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Review By Dilip Davda on September 8, 2024
• The company that was primarily in diamond tools has diversified into Metal Powder and THA products.
• While it posted growth in its top lines for the reported periods, it marked inconsistency in its bottom lines.
• It has an order book worth Rs. 8.54 as of March 31, 2024.
• Based on FY24 earnings, the issue relatively appears exorbitantly priced.
• Well-informed investors may park moderate funds for long term.
ABOUT COMPANY:
Innomet Advanced Materials Ltd. (IAML) is engaged into manufacturing of Diamond Tools and later on through backward integration, started manufacture of Metal Powders (Ferrous, Non-Ferrous and their Alloys). Further with R&D got into manufacture of Tungsten Heavy Alloys (THA).
Manufacture of "METAL POWDERS & TUNGSTEN HEAVY ALLOYS" comes under the gamut of "POWDER METALLURGY". The Company has all the necessary infrastructure for the development and manufacture of Metal Powders and Tungsten Heavy Alloys. To update itself technologically, the Company associates with the senior most scientists in the world and with renowned Research Organizations in India for continuous development of various Powder Metallurgy (PM) products.
The Company has also started/conducted in-house experiments to develop products required by the end users. Innomet has been found to be in conformity with the Quality Management System Standard: ISO 9001:2015 with a scope of manufacturing and supply of Ferrous & Non-Ferrous Metal/Alloy Powders and Tungsten Heavy Alloy components.
IAML is currently catering to Powder Metallurgy Components, Diamond Tools, Welding, Brazing, Catalyst, Surface Coatings, Aesthetics and many others. It is passionate towards Innovation and developing new products for customers. The company encourages R&D divisions of the other companies to work with it in their projects related to Powder Metallurgy and assist them with infrastructure and expertise in whatever capacity it can for import substitution. It had an order book worth Rs. 1.15 cr. for Metal Powders and Rs. 7.39 cr. worth of THA division.
Innotung, is the brand name for "The Tungsten Heavy Alloy series" manufactured through Powder Metallurgy process by the Company. It supplies the material in the form of bars, plates, cubes, spheres and components of various sizes and shapes also in the finished machined condition as per customer drawings. As of March 31, 2024, it had 56 employees on its payroll and additional 21 contract workers.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3423600 equity shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 34.24 cr. The issue opens for subscription on September 11, 2024, and will close on September 13, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.46% of the post-IPO paid-up capital of the company. The company is spending Rs. 4.17 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 11.60 cr. for working capital, Rs. 7.88 cr. for capex on machinery and equipment, Rs. 2.09 cr. for repayment/prepayment of certain borrowings, and Rs. 8.50 for general corporate purposes.
The issue is solely lead managed by Expert Global Consultants Pvt. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Prabhat Financial Services Ltd. is the market maker for the company.
Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 19 between August 2023 and September 2023. It has also issued bonus shares in the ratio of 1 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 6.26, Rs. 6.86, and Rs. 19.00 per share.
Post-IPO, company's current paid-up equity capital of Rs. 9.52 cr. will stand enhanced to Rs. 12.94 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 129.40 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 22.40 cr. / Rs. 0.55 cr. (FY22), Rs. 27.15 cr. / Rs. 3.22 cr. (FY23), Rs. 29.56 cr. / Rs. 2.52 cr. (FY24). It posted inconsistency in its bottom lines for the reported periods.
For the last three fiscals, it has reported an average EPS of Rs. 5.36, and an average RoNW of 26.16%. The issue is priced at a P/BV of 6.36 based on its NAV of Rs. 15.73 as of March 31, 2024, and at a P/BV of 2.64 based on its post-IPO NAV of Rs. 37.83 per share.
If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 51.28. The issue relatively appears exorbitantly priced.
For the reported periods, the company has posted PAT margins of 2.46% (FY22), 11.85% (FY23), 13.28% (FY24), and RoCE margins of 10.23%, 27.70%, 16.27% respectively for the referred periods. There appears to be some mismatch in PAT margins for FY23 and FY24.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Expert Global in the last four fiscals (including the ongoing one), out of the last 10 listings, 1 opened at discount, 1 at par and the rest listed with premiums ranging from 10.47% to 90% on the date of listing.
Review By Dilip Davda on September 8, 2024
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Innomet Advanced Materials Limited offers an early investment opportunity in Innomet Advanced Materials Limited. A stock market investor can buy Innomet Advanced Materials IPO shares by applying in IPO before Innomet Advanced Materials Limited shares get listed at the stock exchanges. An investor could invest in Innomet Advanced Materials IPO for short term listing gain or a long term.
Read the Innomet Advanced Materials IPO recommendations by the leading analyst and leading stock brokers.
Innomet Advanced Materials IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Innomet Advanced Materials IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Innomet Advanced Materials IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Innomet Advanced Materials IPO.
The Innomet Advanced Materials IPO allotment status will be available on or around September 16, 2024. The allotted shares will be credited in demat account by September 17, 2024. Visit Innomet Advanced Materials IPO allotment status to check.
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