Mangalam Alloys IPO Review: Mangalam alloys is coming up with its Initial Public Offering. This is an SME (small and medium size enterprise) which is going to be listed on NSE SME.
The IPO will open for subscription 21st September 2023, and closes on 25th September 2023. This review will delve into the IPO’s strengths and weaknesses. Keep reading for more details!
Table of Contents
Mangalam Alloys IPO Review – About The Company
Mangalam Alloys Private Limited, incorporated in 1988, is a stainless steel manufacturing company based in Ahmedabad, Gujarat, India. It has an integrated manufacturing unit covering 40,000 sq. meters land with an installed capacity of 25,000 TPA. The company manufactures SS Ingots, Round Bar, RCS, Bright bar, different sections/ profiles like square, hex, angle, patti, etc.
Mangalam Alloys Private Limited generates majority of its revenue from the state of Gujarat (79.53%), followed by Karnataka (17.82%) and other states (2.65%). The company also generates 75.98% of its revenue from the domestic market and 24.02% from exports.
As of the financial year ending on 31 March 2023, the company had a turnover of INR 3029.225 million and employs over 200 people.
Mangalam Alloys IPO Review – Industry Overview
The steel industry is a key sector in India’s economy, accounting for about 2% of the nation’s GDP. India is the world’s second-largest crude steel producer, with a production capacity of 133.596 million tonnes in FY22. The government has set an ambitious target of achieving 300 million tonnes of steel production capacity by 2030-31.
The Indian steel industry is expected to grow at a CAGR of 10.9% from 2021 to 2035, driven by factors such as low per capita steel consumption, increased infrastructure construction, and the thriving automobile and railways sectors.
The government has taken several policy initiatives to support the growth of the steel industry, including the Make in India initiative, the National Steel Policy, 2017, and the production-linked incentive (PLI) scheme for specialty steel.
The PLI scheme is expected to attract investment worth ~Rs. 400 billion (US$ 5.37 billion) and expand specialty steel capacity by 25 million tonnes (MT), to 42 MT in FY27, from 18 MT in FY21.
In the Union Budget 2023-24, the government allocated Rs. 70.15 crore (US$ 8.6 million) to the Ministry of Steel. To support MSMEs, the government has reduced customs duty on stainless steel to 7.5%.
The steel industry plays a vital role in the development of the Indian economy, and its growth is expected to be driven by increasing demand from various sectors.
Mangalam Alloys IPO Review – Financial Highlights
The company’s assets have seen a rise, going from 312Cr in March 2021 to 332Cr in March 2023.
The revenue remained stable at 272Cr in March 2021 and increased to 302Cr in March 2023. The net worth of the company slightly increased from 63.9Cr in 2021 to 79Cr in 2023.
The PAT improved from a loss of -6.5Cr in march 2021 to a profit of 10.1Cr in march 2023.
The company’s borrowing has decreased from 167.6Cr in march 2021 to 153.5Cr in march 2023
In terms of return ratios, the company’s ROE is 12.82 and ROCE is 20.92. The debt-to-equity ratio stands at 1.94 indicating a high level of debt compared to equity.
FINANCIAL METRICS:
(Source: RHP of the company)
Competitors of the Company
Some of its competitors are Ratnamani Metal and Tubes, Arfin India, India Steel Works Limited, and Panchmahal Steel Limited.
Strengths of the Company
- Mangalam alloys has a unique integrated stainless steel and higher alloys long product manufacturing unit with a diversified portfolio. This makes the company a one-stop shop for a wide range of stainless steel products, catering to the diverse needs of its customers
- The company is the only stainless steel manufacturing unit in India to recycle nearly 100% of its solid waste, achieving zero effluent discharge, zero domestic sewage discharge, and zero solid waste discharge. This demonstrates the company’s commitment to sustainability and environmental protection.
- Mangalam Alloys is a proud Make in India company, generating around 18 lakh units of stainless steel per annum and consuming all of it captively. The company also has a 1.25 MW wind mill at Mandvi, Kutch, Gujarat, and ONGC gas connections, which contribute to its green energy initiatives.
- Mangalam Alloys has developed and implemented a wide range of networking channels throughout the industry, enabling it to identify its core customer base and design right marketing strategies for procurement and liaising of projects. This helps the company to deliver customized solutions to its clients.
Weaknesses of the Company
- The company’s business is sensitive to fluctuations in steel prices, which are influenced by a variety of factors such as the availability and cost of raw materials, transportation costs, and the demand and supply of steel. Any decrease in steel prices could adversely impact the company’s business, financial condition, and results of operations.
- Mangalam Alloys is dependent on a few suppliers for raw materials for its current manufacturing facilities. Any default by a supplier or inability to deliver the required materials in a time-bound manner could have a material adverse effect on the company’s business operations and profitability.
- The company generates a significant portion of its revenue from the states of Gujarat and Karnataka. Any loss of a major client or reduced business from significant clients in these regions could have a considerable negative impact on the company’s financials.
- The company is dependent on third-party transportation providers for the delivery of its goods. Any disruption in their operations or a decrease in the quality of their services could affect the company’s reputation and results of operations.
Mangalam Alloys IPO Review – GMP
The SME IPO for Mangalam Alloys is set at a price of ₹80. The latest grey market price as on September 20th, 2023 is ₹25. The IPO is projected to list at a premium of 31.25%, with an estimated listing price of ₹105.
Mangalam Alloys IPO Review – Key IPO Information
| Particulars | Details |
|---|---|
| IPO Size | 54.91Cr |
| Fresh Issue | 49.01Cr |
| Offer for sale | 5.90Cr |
| Opening Date | 21st september 2023 |
| closing Date | 25th September 2023 |
| Face Value | ₹10 per share |
| Price Band | ₹80 per share |
| Lot Size | 1600 shares |
| Minimum Lots | 1 (1600 shares) |
| Maximum Lots | 1 (1600 shares) |
| Investment amount | 1,28,000 |
| Listing Date | 25th september 2023 |
Promoters: Mr. Uttamchand Chandanmal Mehta and Mr. Tushar Uttamchand Mehta are the promoters of the company.
Book Running Lead Manager: Expert global consultant private limited
Registrar to the Offer: Skyline financial services private limited
The Objective of the Issue: The company intends to utilize the proceeds of the Issue to meet the following objects:
- Working capital requirements
- Capital Expenditure for business expansion and research and Development;
- General Corporate Purposes; and
- To meet issue expenses.
In Closing
Mangalam Alloys is a leading stainless steel manufacturing company with an integrated manufacturing unit. It has a diversified product portfolio and a strong customer base.
The company’s profits have shown improvement, indicating its growth potential. However, it also faces some challenges, such as its vulnerability to fluctuations in steel prices and its reliance on a few suppliers for raw materials. Overall, Mangalam Alloys is well-positioned in the industry and poised to benefit from the continued growth of the Indian steel industry.
The company can tap into the potentially huge domestic demand for stainless steel-intensive investments in sectors like engineering, defense, medical equipment, consumer durables, and more.
Mangalam alloys is an SME IPO where the minimum investment amount is 1,28,000 Which is higher than mainline IPO.
What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written by Niharika Jadhav
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