Vasu Naren, Chairman & Managing Director, Sona Machinery Limited, says SMEs have fared quite well with their IPOs due to the interest of investors to opt for emerging and non-conventional businesses that are backed by strong fundamentals and established track record of consistent financial performance.
“They are perceived as having a lower risk on investments with a better performance, while giving good pricing and quality of offerings. Another crucial and deciding factor for SMEs is their proven business model, which is bundled with a clear understanding of their markets and customers, and a demonstrated ability to generate revenue with sustainable operations in the longer run,” he says.
Sona Machinery Limited, a Ghaziabad-based agro-processing original equipment manufacturer, recently announced the filing of its draft red herring prospectus (DRHP) with NSE Emerge, the SME platform of the National Stock Exchange (NSE). The IPO comprises a fresh issue of up to 3,624,000 equity shares with a face value of Rs 10 on NSE Emerge.
The company is planning to file the IPO sometime in the next two months. It refused to discuss how much it was planning to raise.
Naren explains that the funds raised will be used to expand manufacturing operations, set up a facility and buy the ancillary equipment required for these. Some part of the capital raised will also go towards general corporate expenses.“A policy focus and push from the government has led to growth in the food processing industry, especially for grains. Then there is also an ever-rising demand from customers for our products. We anticipate that the increase in demand will continue for the coming years. Looking at the outlook as well as to meet our products demand, the capital generated will be used in expanding our manufacturing operations,” he says. Naren is optimistic about the IPO and explains that economic progress in the agro-processing industry is looking good and the demand for processed food products has constantly been fuelling industry growth. “The recent spate of IPOs from the SME sector have fared quite well with the retail investors taking it into their strides, which is the result of additional spending power available to them. Currently, we are the only company in our industry to get listed and are quite optimistic that we would be attracting investors and meeting the desired results from this offering to meet our requirements,” he says.
Talking about preparing his team for the IPO, he says that it was definitely not easy to take the buy-ins from the team. But all aspects of demand for the products and the increase in customer requirements were discussed rigorously before being ratified and absorbed. “This decision would result in value creation for all, while addressing our aspirations for fulfilling customer demand, creating new products and meeting our expansion requirements,” he adds.
In FY 2023, the company clocked revenue from operations of Rs 80.97 crore, growing at a CAGR of 266.11% from 2021 to 2023. Its profit after tax for FY 2023 was Rs 7.71 crore, a CAGR of 423% from 2021 to 2023, and PAT margin was 9.52%. The company’s return on equity (RoE) and return on capital employed (RoCE) were 102.3% and 80.01%, respectively, for financial year 2023.
