Inside Look at RR Kabel Limited: A Comprehensive Guide to Understanding its Operations, Risks, and Strengths
Add some background information on the company's origin here: The three promoters of this company, Tribhuwan Prasad Rameshwar Lal Kabra, Gopal Rameshwarlal Kabra, and Mahendra Kumar Rameshwar Al-Kabra, all hailed from the electrical industry. They decided to name the company after their parents, Ratni Devi Kabra and Rameshwar Lal Kabra.
Company Operation: Two Major Segments
Primarily, the company operates in two major segments:
- Wires and Cables: This segment includes two subcategories—house wires and industrial wires—along with two types of cables—power cables and specialized cables.
- Fast Moving Electrical Goods (FMEG): This wider category encompasses fans, lighting equipment, switches, switch gears, and appliances.
Revenue Distribution and Manufacturing Facilities
The company's revenue breaks down as follows:
- Wires and cables contribute around 88-89% of the revenue
- FMEG contributes to approximately 11-12%
In terms of manufacturing, all wires and cables production occurs in-house, in two different manufacturing facilities—one in Wagodia, Gujarat and the other in Silvassa, Dadra and Nagar Haveli. Meanwhile, the production of FMEGs in-house only meets around 37% of the demand; the rest is sourced from contract manufacturing or bought and sold as traded goods.
Extensive Distribution and Global Reach
RR Kabel has an extensive distribution network, boasting over 3,450 distributors, 3,656 dealers, and over 100,000 dealer retailers. They also have 21 warehouses spread across 17 states and union territories in India. Outside India, RR Kabel distributes to 63 countries across North America, Asia Pacific, Europe, and the Middle East.
Notable Economic and Industry Data
Economically, there are several reasons why RR Kabel is positioned well for future growth:
- India's nominal GDP ranked fifth in the world as of 2022 and is expected to rise to third by 2030.
- Urbanization, nuclear families, a growing middle class, and increasing digitization in India all point to growing demand for RR Kabel's products.
Wires and cable market in India is predicted to grow at a CAGR of 13% from financial year 2023 through 2027. The FMEG market also has a healthy, albeit slightly lower, projected growth. The prevalence of branded players in the market should serve RR Kabel well as a branded manufacturer.
Risks and Challenges
It's important to note several risks that RR Kabel faces:
- Volatility in the costs of raw materials: Given that the cost of materials as a percentage of total expenses is over 80%, fluctuations in prices can significantly impact the profitability and cash flows of the company.
- Availability of counterfeit products
- Rising power and fuel costs
Strengths
RR Kabel has numerous strengths:
- A scaled B2C business
- A diverse product portfolio
- A powerful distribution network
- Recognized consumer brands
- Advanced technological facilities
- Strategic position for growth in the FMEG segment
- An experienced and committed professional management team
RR Kabel's IPO
The company's IPO opened on September 13 with a price band of 983 to 1035 and a total issue size of 1964.01 crores. The money raised will be used partially for debt repayment and for general corporate purposes.