Good growth but below industry average financials

• Plaza Wires is a company that has demonstrated solid financial growth over the past two years, with its revenue and net profit increasing by 12% and 33%, respectively. This growth can be attributed to a notable decrease in the company's raw material costs as a percentage of its revenue, which has led to improved profit margins. However, it's important to note that even with these improvements, Plaza Wires still lags behind its peers in terms of profit margins.
• Plaza Wires operates in a highly competitive industry with numerous players, and as such, it operates in a low-margin business environment. This competitive landscape limits the company's ability to significantly expand its profit margins
• An additional point of concern is the decline in the Cash flow from Operation (CFO) . While the CFO had previously shown positivity in the financials over the last two years, there has been a decline in FY23, with the CFO decreasing from Rs 11 crore to Rs 8.6 crore.
• The company's family-run nature raises concerns about potential corporate governance issues. Also, the size of the issue is only Rs 71 cr which won't attract the attention of the investors.

Rich Valuations

• Plaza Wires is currently seeking a Price-to-Earnings (PE) ratio of 31x and a market capitalization-to-sales ratio of 1.3x, which is relatively expensive compared to its industry peers. However, the question arises as to why the company should command such high valuations when its financial performance is not superior to that of its competitors. Hence, we advise you to avoid this IPO.