Euro Pratik Sales IPO Opens For Subscription — Read HDFC Securities Analysis For Key Details

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HDFC Securities Report

Euro Pratik Sales launched its initial public offering on Sep. 16 and the offer closes for subscription on Sep. 18. The seller of decorative wall panels has fixed the price band in the range of Rs 235 and Rs 247 per equity share.

The Rs 451.31-crore issue is an entirely offer-for-sale of 1.83 crore shares. Since the IPO is entirely an OFS, proceeds from the offer will go directly to the selling shareholders.

Investors can place bids starting from a minimum of 60 shares and in multiples thereafter.

The shares will be listed on both the National Stock Exchange and the BSE.

Axis Capital Ltd., DAM Capital Advisors Ltd. are the book-running lead managers for the public issue while MUFG Intime India Pvt. Ltd. is the registrar to the issue.

Objects of Issue:

1. to carry out the Offer for Sale aggregating up to Rs 4,513.15 million; and

2. achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Further, the company expects that listing of the Equity Shares will enhance its visibility and brand image and provide liquidity and a public market for the Equity Shares in India.

Competitive Strengths

• One of India’s leading and largest organized wall panel brands in the organized Decorative Wall Panel industry.

• Comprehensive product portfolio across various categories  Staying ahead of market trends with merchandising capabilities and a key focus on product novelty and new designs.

• Asset-light business model with global long-term partnerships.

• Pan-India presence with a well-established distribution network  Experienced Promoters and management team.

• Proven track record of robust financial performance and low leverage levels.

Business Strategy:

• Expand into new markets.

• Continue to expand distribution network and undertake measures to improve inventory management Systems.

• Continue to improve brand equity and consciousness.

• Continue to focus on product innovation in response to evolving consumer preferences and further expand product portfolio  Integrate recent acquisitions and continue to expand business through strategic inorganic growth Opportunities.

• Leverage market position to capitalize on favourable industry trends.

Key Concerns

• EPSL’s operational risks such as accidents and damage to its warehousing facilities.

• Exchange rate fluctuations.

• Material dependence on its largest contract manufacturer for manufacturing of products.

• Dependence on top 30 distributors.

• Inability to expand or manage growing distribution network, or any disruptions in distribution chain.

• Negative cash flows from operating activities.

• Related party transactions in the ordinary course of the business.  Significant dependence on revenue from sale of Decorative Wall Panels.

• Lack of ownership of the brand name “Euro Pratik” which is crucial for operations.

• Operations involving engagement with counterparties in countries such as South Korea, China, the United States, Romania, Turkey, Indonesia and Portugal.

• Failure to promote or develop the “Euro Pratik” and “Gloirio” brands.  Lack of intellectual property protection for a majority of the designs used in products.

• Failure to manage growth and expansion operations or to successfully implement business plan and growth strategies in a timely manner or within budget estimates.

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