Divine Power Energy Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Electrical Equipment |
| Sub-class | Copper and Aluminium Winding Wires |
| Location | Sahibabad, Uttar Pradesh |
| Establishment Year | 2001 |
Management
| Managing Director | Rajesh Giri |
| Educational Qualifications | B.Com., LL.B. degree |
| Experience | Over two decades of experience running the company. |
| Annual Salary | ₹ 0 Lakhs |
| Total Number of Employees | 40 |
About
Divine Power Energy Limited is an Indian manufacturer specializing in copper and aluminium winding wires, a critical component in the power distribution industry. The company has established a strong presence in North India, catering to both power distribution companies and transformer manufacturers.
Products and Services:
The company offers a diverse range of products under its “Divine” brand:
- Bare Copper/Aluminum Wire and Strip: These are the basic conductors used as raw materials for further processing.
- Winding Copper/Aluminum Wire and Strip: These insulated wires and strips are used in the manufacturing of transformers, motors, and other electrical equipment.
- Fiberglass Insulated Winding Wires/Strips: These specialized wires are used in electromagnetic coils for lifting magnets.
- Super Enamelled Wires and Strips: The company has recently ventured into trading these wires, which have a longer lifespan and higher temperature resistance compared to traditional winding wires.
Clients:
- Power Distribution Companies: These companies utilize the winding wires for the manufacturing and maintenance of transformers used in power distribution networks.
- Transformer Manufacturers: These manufacturers incorporate the winding wires into the transformers they produce.
- Industries Utilizing Electromagnetic Coils: The fiberglass-insulated winding wires cater to industries involved in the production of lifting magnets and other electromagnetic coil applications.
Manufacturing Process:
- Drawing: Copper or aluminium rods are drawn into wires or strips of varying sizes using specialized machines.
- Annealing: The drawn conductors are heated and then rapidly cooled to enhance their flexibility and make them suitable for winding.
- Testing of Bare Conductor: The bare conductors undergo rigorous quality checks for dimensions, tensile strength, resistivity, and conductivity.
- Insulation: The tested conductors are insulated with materials like paper, cotton, or fibreglass to prevent short circuits.
- Testing of Insulated Conductor: The insulated conductors are subjected to high-voltage tests to ensure their ability to withstand the required voltage levels.
- Packing: The final products are carefully packed and prepared for dispatch.
Raw Materials:
- Aluminium and Copper Rods: These are the fundamental materials for producing wires and strips.
- Insulating Paper, Crepe Paper, Fiberglass, and Cotton: These materials are used to insulate the conductors.
Suppliers:
Aluminium and Copper Rods: These are sourced from major players like Hindalco, NALCO, and Birla Copper, ensuring reliable supply and favourable terms.
Insulating Paper: Procured from the local market.
Crepe Paper: A specialized insulating paper, also sourced locally.
Fiberglass: Imported from China through Indian distributors.
Cotton: Procured from the local market for making cotton thread used in insulation.
Other Key Aspects:
The company has a strong foothold in North India, particularly in states like Uttar Pradesh, Delhi, Uttarakhand, Haryana, Punjab, and Bihar. Their primary clients are power distribution companies and transformer manufacturers. The recent expansion into fibreglass-insulated wires has opened up opportunities in industries utilizing electromagnetic coils, such as heavy engineering and shipping.
International Accreditations and Product Approvals: The company adheres to international manufacturing standards and holds certifications like ISO 9001:2015.
Manufacturing Process Flowchart
Revenue – Category
Revenue – Region
Audit and Legal
Auditor’s Remarks:
The auditors did not find any significant issues or concerns with the company’s financial reporting that would require them to include a qualification or adverse opinion in their report.
Non-Compliances and Other Issues:
Divine Power Energy Limited has incurred penalties related to delayed filings of forms such as DIR-12, MGT-14, PAS-3, CRA-2, and CRA-4. The total penalty paid for these late filings amounted to Rs. 34,000.
Discrepancies in Quarterly Bank Statements: The company’s quarterly returns/statements filed with banks showed some discrepancies compared to its books of accounts, primarily related to reconciliation and valuation differences.
Contingent Liabilities:
As of March 31, 2024, Divine Power Energy Limited has contingent liabilities amounting to Rs. 1.69 lakhs. These contingent liabilities are primarily related to claims against the company that it is contesting.
Legal Cases:
Tax Matters:
Four cases related to tax liabilities, with a total amount involved of Rs. 95.51 lakhs
The Goods and Services Tax Department issued Form GST DRC-07 on May 30, 2022, demanding Rs. 91.80 lakhs for the period between July 1, 2017, and March 31, 2018. This demand pertains to dues towards SGST, CGST, and penal interest.
SWOT Analysis
Strengths
| Strong Regional Presence: Divine Power Energy Limited has established a dominant position in the North Indian market, particularly in states like Uttar Pradesh and Punjab. This strong regional presence provides a stable customer base and opportunities for further expansion. |
| Customization Capabilities: The company’s ability to tailor its products to specific customer requirements gives it a competitive edge in the market. |
| International Accreditations and Product Approvals: The company adheres to international manufacturing standards and holds certifications like ISO 9001:2015, ensuring product quality and reliability. |
| Consistent Track Record of Growth: The company has demonstrated consistent revenue growth, driven by factors such as increased domestic demand, product modifications, and technological advancements. |
Weaknesses
| Working Capital Intensive Operations: The company’s business model requires significant working capital to manage inventory and trade receivables, which can impact its financial flexibility and profitability. |
| Customer and Supplier Concentration: The company’s revenue is heavily reliant on a few key customers, and its raw material sourcing is concentrated among a limited number of suppliers. This dependence creates vulnerabilities in the supply chain and potential revenue fluctuations. |
| High Debt-to-Equity Ratio: The company’s debt-to-equity ratio has been above 2 in recent years, indicating a higher financial risk and potential sensitivity to interest rate changes. |
| Lack of Formal Order Book: A significant portion of the company’s orders are managed through informal channels, making revenue forecasting and financial planning less predictable. |
| Limited Geographical Diversification: The company’s operations are primarily concentrated in two states, making it susceptible to regional economic downturns or policy changes. |
Opportunities
| Growing Power Distribution Industry: The increasing demand for electricity and the government’s focus on upgrading power infrastructure present significant growth opportunities for the company. |
| Expansion into New Markets and Products: The company’s recent foray into fibreglass-insulated wires and traded super-enamelled wires demonstrates its potential to expand its product portfolio and tap into new markets. |
| Rising Demand for Renewable Energy: The global shift towards renewable energy sources like solar and wind power could create additional demand for the company’s products, particularly tinned copper wires used in solar panels. |
Threats
| Intense Competition: The winding wires industry is highly competitive, with both organized and unorganized players vying for market share. The company faces competition from larger, more established players with greater resources. |
| Fluctuations in Raw Material Prices: The prices of key raw materials like copper and aluminium are subject to global market fluctuations, which can impact the company’s profitability and margins. |
| Economic Slowdown: Any slowdown in the Indian or global economy could adversely affect the demand for the company’s products and its financial performance. |
| Technological Obsolescence: The rapid pace of technological advancements in the electrical equipment industry could render the company’s existing technology and processes obsolete, requiring continuous investments in upgrades. |
Porter’s Five Forces1
| Threat of New Entrants | HIGH |
| The industry has low barriers to entry, particularly for small-scale, local players in the unorganized sector. This can lead to increased competition and price pressures. The need for specialized machinery and technical expertise might pose some barriers, but the presence of numerous unorganized players suggests that these barriers are not insurmountable. |
| Bargaining Power of Suppliers | MODERATE |
| The company sources its raw materials from a limited number of suppliers, although it maintains flexibility by not having formal contracts. This concentration of suppliers could lead to potential supply chain disruptions or price increases, affecting the company’s operations and margins. |
| Bargaining Power of Buyers | HIGH |
| The company’s reliance on a few key customers, particularly power distribution companies and transformer manufacturers, gives these buyers significant bargaining power. They can exert pressure on prices and payment terms, potentially impacting the company’s profitability. |
| Threat of Substitute Products or Services | LOW |
| The threat of substitute products is relatively low, as winding wires are essential components in electrical equipment and have limited direct substitutes. However, alternative materials or technologies could emerge in the future, posing a potential threat. |
| Rivalry Among Existing Competitors | HIGH |
| The industry is highly competitive, with numerous players in both the organized and unorganized sectors. Competition is based on factors like price, quality, delivery, and technical capabilities. The presence of larger, more established players with greater resources intensifies the competitive rivalry. |
Peer Comparison
The company’s performance on various financial and operational metrics compared to its peers for FY 2024 is as follows:
| KPI | Divine Power Limited | Shera Energy Limited | Bhagyanagar India Limited | Rajnandini Metal Limited | Ram Ratna Wires Limited | Precision Wires Limited |
| Revenue from Operations (Rs. in Crores) | 222 | 875 | 1431 | 1212 | 2983 | 3301 |
| EBITDA Margin (%) | 6.76% | 6.01% | 5.31% | 2.47% | 4.50% | 4.64% |
| PAT Margin (%) | 2.88% | 1.61% | 3.20% | 1.26% | 1.83% | 2.21% |
| ROCE (%) | 16.25% | 19.01% | 23.56% | 18.30% | 16.82% | 22.47% |
| ROE (%) | 25.06% | 11.00% | 23.65% | 26.87% | 12.64% | 14.39% |
| Debt-to-Equity Ratio (times) | 2.26 | 0.94 | 0.52 | 1.77 | 0.58 | 0.19 |
Green Box
IPO Funds:
Working Capital Requirements:
The company plans to allocate a significant portion of the proceeds, to fulfil its working capital needs. This includes funding for inventory procurement, managing trade receivables, and meeting other day-to-day operational expenses.
Product Modifications:
The company actively modifies its products to meet evolving market demands. For instance, they shifted their focus to manufacturing fine wires/strips, which require greater technological expertise and command higher margins.
Consistent Track Record of Growth:
The company has demonstrated consistent revenue growth, showcasing its ability to adapt to market dynamics and capitalize on opportunities. This track record could instil confidence in potential investors regarding the company’s prospects.
The company’s strong presence in North India, particularly with long-standing clients like BSES and Uttarakhand Power Corporation Limited, forms a solid base for its marketing efforts.
Industry Outlook:
Globally, the electrical equipment market is projected to expand from $1,619.07 billion in 2023 to $2,193.05 billion in 2028, exhibiting a compound annual growth rate (CAGR) of 6.1%.
Domestically, the Indian electrical equipment market is also on a robust growth trajectory. It is anticipated to reach a value of USD 52.98 billion by 2027, demonstrating a CAGR of 11.68% between 2022 and 2027.
Amber Box
Auditor Changes:
During the financial year 2023-2024, the company’s statutory auditor was changed twice due to casual vacancies. While this in itself might not be a red flag, frequent auditor changes can sometimes warrant further scrutiny.
Buyer and Supplier Concentration:
The top 10 customers contributed 68% to the revenue and the top 10 suppliers contributed 77% of the Cost of Goods Sold (COGS).
Capacity Utilization:
As of March 31, 2024, Divine Power Energy Limited’s manufacturing facility had a capacity utilization rate of 49.86%. Sources and related content
Red Box
Negative Operating Cash Flow:
In FY 2024, the company reported a negative operating cash flow of Rs. 282.08 lakhs.
Smaller Scale of Operations:
Compared to its listed peers, Divine Power Energy Limited has significantly lower revenue, indicating a smaller scale of operations. This could limit its bargaining power with suppliers and customers, as well as its ability to invest in large-scale expansion or technological advancements.
Lack of Formal Order Book:
A substantial portion of the company’s orders are recorded through informal means like phone calls and emails. This lack of a formal order book makes it challenging to accurately predict future revenues and could lead to uncertainties in financial forecasting.
Higher Leverage:
The company’s debt-to-equity ratio is notably higher than most of its peers, suggesting a greater reliance on debt financing. This could increase financial risk and vulnerability to interest rate fluctuations.
Images
- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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