Vdeal System: Powering the Future of Smart Electrical Solutions

About the Company:

• Vdeal System is ISO 9001:2015 certified and specializes in providing solutions for:
  • Smart Low Voltage (LV) panels
  • Smart Medium Voltage (MV) panels
  • Smart Variable Frequency Drive (VFD) panels
  • Smart Programmable Logic Controller (PLC) panels
• The company offers air-insulated and sandwich busducts, supported by in-house product design, development, manufacturing, system integration, and servicing of automation solutions and smart electrical control panels.
• All products adhere to international IEC standards for quality and safety.
• Vdeal System has established business relationships with global electrical companies, and these strategic partnerships with renowned brands provide a competitive edge.

Company Highlights:

• A growing integrated electrical and automation solution provider with significant presence across multiple industries.
• Operates on a business-to-business (B2B) model, supplying products to major industry players.
• Driving the next wave of AI and ML-driven innovation by integrating IoT (Internet of Things), AI, and ML into a cloud-based Software as a Service (SaaS) model.

Industry Overview:

• The Smart Electrical Control Panels Market is projected to reach USD 10.3 billion by 2032, growing at a CAGR of 6.1% during the forecast period (2023-2032).
• The market size was valued at USD 5.8 billion in 2022.

Promoters:

• Mr. Dhiraj Kochar: A graduate of NIT Surathkal in Electrical & Electronics Engineering with 17 years of experience in power sector companies like ABB.
• Mrs. Tapaswini Panda
• Mr. Brahmananda Patra
• Reveal AI Technologies Private Limited

IPO Details:

• Vdeal System is raising ₹18 crore through a fresh issue to:
  1. Meet working capital expenses (₹7 crore)
  2. Prepay or repay secured and unsecured loans (₹4.6 crore)
  3. Other general expenses (remaining amount)

Financials:

• Market Cap: ₹69 crore
• P/E Ratio: 22.5
• ROCE: 42%
• D/E Ratio: 1.5x (to be reduced by 30% with IPO funds)
• Market Cap to Sales Ratio: 2.6x

Revenue (₹ crore):

• 2022: 19
• 2023: 20.4
• 2024: 26.2

EBIDTA Margin:

• 2022: 7.8%
• 2023: 10.1%
• 2024: 21%

Profit (₹ crore):

• 2022: 0.23
• 2023: 1.1
• 2024: 3.1

Margin Expansion Due To:

• Introduction of MV panel (high margin, less competition)
• Plant optimization to reduce costs

Key Company Points:

• Founder Experience: Mr. Dhiraj Kochar, a graduate of NIT Surathkal, has significant experience in the electrical power sector.
• Growth Plans: Aims to grow revenue 4x to ₹100 crore by 2027 with no additional capex, utilizing the current plant (currently at 25% capacity).
• IPO Impact: The IPO will provide fresh cash to grow the business, addressing working capital limitations and enabling operating leverage.
• Strategic Relationships: ABB approved partner, capable of designing panels to IEC6143 standards.
• Technology Use: Uses SolidWorks software to reduce manpower needs and bids only on projects with margins of 18-20%.
• Order Book: ₹26 crore in Letter of Intent (LOI) and pipeline orders, executable in six months.
• Post-IPO Ownership: Before IPO, promoters owned 99.97%. After the IPO, promoter ownership will reduce to 67%.
• Employees: The company employs 65 people as of August 20, 2024.

Risks:

1. Potential Conflict of Interest:

• The promoter owns Reveal AI Technologies, which is developing IoT products for monitoring panel status and transferring data to the cloud. This could present conflicts of interest, as the company takes services from Reveal AI for asset monitoring solutions.

2. Dependence on Promoters:

• The company is highly dependent on its promoters. The loss of key individuals could impact operations, financials, and growth.

3. Customer Concentration:

• A significant portion of revenue comes from key customers:
  • Top 5: 52%
  • Top 10: 71%
• The loss of a major customer could materially affect business results.

4. Supplier Dependency:

• Dependence on top 10 suppliers for raw materials creates vulnerability. Any disruption in supply or increase in input costs could impact pricing and profitability.

5. Lease Risk:

• The company operates on leased premises in Orissa. Any suspension or cancellation of the lease could affect operations.

6. Regulatory Risks:

• The company requires various licenses and permits to operate. Failure to renew these in time could disrupt business.

7. Technological Risk:

• Rapid changes in technology could make the company’s products obsolete. Innovation is critical to keeping up with evolving industry standards and customer preferences.

8. Geographical Concentration:

• A significant portion of revenue comes from Eastern India. Any regional challenges could affect profitability.

Disclaimer:

• Invested and Biased