VRAJ IRON AND STEEL IPO Review - Issue Date, Price, GMP, Allotment, Lot Size, and Details

About VRAJ IRON AND STEEL Limited

Vraj Iron And steel Limited (formerly known as Phil Ispat Pvt. Ltd.) is a subsidiary company of Gopal Sponge and Power Private Limited (GSPPL) Raipur having interest in steel, power. Vraj Iron And Steel Limited has currently two manufacturing units at Raipur and Bilaspur in Chhattisgarh. The Company has pride to declare itself as one of the leading Iron and steel manufacturers of Central India. Their manufacturing plant at Raipur also includes a captive power plant with an aggregate installed capacity of 5 MW, as of December 31, 2023. They are in the process of increasing the capacities of their existing manufacturing plants and captive power plant, which is expected to increase our aggregate installed capacity (comprising of intermediate and final products) from 2,31,600 TPA to 5,00,100 TPA and captive power plants aggregate installed capacity from 5 MW to 20 MW. The proposed expansion of Sponge Iron and Captive Power Plant are expected to become operational in Q4 of FY 2024-25 whereas MS Billets is expected to become operational in Q1 of FY 2025-26.

The state-of-art integrated steel plants includes manufacturing setup like DRI unit, EAF, continuose billet casting mill, sophisticated and high-speed rolling mill, microprocessor-bassed product technologies and fully-equipped quality Assurance & testing laboratories. Their best quality Iron and steel products is most preferred for all type of Structure purposes acrross India.

Their product offerings such as Sponge Iron, TMT Bar, MS Billets and by-products Dolochar, Pellet and Pig Iron cater to a mix of customers that consist of industrial customers and end-users. They sell their products directly as well as through brokers / dealers. As of December 31, 2023, they had a workforce of 531 employees & workers. Company is engaged in manufacturing of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj.

INDIAN STEEL INDUSTRY

India is the second-largest steel producer in the world with an installed capacity of 161.3 MT in FY23. It is also the second-largest consumer of finished steel with a consumption of 120 MT in FY23. The Indian steel sector growth over the years has been attributed to the domestic availability of raw materials such as iron ore and costeffective labour. Also, the industry has benefitted from domestic demands in sectors such as construction, real estate, and automobiles. Whereas the vast coastline has enabled exports and imports, making India one of the leading countries in the global steel industry.

Further, the per capita finished steel consumption in India was 81.1 kg in CY22, significantly lower than the world average of 222 kg per capita. The National Steel Policy 2017 envisages that per capita finished steel consumption will increase to 158-160 kg by FY31. In addition, steel has an output multiplier effect of 1.4x on GDP and an employment multiplier effect of 6.8x in India. Thus, the steel industry has significant domestic potential and is expected to play a key role in the future economic growth of the country.

The steel industry in India has grown steadily with a CAGR of 16.4% from FY19-FY22 in value terms, driven by volume and realisation growth. The size of the industry reached Rs. 9 lakh crore in FY22 as the average prices of finished steel rose by 45% on a y-o-y basis. During FY23, the size of the industry stood at 9.2 lakh crore, indicating a growth of 2.7% y-o-y. This growth can be attributed to increased volumes of finished steel by 13.3% y-o-y and high prices of steel.

Domestic Crude Steel Production
The domestic crude steel production has grown at a CAGR of 3.3% in the past five years to reach 126.3 MT in FY23 from 110.9 MT in FY19. Large steel manufacturers’ capacity utilization has been in the range of 80% to 90% in FY23 and most players have announced the expansion of crude steel capacities. The National Steel Policy 2017 envisages achieving 300 MT of production capacity from the current level of 153-157 MT to cater to the expected steel demand of 230 MT by FY31. The crude steel production in India increased by 14.1% y-o-y to 69.7 MT in H1 FY24 (April 2023-September 2023) from 61.1 MT in H1 FY23 (April 2022-September 2022).

India’s Consumption of Sponge Iron, Billets and TMT Bars/Rods
- Sponge Iron
The domestic sponge iron consumption has grown at a CAGR of 5.7% over the past five years from 34 MT in FY19 to 43 MT in FY23.
- Billets
Billets consumption has grown at a CAGR of 7.8% over the past five years from 47 MT in FY19 to 64 MT in FY23.
- TMT Bars/Rods
TMT Bars and Rods consumption has grown at a CAGR of 8.7% over the past five years from 36 MT in FY19 to 52 MT in FY23.

TMT bars are high strength re-enforcement bars with a hard-outer core and a soft inner core. They are manufactured through a process called thermo-mechanical treatment. They are mainly used in construction and real estate projects. TMT bars are supplied in India by multiple players including small unorganized players. Most large organized players manufacture TMT bars as part of their forward integration. However, most of the unorganized players manufacture TMT bars using steel billets which are then rolled into TMT bars in the rolling mills.

VRAJ IRON AND STEEL LIMITED STRENGTHS
1. Integrated and well-established manufacturing setup
2. Manufacturing plants are strategically located, supported by robust architecture, leading to cost efficiencies and a stable supply chain
3. Diversified product mix with strong focus on value added products
4. Experienced Promoter, Board and management team
5. Consistent track record of growth and financial performance

VRAJ IRON AND STEEL LIMITED STRATEGIES
1. Expansion of manufacturing facilities
2. Reduce Debt Levels and improve Debt to Equity Ratio
3. Strengthen their customer base by growing existing customer business and acquiring new customers
4. Focus on operational efficiencies to improve returns

VRAJ IRON AND STEEL LIMITED RISK FACTORS & CONCERNS
1. Both of their existing manufacturing facilities are concentrated in a single region i.e. Raipur and Bilaspur, Chhattisgarh.
2. 100% of their revenue is from sale of their steel products such as TMT Bars, MS Billets, Sponge Iron & others related items.
3. Total capital expenditure for the Expansion Project is ₹1,645 million and the have incurred ₹1,020 million till June 03, 2024.
4. They might be unable to successfully implement their Expansion Project, including Captive Power Plant.
5. They might be unable to follow the new industry trends such as Steel scrap recycling policy, Decarbonising the Steel Industry, Green Steel and Carbon Capture Utilisation and Storage (CCUS) and Enhancing Sustainability and ESG Focus.
6. They have acquired the Raipur Plant through a slump sale and have not obtained an independent valuation report prior to such acquisition.