The H.M. Electro Mech IPO successfully listed on BSE SME on January 31, 2025, at an opening price of ₹81, an 8% premium over the issue price of ₹75 per equity share. This was a strong debut, signaling positive market sentiment despite concerns about market conditions.

About H.M. Electro Mech Limited

H.M. Electro Mech is an infrastructure company specializing in pumping machinery for water and wastewater management, electrification projects for central and state governments, and diesel generating sets projects for government bodies, nationalized banks, and industries. The company is also involved in instrumentation and civil works. H.M. Electro Mech is based in Ahmedabad and has a track record of executing turnkey projects in the water and waste management sectors.

IPO Details and Subscription

The H.M. Electro Mech IPO was a book-built issue offering a total of 36.99 Lakh shares and raising ₹27.74 Crores. The price band for the IPO was set at ₹71 to ₹75 per share, with a lot size of 1,200 shares. Retail investors were required to invest a minimum of ₹1,20,000 for one lot, while High-Net-Worth Individuals (HNIs) were required to invest ₹2,40,000 for two lots.

The IPO was heavily subscribed, with an overall subscription rate of 86.08x on its final day of bidding. The grey market premium (GMP) of ₹16 suggested listing gains of 21.33% and indicated strong demand for the stock. The market capitalization at the issue price was ₹102.74 Crores, and the final listing price of ₹81 reflects the positive market reception.

Grey Market Premium and IPO Review

The GMP for the H.M. Electro Mech IPO was reported at ₹16, which suggests a 21.33% premium over the issue price. This is a positive indicator for those hoping for listing gains, as it reflects strong demand and a favorable perception of the company’s financial stability and growth prospects.

Given the financial performance of the company, including steady growth in revenues and profits, and solid financial metrics such as a P/E ratio of 9.16x (pre-issue) and 12.55x (post-issue), H.M. Electro Mech appears to be fairly priced compared to its industry peers. Additionally, the ROE of 29.06% and ROCE of 33.28% indicate solid returns on capital employed, which further support the positive outlook for the company.

Objectives of the IPO

The net proceeds from the IPO will be utilized for:

1. ₹2,100 Lakhs to meet the company’s working capital requirements.
2. General corporate purposes.

These funds will help the company expand its operations and take on more projects in the infrastructure space.

Key Financials

H.M. Electro Mech has shown a consistent growth trajectory in its financials, with revenues from operations increasing from ₹6,202.77 Lakhs in FY 2022 to ₹11,729.98 Lakhs in FY 2023. For the half-year period ending September 30, 2024, the company posted revenues of ₹4,542.85 Lakhs. The profit after tax (PAT) for FY 2024 was ₹333.89 Lakhs, reflecting steady profitability.

The EPS for FY 2024 is ₹8.19 pre-issue, which drops to ₹5.98 post-issue. However, the P/E ratio of 9.16x pre-issue and 12.55x post-issue compares favorably with the industry average P/E ratio of 15x.

Conclusion and Recommendation

The H.M. Electro Mech IPO has delivered an 8% premium at listing, reflecting a strong debut on the BSE SME platform. Given the positive grey market premium, solid financials, and the growth prospects in the infrastructure and water management sectors, investors are advised to consider applying for the H.M. Electro Mech IPO for listing gains.

The Upcoming IPOs in this week and coming weeks are Chamunda Electricals.

The Current active IPO are Malpani Pipes And Fittings and Dr. Agarwal's Health Care.

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