Two-wheeler helmet manufacturer Studds Accessories has filed draft prospectus with capital market regulator SEBI, seeking permission to launch its IPO. In the draft prospectus, the company said it plans to sell new shares worth INR98 crore. Â Studds Accessories IPO will also involve sale of 3,939,000 shares by existing investors, including promoters Madhu Bhushan Khurana and Sidhartha Bhushan Khurana.
Studds Accessories IPO: Use of funds
The company plans to use IPO funds towards:
- Part-financing the motorcycle helmet and accessories manufacturing facility situated in Faridabad: INR74.5 crore
- Part-financing the bicycle helmet manufacturing facility situated in Faridabad: INR8.5 crore
- General corporate purposes
Studds Accessories IPO: Listing the helmet giant
Studds Accessories claims to be the largest manufacturer of two-wheeler helmets in the world in terms of volume in Fiscal 2018. Its product portfolio includes two brands – Studds and SMK –  each positioned to target specific segments of the helmet and two-wheeler lifestyle accessory market.
The flagship brand Studds is the largest selling two-wheeler helmet brand in India. Apart from India, the brand is marketed and sold in 21 countries as of 30 June 2018. The Studds brand had a market share of more than 25% share in the two-wheeler helmet industry in India in FY2018.
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The company also entered in premium helmet segment though the SMK brand in 2016. This brand has quickly emerged as the leading brand in its segment and is also exported to 23 countries in Europe, Asia and Latin America. According to a report by Frost & Sullivan, the SMK brand had a share of 27.79% in the premium two-wheeler helmet market in the local market in the year concluded on 31 March 2018.
Studds Accessories IPO: Benefits of negative working capital
The company is a well-known name, competing with the likes of Steelbird and Vega, and its early steps of moving into the premium segment are paying off. In the latest financial year ended 31 March 2018, the company’s consolidated revenues stood at INR341.4 crore, nearly double from INR173.5 crore in FY2014. In these years, the company has also witnessed a massive jump in its earnings from INR7.5 crore to INR32.4 crore.
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This has been made possible through negative working capital and a lean balance sheet. Most of the orders placed by its dealers are backed by advance payments and same is the case with imports which are usually backed by advance payments or letter of credit. As of 30 June 2018, the company’s outstanding loans stood at just INR5 crore.
Good growth but stock will be expensive. IPO price is 1100 in grey market.
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