IPO Talk | IPO proceeds to boost capacity, long-term margins at Safe Enterprises: CFO Mikdad Merchant

With retail evolving rapidly in the age of smart shopping, Safe Enterprises Retail Fixtures Ltd (SERFL) is positioning itself at the intersection of innovation, scalability, and design.

In a candid conversation with ETMarkets IPO Talk, CA Mikdad Merchant, Whole-Time Director and Chief Financial Officer at SERFL, outlines how the company plans to utilise the IPO proceeds to consolidate manufacturing operations, scale up capacity, and unlock long-term margin expansion.

From launching patented electrified shopfittings under its "Insync" brand to expanding exports and mitigating customer concentration risks, Safe Enterprises is eyeing its next phase of growth. Edited Excerpts -

Q) Thanks for taking the time out. What does Safe Enterprises Retail Fixtures make and what differentiates Safe Enterprises Retail Fixtures Ltd from other retail fixture manufacturers in India?

A) Safe Enterprises Retail Fixtures Limited designs, manufactures and installs Retail Fixtures and Shopfittings i.e. furniture of the type used in malls and shops to display merchandise.

Retail Fixtures and Shopfittings constitute a substantial portion of the visual space of any retail store and shoppers typically need to interact with these fixtures and hence they play a critical role in the shopper's experience while in the store.

SERFL, realising that retail is evolving and today's shoppers are SMART Shoppers, has designed and manufactured shop fittings components including innovative electrified shop fittings which help transform shops into SMART Shops.

As these modern fixtures are designed to "be Insync" with today's shoppers, the brand name under which these fixtures are made is called "Insync Shopfittings". Now shoppers can pick up merchandise and have the details automatically appear on tablets and screens which are powered by "Insync" fixture components.

We have 15 registered design patents on our name and our focus on building pre-engineered shopfittings components is our key differentiator.

Q) A significant portion of the IPO proceeds is earmarked for setting up a new manufacturing unit. How will this expansion impact revenue and margins?

A) Currently we are at over 90% capacity utilisation which is impacting our growth. In Navi Mumbai we have 3 manufacturing units which we are consolidating into one large unit.

This will increase our capacity substantially and moreover having all processes under one roof is expected to increase productivity and overall throughput.

Q) The IPO values the company at a P/E of 12.08. How does this valuation compare to peers like Naman In-Store (India) Ltd?
A) As at June 20, the PE ratio of Naman stood at 22. As at 31st March 2025, many of the KPIs such as PAT and PAT margin for SERFL is more favourable than those of Naman In-Store.

Q) Why is the company investing in its subsidiary, Safe Enterprises Retail Technologies Pvt Ltd, and what strategic role does this play?
A) The subsidiary SERTPL manufactures many of the components under the Insync Shopfittings brand name. The investment in the subsidiary is towards increasing capacity for production by installing additional machineries and for working capital that will be needed as the pro scale of operation increases.

Q) How sustainable is the high RoE (77.54%) and RoCE (69.10%) going forward?
A) As the IPO proceeds will increase the capital employed immediately but the benefits of the IPO proceeds will start showing in the FY 26-27 as the new factory will get completed then.

It may result in a reduction of RoCE and RoE on an immediate basis but we expect the effect to get reversed in subsequent years.

Q) The company derives more than 98% of its revenue from domestic sales. Are there plans to scale up exports in the near future?
A) Yes definitely, export is amongst our strategic focus areas. Currently we export to the Middle East, Malaysia, USA etc. We are in the process of expanding the country-wise export base and also increasing volumes in the countries we already export to.

For us, export is relatively a new revenue stream i.e. around 3 years old and efforts towards this end should now start bearing fruit in the next few years.

Q) With the largest customer contributing over 84% of revenues, how is the company mitigating customer concentration risk?
A) The same customer in question gives us business through various brands and retail formats. Retailers are typically organised brand-wise and each brand focuses on a different market segment, so as such even within one customer there is diversification.

Having said that, we are definitely working to increase the customer base. Our main constraint is the production capacity, which is planned to get augmented through the setup of new factory and also through new machineries being added in our subsidiary.

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