An In-Depth Look at Sunlite Recycling Industries Ltd.'s (SRIL) Upcoming IPO: Sustainable Growth in the Copper Industry

Sunlite Recycling Industries Ltd. (SRIL) has made a significant mark in the copper manufacturing sector, with a product range that includes copper rods, wires, earthing strips, and conductors. What sets SRIL apart is its dedication to sustainability, utilizing recycled copper scrap in its production processes. This eco-friendly approach not only reduces the environmental impact but also promotes energy efficiency—a key concern in today’s industrial landscape. SRIL’s products cater to a wide array of industries, from power generation and transmission to distribution and electronics, showcasing its versatility and relevance in various sectors. Additionally, the company offers specialized job work services, transforming customer-supplied copper scrap into tailored copper products.

A Commitment to Sustainability: SRIL’s Green Manufacturing Process

SRIL’s operations are rooted in a firm commitment to sustainability. The company leverages solar energy and clean natural gas in its recycling processes, significantly lowering pollution levels compared to traditional methods. This environmentally conscious approach is increasingly important in a world where copper recycling is on the rise, driven by the need to conserve natural resources and reduce energy consumption. Recycling copper requires far less energy than extracting it from primary sources, aligning SRIL’s operations with global sustainability trends.

Operational Strength: Infrastructure and Workforce

As of March 31, 2024, SRIL’s workforce comprised 38 full-time employees, with additional contract labor employed as required. The company operates with a robust infrastructure, featuring 20 machines designed to produce a diverse range of copper products, each meeting the exacting specifications of its clientele. This operational capability underscores SRIL’s ability to scale its production and meet growing demand in the copper industry.

SRIL’s Initial Public Offering (IPO): A Strategic Move for Growth

SRIL is set to launch its initial public offering (IPO) through a book-building process, offering 2.88 million equity shares with a price range of INR 100 to INR 105 per share. The IPO aims to raise approximately INR 30.24 crore at the upper price band, with the subscription period running from August 12 to August 14, 2024. Investors can participate with a minimum application of 1,200 shares, and the shares will be listed on the NSE SME Emerge platform.

The funds raised through the IPO will be allocated towards several key areas: repaying certain borrowings (INR 15.80 crore), investing in new plant and machinery (INR 4.05 crore), and covering general corporate expenses. Post-IPO, SRIL’s paid-up equity capital is expected to increase from INR 8 crore to INR 10.88 crore, resulting in a market capitalization of INR 114.24 crore at the upper price band.

Financial Performance: Steady Growth and Strong Returns

SRIL has exhibited consistent growth over the past three fiscal years. In FY24, the company reported a total income of INR 1,166.55 crore, with a net profit of INR 8.90 crore, reflecting a Profit After Tax (PAT) margin of 0.76%. The company’s Return on Capital Employed (RoCE) improved to 29.49% in FY24, signaling efficient use of its capital resources. Additionally, SRIL reported an average Earnings Per Share (EPS) of INR 16.12 and an average Return on Net Worth (RoNW) of 79.92% over the last three years. At a P/E ratio of 12.84, the IPO is considered fully valued given the company’s recent performance.

Market Position and Investment Outlook: A Competitive Edge

Operating in a highly competitive and fragmented market, SRIL has consistently increased its revenue and profits, demonstrating resilience and strong market positioning. However, the pricing of the IPO reflects the company’s solid FY24 performance, which might seem on the higher side to some investors. Despite this, SRIL’s commitment to sustainability, coupled with its expanding operations, makes it an attractive option for long-term investors. The company’s strong focus on eco-friendly practices and its robust growth trajectory suggest that SRIL could be a valuable addition to portfolios seeking exposure to the copper manufacturing sector.

In summary, SRIL’s IPO represents a strategic move to capitalize on its solid performance and sustainable manufacturing practices. Investors with a long-term perspective might find this IPO an appealing opportunity to invest in a company that is not only financially sound but also committed to contributing positively to the environment.