Innomet Advanced Materials Ltd., a manufacturer specializing in metal powders and tungsten heavy alloys, made an impressive debut on the NSE SME exchange on Wednesday, September 18, 2024. The stock opened at ₹190, reflecting a 90% premium over its issue price of ₹100 per share. This strong market debut follows an oversubscription of 4.81 times during the IPO, with significant interest from retail investors and High-Net-Worth Individuals (HNIs).

Company Overview

Innomet Advanced Materials operates in the Powder Metallurgy sector, focusing on the production of metal powders and tungsten-heavy alloys. The company has developed a strong infrastructure for manufacturing and development, catering to industries that require high-performance metal components. Their tungsten-heavy alloys are widely used in sectors like aerospace, defense, and medical applications due to their high density, corrosion resistance, and durability.

Innomet Advanced Materials IPO Details:

IPO Size: ₹34.23 Crore

Shares Offered: 34.23 lakh shares through a fresh issue

Price Band: ₹100 per equity share

Lot Size: 1,200 shares

Minimum Investment for Retail Investors: ₹120,000

Minimum Investment for HNIs: 2 lots (2,400 shares), amounting to ₹240,000

EXPERT GLOBAL CONSULTANTS PRIVATE LIMITED served as the book-running lead manager, and SKYLINE FINANCIAL SERVICES PRIVATE LIMITED acted as the registrar for the issue. Prabhat Financial Services Limited functioned as the sole market maker.

Grey Market Premium (GMP) and Subscription

During the subscription period from September 11-13, 2024, the IPO generated significant interest, as reflected by the Grey Market Premium (GMP) of ₹35 to ₹40 per share. This premium indicated potential listing gains of 35%-40%, which was realized when the stock listed at ₹190 on NSE SME.

As of the second day of the IPO, the subscription status showed that the issue was oversubscribed 4.81 times, signaling strong demand from both retail and institutional investors. The demand was driven by positive sentiment around the company's financial performance and the growing importance of Powder Metallurgy in key industrial sectors.

Financial Performance of Innomet Advanced Materials Ltd.

Innomet Advanced Materials has shown consistent financial growth over the past few fiscal years. Revenue grew from ₹2,240.35 lakhs in FY22 to ₹2,955.45 lakhs in FY24. EBITDA, a key measure of profitability, increased significantly from ₹171.57 lakhs in FY22 to ₹574.49 lakhs in FY23, before settling at ₹494.86 lakhs in FY24.

Key Financial Metrics:

Revenue: ₹2,955.45 lakhs in FY24, up from ₹2,240.35 lakhs in FY22

EBITDA: ₹494.86 lakhs in FY24, up from ₹171.57 lakhs in FY22

PAT (Profit After Tax): ₹251.91 lakhs in FY24, up from ₹55.17 lakhs in FY22

Pre-issue EPS: ₹2.65

Post-issue EPS: ₹1.94

Pre-issue P/E ratio: 37.73x

Post-issue P/E ratio: 51.54x

The company's Return on Capital Employed (ROCE) for FY24 is 16.27%, and Return on Equity (ROE) stands at 21.37%, both reflecting solid operational performance and efficient capital utilization.

Objectives of the IPO

The company plans to use the funds raised from the IPO for the following purposes:

Working Capital: ₹1,159.70 lakhs will be allocated to meet the company’s growing working capital requirements, essential for sustaining its production and operational activities.

Capital Expenditure: ₹788.20 lakhs will be invested in the purchase of machinery and equipment, which will enable the company to enhance its manufacturing capacity and expand its product offerings.

Debt Repayment: ₹209.19 lakhs will be used to repay or prepay a portion of the company’s outstanding borrowings, which will help reduce interest expenses and improve profitability.

General Corporate Purposes: ₹850.00 lakhs will be used for general corporate activities, including marketing and business development, which are vital for the company’s growth.

Issue Expenses: ₹416.51 lakhs will be earmarked to cover the costs associated with the IPO.

Innomet Advanced Materials IPO Allotment and Listing

The allotment of shares is set to be finalized on Monday, September 16, 2024. Investors who applied for the IPO can check their allotment status on the registrar’s website by following these steps:

Visit the IPO allotment status page on the registrar’s website.

Select Innomet Advanced Materials Ltd. IPO from the dropdown list.

Enter your application number, PAN, or DP Client ID.

Submit the information to check your allotment status.

Once the shares are allotted, they will be credited to investors' Demat accounts. The shares have already made their debut on September 18, 2024, with a significant premium.

Review and Recommendations

The IPO of Innomet Advanced Materials Ltd. was fairly priced, with a post-issue P/E ratio of 51.54x. The company’s solid financial performance, driven by consistent revenue growth and improved profitability, has attracted the interest of risk-tolerant investors. The stock's debut at a 90% premium indicates robust demand and positive market sentiment, despite the high valuation.

While the Grey Market Premium had predicted gains of 35%-40%, the actual listing gains far exceeded expectations. The strong debut reflects the company’s position in a niche market and its growth potential, especially given the increasing demand for metal powders and tungsten-heavy alloys in key industries like aerospace and defense.

Conclusion:

Investors with a higher risk tolerance who are interested in Powder Metallurgy and high-growth industrial sectors may find Innomet Advanced Materials a valuable addition to their portfolio. However, given the high post-issue P/E ratio and rapid price appreciation, new investors should proceed with caution and consider the stock’s future performance and market conditions.

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