Classic Electrodes (India)

• Classic Electrodes (India) is coming out with an initial public offering (IPO) of 47,71,200 equity shares in a price band Rs 82-87 per equity share.
• The issue will open on August 22, 2025 and will close on August 26, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 8.20 times of its face value on the lower side and 8.70 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Bhagyashree Agarwal.

Profile of the company

Classic Electrodes (India) is engaged in the business of manufacturing welding electrodes and providing engineering solutions to customers both in domestic and international market. The company has been in existence for twenty-seven years now and provides a wide range of product offerings including General Purpose Electrodes, Low Alloy Electrodes, Low Hydrogen Electrodes, Stainless Steel Electrodes, Hard Facing Electrodes, Cast Iron Electrodes, Non-Ferrous Electrodes, Low Heat Input Electrodes, Cutting and Gauging Electrodes, Mig Wires etc.

It is focused on alloy and process development, quality and design, which has allowed it to develop products suited to its customers’ requirements. The company has expertise to design, develop and manufacture complex and specialized industrial equipment and components for OEM’s and end user industries. The company, which housed a team of over 95 employees who are deployed in various departments as of February 28, 2025, along with its decades of experience in welding electrodes, enables it to develop specialized products and solutions.

The company specializes in the manufacturing of general electrodes and MIG wires, which constitute the majority of its turnover. However, trading activities contribute approximately 30-35% of the total revenue. The company procures wire rods, rutile, and other raw materials primarily for captive consumption and when the market opportunities arise, the company sells surplus raw materials, primarily wire rods, to peers and other players in the same industry. Wire rods are a critical raw material in electrode manufacturing, and their bulk procurement enables the company to secure volume discounts from suppliers. This strategic advantage allows the company to trade these materials profitably, offering customers reasonable margins.

Proceed is being used for:

• Funding capital expenditure of the company to purchase Plant and Machinery
• Repayment of a portion of certain outstanding borrowing availed by the company
• Funding the working capital requirements of the company
• General corporate purposes

Industry Overview

Manufacturing in India mainly relies on welding consumables as a primary technique for combining metals, as no other process provides such broad benefits. Welding consumables, which are materials which foster the joining of two metals or alloys, are crucial components of welding processes because they determine the quality and strength of the connection. Because different welding consumables have varied features and characteristics, consumable selection varies depending on the type of metal being welded, the welding technique, and the ultimate product application.

In 2023, the welding consumables market was valued at $1.17 billion. Looking ahead, International Market Analysis Research Analysis and Consulting Group forecasts that the market will reach $1.57 billion by 2028, with a compound annual growth rate (CAGR) of 6.1% from 2023 to 2028. Infrastructure development, including roads, bridges, ports, and airport is attracting significant investment due to increased demand. Investing in infrastructure is a key development driver for the consumables sector. This investment in infrastructure is one of the key growth drivers for the welding consumables sector, because welding indispensable in the construction industry, as it provides strong and reliable joining solutions for structural components.

The growth of the welding consumables sector is further aided by the rise of businesses including heavy engineering, energy, oil and gas, shipbuilding, railroads, power, transportation, and automotive, as these industries require ongoing plant construction and maintenance. As India strives to become a global manufacturing hub, the need for welding consumables would surge. Government initiatives such as the National Infrastructure Pipeline, which will invest approximately Rs 111 lakh crore in infrastructure from fiscal years 2020 to 2025 in sectors such as heavy engineering, roads, urban infrastructure, and railways, as well as industrial reforms such as ‘Make in India’ and ‘Atmanirbhar Bharat’, will support growth in the welding consumables sector.

Pros and strengths

Quality Control and innovation: The company has ability to produce high-quality electrodes consistently, meeting industry standards and customer specifications. It also has capacity to innovate new electrode designs, materials, or production techniques, staying ahead of competitors and addressing evolving market demands.

Strong supply chain management and distribution network: The company has efficient management of the supply chain, ensuring timely sourcing of raw materials and components. It also has strong distribution channels ensuring widespread availability of products.

Strong research and development and customization: Investment in R&D to continuously improve products and explore new opportunities. The company has flexibility to customize electrodes according to specific client needs, offering tailored solutions.

Risks and concerns

Maximum revenue comes from limited customers: The company is dependent on a few customers for a portion of its revenues. The company has garnered 68.43%, 56.52% and 61.00% of its total revenue from top 10 customers in FY25, FY24 and FY23 respectively. The company presently does not have any long-term or exclusive arrangements with any of its customers. The company’s customers may also cancel purchase orders at short notice or without notice, which could have an impact on its inventory management. In the event of frequent cancellations of purchase orders, the same could have a material adverse effect on its business, financial condition, results of operations and cash flows.

Significant revenue derived from a certain geographical region: A significant portion of its revenue from operations is derived from its services offered to customers in West Bengal. For period ended February 28, 2025 and Fiscals ended 2024, 2023 and 2022 its revenue generated from operations in West Bengal was Rs 13,134.25 lakh, Rs 14,137.63 lakh, Rs 10,505.06 lakh and Rs 8,646.83 lakh respectively, which represented 70.01%, 72.94%, 69.63%, and 64.61% of its revenue from operations for such periods respectively. Any decrease in revenue from West Bengal, including due to increased competition or supply, or reduction in demand, or its inability to extend or renew subsisting contracts at commercially viable terms, may have an adverse effect on its business, cash flows, results of operation and financial condition.

High working capital requirement: The company’s business demands substantial working capital, mainly because there is a significant time gap between the purchase of raw materials and the receipt of sale proceeds from its finished products. As a result, it is required to maintain sufficient stock at all times in order to meet manufacturing requirements, thus increasing its storage and working capital requirements. There could be situations where the total funds available may not be sufficient to fulfil its commitments, and hence it may need to incur additional indebtedness in the future, or utilize internal accruals to satisfy its working capital needs. Further, it requires a substantial amount of capital and will continue to incur significant expenditure in maintaining and growing its existing infrastructure and any additional fund raise, equity or debt, could have a significant effect on its profitability and cash flows and it may be subject to additional covenants, which could limit its ability to access cash flows from operations.

Outlook

Classic Electrodes (India) is a prominent Indian manufacturer specialising in welding consumables, including electrodes and MIG wires. The company manufactures welding electrodes and provides engineering solutions to domestic and international customers. The company has strong brand known for quality, reliability, and performance, trusted by industrial users and distributors in India and select global markets. It has wide range of welding consumables: mild steel, stainless steel, cast iron electrodes, deep penetration electrodes, and MIG wires. On the concern side, the company is dependent on a few customers for a portion of its revenues. Further it generally does not enter into long-term arrangements with its customers and any failure to continue its existing arrangements could adversely affect its business and results of operations. Moreover, a significant portion of the company’s revenues are derived from a certain geographical region and any adverse developments affecting such region could have an adverse effect on its business, cash flows, results of operation and financial condition. 

The company is coming out with a maiden IPO of 47,71,200 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 82-87 per equity share. The aggregate size of the offer is around Rs 39.12 crore to Rs 41.51 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for the period ended February 28, 2025 was Rs 18,760.18 lakh. Moreover, the company had reported a profit after tax for the period ended February 28, 2025 at Rs 957.31 lakh.

The company is strategically planning to automate its processes, aiming to utilize 100% capacity for ensuring timely product deliveries with the expected quality standards. Currently equipped with a capacity of up to 7059.77 MT for Electrodes and 3085.26 MT of Mig Wire at Unit I, the company is planning to expand by adding new machineries. Through this enhancement, the company underscores its ability to anticipate technological and regulatory changes, successfully developing and introducing new and improved products in a timely manner. This capability is identified as a significant factor contributing to the company's competitiveness.