Sunlite Recycling Industries Limited
Company
| Logo Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Electrical Equipment / Wiring |
| Sub-class | Copper Wires, Rods, Strips |
| Location | Kheda, Gujarat |
| Establishment Year | 2017 |
Management
| Managing Director | Nitin Kumar Heda |
| Educational Qualifications | Bachelor of Commerce |
| Experience | 17 years |
| Annual Salary | 1.2 Cr |
| Total Number of Employees | 38 |
About
Sunlite Recycling Industries Limited is engaged in the manufacturing of copper products through the recycling of copper scrap
Products and Services:
Products and Target Market:
The company produces a diverse range of copper products, including rods, wires, earthing wires, earthing strips, conductors, and wire bars. These products have applications in various industries, including power generation, transmission, distribution, and electronics.
Raw Materials and Suppliers:
The company primarily uses copper-based metal scrap as raw material, sourcing it from both domestic and international suppliers. Copper scrap undergoes a multi-stage recycling process, which includes sorting, melting, casting, rolling, drawing, and finally, packing and dispatch.
Raw Material Sourcing:
Sunlite Recycling Industries Limited sources its raw materials, primarily copper scrap, both domestically (73%) and internationally (23%) from suppliers in Saudi Arabia, the UAE, and the USA.
Other Key Aspects:
Growth Strategies:
Sunlite Recycling Industries plans to expand its geographical presence, particularly in Maharashtra, Telangana, Madhya Pradesh, and Tamil Nadu. They currently operate in more than 10 states and union territories across India. The company also intends to invest in advanced machinery to enhance its manufacturing capabilities.
The company is committed to environmental responsibility and employs sustainable practices by utilizing solar energy and clean natural gas in its recycling process.
Work Flow Chart
Revenue – Category
Revenue – Location
Audit and Legal
Auditor’s Remarks:
There are no audit qualifications on the Restated Financial Statements of Sunlite Recycling Industries Limited.
Non-Compliances and Other Issues:
A penalty of ₹21 lakhs was imposed due to a discrepancy found during an inspection of goods in movement. The company had listed an incorrect vehicle number, attributed to an “urgent change in vehicle.” While the company paid the penalty “under protest” and filed an appeal, the outcome of the appeal remains pending.
Legal Cases:
Litigations against the company:
The company is involved in six litigations with a disputed amount of ₹15.64 Cr, encompassing both direct and indirect taxes.
One case concerns direct tax (TDS default) with a disputed amount of ₹1.63 lakhs.
Five cases involve indirect taxes, specifically related to GST show-cause notices. The company has replied to the notices, but an order is still pending. The disputed amount in these cases is ₹15.63 Cr
Contingent Liabilities:
As of March 31, 2024, the company reported a total of ₹17.16.Cr in contingent liabilities.
SWOT Analysis
Strengths
| Strong Portfolio and Diverse Range of Copper Products: The company boasts a robust portfolio encompassing a wide variety of copper products. |
| Revenue from Multiple Geographies in India: The company generates revenue from various locations across India, indicating a geographically diversified customer base. |
Weaknesses
| Vulnerability to Raw Material Price Fluctuations: The company’s production costs are susceptible to fluctuations in raw material prices, particularly copper scrap, which could impact its profitability. |
| Working Capital Management: The Company runs on a very low-profit margin and requires very high working capital compared to its profits and assets and delayed Trade Receivables can have a very adverse impact on the company. |
Opportunities
| Growing Copper Demand: As a highly recyclable metal, copper is experiencing increasing demand globally, driven by sectors like electronics, construction, and renewable energy, it’s a widely recognized market trend that could benefit the company. |
| Expansion into New Geographic Markets: While currently serving multiple regions in India, the company could explore expansion into new domestic or international markets to further diversify its revenue streams. |
Threats
| Competition: The copper industry is highly competitive. New entrants or existing players could challenge the company’s market share. |
| Economic Slowdown: A general economic downturn could reduce demand for copper products, impacting the company’s revenues. |
| Environmental Regulations: Stringent environmental regulations could increase compliance costs for the company. |
Porter’s Five Forces
| Threat of New Entrants | HIGH |
| Barriers to entry are low in this industry. |
| Bargaining Power of Suppliers | LOW – MODERATE |
| While the raw material is readily available from multiple suppliers in the market, reducing their bargaining power, prices are driven by general global markets. |
| Bargaining Power of Buyers | HIGH |
| Copper wires and rods are not a niche product and a large number of suppliers exist in the market giving bargaining power to buyers. |
| Threat of Substitute Products or Services | LOW |
| There are very few alternatives to Copper in Electric equipment and this is not going to change in the near future. |
| Rivalry Among Existing Competitors | HIGH |
| The competition is very high resulting in very thin margins from the revenues. |
Peer Comparison
- Higher Return on Equity (ROE): Sunlite’s RoE and RoCE significantly exceeded both Bhagyanagar’s and Rajnandini’s for FY 2023-24
Green Box
IPO Funds:
Sunlite Recycling Industries Limited plans to purchase additional plant and machinery for its existing manufacturing unit with 4.04 Cr to enhance its copper component manufacturing capabilities.
Specifically, related to copper busbars, tinned copper wire, and tinned coated bunched copper wire catering to the power generation, transmission, distribution, and electronics industries.
This investment is intended to increase operational efficiency and cost-effectiveness in response to anticipated future demand for these products.
Strong Financial Performance: The company has demonstrated consistent revenue growth. Its key financial indicators, including EBITDA margin, PAT margin, ROE, and ROCE, have shown positive trends
Industry Outlook:
ICRA, an Indian investment information and credit rating agency, forecasts domestic copper demand to rise by approximately 11% in both fiscal years 2024 and 2025.
Anticipated growth of the electric vehicle (EV) market and supporting infrastructure: Copper is a key material in electrical wiring and components.
Amber Box
The copper industry is closely tied to the performance of other industries. Power generation, transmission, and electronics industries heavily rely on copper in their manufacturing processes. Any growth or downturn in these sectors will directly impact the demand for copper products.
The company had a negative Operating Cash Flow (OCF) of 7.87 Cr in 2022, which turned positive only in 2023 and 2024.
Dependence on Raw Material Prices:
The company’s production costs are significantly impacted by fluctuations in raw material prices, particularly copper scrap. While there are no hedging mechanisms currently in place, the company acknowledges its vulnerability to these price swings, which could impact profitability.
Short Operating History as a Company:
Sunlite Recycling Industries Limited was incorporated as a private limited company in 2022, taking over the business of a partnership firm (2017). This limited track record as a company may make it challenging to fully assess its long-term growth potential and ability to navigate market fluctuations.
Red Box
Working Capital Requirements:
The company’s operations necessitate substantial working capital. The sources note the risks associated with managing this working capital, including potential delays in customer payments and the need to secure additional financing. Difficulties in managing working capital could hinder the company’s ability to meet its financial obligations.
High Debt-to-Equity Ratio:
The company’s high debt-to-equity ratio, stood at 1.74 as of March 31, 2024, with a total outstanding indebtedness of ₹ 35 Cr. A significant portion of the company’s debt comprises short-term borrowings, amounting to ₹ 28.67 Cr. Short-term debt typically carries higher interest rates and higher refinancing risks as it needs to be repaid or rolled over within a shorter timeframe.
Dependence on a Single Business Segment:
The majority of the company’s revenue is generated from the sale of copper rods, constituting approximately 89% of its total revenue in recent fiscal years. This heavy dependence on a single product segment makes the company susceptible to market shifts.
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