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28 September 2023

Mangalam Alloys IPO: Forging Ahead in Stainless Steel

Introduction:

Mangalam Alloys Limited recently launched an IPO with a fixed price issue valued at Rs 54.91 crores. This IPO consisted of a fresh issue of 61.26 lakh shares, aggregating to Rs 49.01 crores, and an offer for sale of 7.38 lakh shares, totaling Rs 5.90 crores. The IPO's bidding phase commenced on September 21, 2023, and concluded on September 25, 2023. The allotment results for the Mangalam Alloys IPO were announced on Saturday, September 2, 2023. The shares were subsequently listed on NSE SME on October 4, 2023. The IPO was priced at ₹80 per share, with a minimum lot size of 1600 shares and a minimum investment requirement of ₹128,000 for retail investors.

Key Market Participants:

Expert Global Consultants Private Limited served as the book running lead manager for the Mangalam Alloys IPO, while Skyline Financial Services Private Ltd acted as the registrar. Rikhav Securities played a pivotal role as the market maker for this IPO.

Stock Performance:

As of October 19, 2023, Mangalam Alloys Limited's stock was trading at ₹58.90, experiencing a slight decrease of 0.76%. The stock had opened at ₹58.05, reached a high of ₹59.70, and touched a low of ₹56.50. The previous closing price was ₹59.35, with a total traded value of 67,200 shares.

Ownership Structure:

Before the IPO, the company had a pre-issue shareholding of 81.17%, which reduced to 59.74% post-issue.

Financial Insights:

Mangalam Alloys Limited's financials indicated a mixed performance. As of March 31, 2023, the company's assets stood at ₹33,201.81 lakhs. It reported revenue from operations of ₹30,817.92 lakhs for fiscal 2023. Notably, the company's profit after tax improved, amounting to ₹1,013.52 lakhs. The company's net worth was ₹7,903.11 lakhs, with reserves and surplus of ₹6,047.16 lakhs. Total borrowings were reported at ₹15,353.27 lakhs.

Market Indicators:

Key performance indicators included a Price-to-Earnings (P/E) ratio of 14.65, Post P/E of 19.46, Market Capitalization of ₹197.49 crores, Return on Equity (ROE) of 12.82%, Return on Capital Employed (ROCE) of 20.92%, Debt/Equity ratio of 1.94, Earnings per Share (EPS) of ₹5.46, and Return on Net Worth (RoNW) of 13.70%.

Objectives of the Issue:

The proceeds from the Mangalam Alloys IPO were intended for various purposes, including:

1. Meeting the working capital requirements.
2. Funding capital expenditure for business expansion and research and development.
3. Covering general corporate expenses.
4. Meeting issue-related expenses.

Expert Opinion:

Pointed out that the company operates in a highly competitive and fragmented segment. While revenues remained stable for FY22 and FY23, the significant improvement in the bottom line for FY23 raised questions about its sustainability. Informed and risk-seeking investors may consider parking funds for the medium to long term.

Subscription Status:

The Mangalam Alloys IPO garnered considerable interest from investors, with an overall subscription rate of 5.57 times as of September 25, 2023. Retail investors displayed robust enthusiasm with a subscription rate of 8.73 times. The issue also saw notable interest from other investors, with a subscription rate of 2.41 times.

Conclusion:

Mangalam Alloys Limited's IPO presents an opportunity for investors to enter the stainless steel manufacturing sector. However, potential investors should perform comprehensive research on the company's competitive positioning, growth prospects, and financial stability before making investment decisions. As always, diversification and prudent risk management are key principles to adhere to when investing in the stock market.

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