Sealmatic India - Seal the Deal?

Stock Opportunities
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Sealmatic India

  • Sealmatic designs and manufactures mechanical seals and associated products mainly for oil & gas, refinery, petrochemical, chemical, pharmaceutical, fertiliser, power, mining, pulp & paper, aerospace, marine and many more industrial applications.
  • Sealmatic has solutions for every sealing requirement – such as Pusher Seals, Standard Cartridge Seals, Elastomer Bellows Seals, Metal Bellows Seals, Engineered Seals, Split Seals, Gas-Lubricated Seals and many more.
  • Sealmatic has proven itself with its heavy-duty mechanical seals with innovative and tailor-made sealing solutions guaranteeing longer service.
  • Sealmatic products are globally recognized as a trusted brand in the process industry.

Products

Unbalanced Seal

  • Pressure: 10 Bar
  • Made of Carbon, Silicon Carbide, Tungsten Carbide
  • Single spring mechanical seal
  • Usage: Slurry and viscous liquid
  • Application: Pumps, Mixers, Blenders, Agitators
  • Size: 16-100mm

Balanced Seal

  • Pressure: 30 Bar
  • Multi-spring mechanical seal
  • Usage: High-pressure pumps, under-vacuum pumps
  • Size: 12-100mm

Teflon Bellow Mechanical Seal

  • Pressure: 10 Bar
  • Made of Ceramic, GFT, GMP, Graphite
  • Usage: Corrosive liquids such as concentrated acids, salt and media
  • Application: Pharma, Medical appliances, Food grade
  • Size: 19-100mm

Metal Bellow Mechanical Seal

  • Pressure: 15 Bar
  • Usage: Extreme Low to High temperature (-20C to 400C)
  • Size: 25mm-150mm

Conical Spring Mechanical Seal

  • Pressure: 10 Bar
  • Commonly used in water pumps
  • Size: 10-100mm

Cartridge Seals

  • Pressure: 25 Bar
  • Usage: High-pressure turbine
  • Application: Reactor, Agitator, Rotator
  • Size: 19-100mm

What are Mechanical Seals

  • Mechanical Seals help in reducing leaks which leads to significant savings that come from less waste, reduces pump failure and eases maintenance.
  • One major factor in using mechanical seals by Indian companies in recent years is that such use reduces hazards to pump operators and adverse environmental conditions, high rotational speed and pressure levels place demanding requirements on sealing technology employed in the process industry.
  • The seal system’s role in a pump is to minimize leakage of the pumped liquid from the area in the pump where the drive shaft enters or exits the casing.
  • Mechanical seals are employed in harsh conditions such as well drilling, freshwater distribution, lift stations, and wastewater treatment in the water & wastewater industry.
  • The introduction of mechanical seals in cooling towers, hot & cold water, circulation pumps, booster pumps, boiler feed, and fire pumps in the HVAC industry is also expected to drive the Indian mechanical seal market.

Types of Seal

  • The Global Mechanical Seals market is segmented by type, which is further segmented into pusher and non-pusher, conventional seals, balanced and unbalanced seals and cartridge seals. Continuous adoption of advanced sealing material in several industries is expected to grow the cartridge seals segment in the years to come.
  • The cartridge seals segment is estimated to have exponential market opportunities as they are designed as universal shaft seals in the seal chamber of pumps, containers or pipelines.

Seals have been divided into 3 categories for further understanding:

  1. Static & Dynamic Seals

Static Seals

  • Used to seal 2 stationery parts
  • Examples - Gaskets/ O Ring

Dynamic Seals

  • Used to seal 2 rotating or stationary/ rotating parts

  • Examples - Gland packing, Mechanical Seals

  1. Pusher & Non-Pusher Seals

Pusher Seals

  • Movable O ring
  • Used in low-temperature services
  • Light liquid services - ethylene, propane, methane, butane.
  • Single-spring or Multi spring
  • Combination of Rotary face & Stationery face

Non-Pusher Seals

  • Bellows assembly
  • Bellow is a component consisting of spring and stationary-like characteristics
  • It doesn’t have any springs
  • Used in high-temperature applications
  1. Balanced & Unbalanced Seals

Balanced

  • Same opening & closing face
  • Less heat is generated across the seal face
  • Seal life is more

Unbalanced

  • Difference in size of opening and closing face
  • More heat is generated across the seal face
  • Less seal life

Market share of Mechanical Seals (2021)

Components of Mechanical Seal

Gland

Sleeve
Mating Ring (Rotatory & Stationery)

Compression Unit

Spring

Rotatory Assembly

Set screws

Raw Material

  • Key raw materials are stainless steel, carbon, Tungsten Carbide, Silicon Carbide, Ceramic
  • The company is importing raw materials from third-party suppliers from the USA, Germany and the UK from approved sources of various international sealing companies.
  • Seal Faces such as carbon and silicon carbide are imported from USA & Germany.
  • Elastomers are imported from Germany.

Industry Analysis

  • Indian Mechanical Seals market was valued at INR 1900 crores in 2022 and is projected to reach INR 2800 crores by 2028.

Key Strengths

  • Approved/ Registered vendor with National/ International customers
  • Consistent financial performance (30% growth in PAT)
  • Well experienced promoter background
  • Optimum utilization of existing capacity & firm plan for expansion
  • Certification of stringent codes

Financials

  • Increase in Rev and PAT YoY

  • Increase in reserve and surplus

  • Debt reduced in FY22 but increased in 6MFY23

  • Decent OPM , NPM

  • Positive OCF

  • Loan given to related parties / group companies

  • Why they project higher trade recieveable/ payable/ inventory holding cycle

  • PE is high at ~19 to ~29 FY22 vs HYFY23

  • Cash conversation is poor

Competition

  • KSB Ltd. entering into mechanical seals manufacturing for captive use plus aftermarket.
  • SKF (SKF AB), John Crane (Smiths Group Plc.), and Flowserve Corporation are the leading market players. SKF holds the largest market share, as per the mechanical seals market report.
  • Some of the other leading players include Trelleborg AB, EnPro Industries Inc. (Garlock Gmbh), Dover Corporation (Waukesha Bearings), SHV (ERIKS Group), Freudenberg SE, Tenneco Inc, Fenner Group Holdings Limited (Hallite Seals).

IPO Proceeds

  • Objective of IPO

  1. Purchase of Plant and Machinery - 12Cr

  2. Product Development - 3Cr

  3. Marketing and After Sales Support - 11Cr

  4. General Corporate Purpose

  5. Provisions and Contingency - 4Cr

  6. Working Capital Requirement - 7.6Cr

  • This unit will be ready during FY 2022-23 and partly operational, it will be fully operational in FY 2023-24.
  • This includes the cost of setting up the office which includes furniture, fixtures, electrical fittings, computer systems etc in Delhi, Chennai, Kolkata and Hyderabad
  • Further, the company is setting up sales and service centres in USA & Europe.

Promoter

  • The promoter Mr Umar Balwa was the founding promoter of Burgmann India Pvt Ltd which was a subsidiary of Feodor Burgmann Dichtungswerke GmbH & Co KG in the years 1993.
  • Burgmann India Pvt Ltd was a joint venture between Feodor Burgmann Dichtungswerke GmbH & Co KG and the Balwa family with 51:49% equity participation.
  • Mr Umar Balwa successfully led the company in India with a sizeable market share until 2007, when the parent company Feodor Burgmann Dichtungswerke GmbH & Co KG was taken over by the Freudenberg Group and under a friendly agreement the Balwa family sold their 49% shares in the company to the parent organisation.
  • Mr Hanif S Chaudhary looks after the manufacturing and operations. With his experience, Sealmatic has been able to develop a wide range of mechanical seals and provide tailor-made sealing solutions for the customers.

Questions

  • Current order book and pipeline?
  • Current capacity?
  • Clarity on CFO & CS salary?
  • Future plans w.r.t. targeting the domestic market?
  • Customer acquisition in international markets as they are opening up new offices?
  • Clarity on promoter’s interest in core business and side projects (Real estate)

Social Media Comments

  • The new factory will lead to a 60% increase in capacity
  • Good order book already existing
  • Consistent OPM
  • The bulk of sales via white labelling
  • Promoter indulges in Real Estate business (Hotel/ Building Construction)
  • Rajasthan Global is not known to stay invested for long
  • Got oversubscribed during IPO but no buyers after listing

Additional links

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