an average EPS of Rs 19.47 and average RoNW of 21.54% for last three fiscals. Issue is priced at a P/BV of 2.47 as per NAV of 40.54 as on Post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 489.21, 105.52 and 19.64 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table.  On BRLM's front, Interactive Financial Services Limited is associated with this SME IPO and handled 14 IPO in last 3 year. From last 10 IPOs, two opened below issue price and remaining opened above issue price or at par on the day of listing. As of now from last 10 IPOs, three is trading above issue price and remaining trading below or at par issue price. ( As on 03.04.24 ) As per financials, DCG Wires And Cables Limited has shown good results, RoNW is 11.22% and P/E is respectively 489.21, 105.52 and 19.64 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced, but sudden rise in net-profit just before IPO is very surprising. Also value of trade receivables is very higher. Company is in business of manufacturing of copper cables and wires, which is highly competitive and fragmented. But we may see growth in the segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1 Devang Patel
• 2 Harshadbhai Patel
• 3 Ushaben Patel