The Newmalayalam Steel IPO 2024 offers shares at a price band of ₹85 to ₹90 per equity share, aiming to raise a total of ₹41.76 Crores through the issuance of 46.4 lakh shares. The IPO opens for subscription on December 19, 2024, and closes on December 23, 2024. The allotment date is set for December 24, 2024, and the shares will list on the NSE SME on December 27, 2024.

With a market capitalization of ₹155.59 Crores at the upper price band of ₹90, the lot size for retail investors is 1,600 shares, with a minimum investment requirement of ₹1,44,000. High-Net-Worth Individuals (HNIs) can invest in 2 lots (3,200 shares), totaling ₹2,88,000.

IPO Subscription Status and GMP Trends

The Grey Market Premium (GMP) for Newmalayalam Steel IPO as of December 18, 2024 stands at ₹14, suggesting a potential listing gain of 15.23%. The expected listing price is ₹95, higher than the IPO price of ₹90. The GMP reflects demand and supply dynamics but should be considered for informational purposes only.

Financial Performance and Pricing Insights

The company reported revenues of ₹15,533.82 Lakh for the period ending September 30, 2024, showing a slight decline from ₹30,314.80 Lakh in FY 2023. The EBITDA for the period ending September 2024 stands at ₹958.34 Lakh, indicating a stable operating performance. However, the Profit After Tax (PAT) for the period is negative, at -₹519.30 Lakh, a concerning figure when compared to the previous years.

For the Newmalayalam Steel IPO, the pre-issue EPS is ₹3.38, and the post-issue EPS is ₹2.50, with a P/E ratio of 25.63x pre-issue and 35.96x post-issue. These figures suggest that the company’s IPO is priced fairly compared to the industry P/E ratio of 39x. The ROCE for FY24 is 17.60%, and the ROE stands at 10.55%, reflecting good returns on capital, but the negative PAT is a point of concern.

IPO Objectives and Use of Proceeds

The net proceeds from the Newmalayalam Steel IPO will be used for:

1. ₹287.62 Lakh for IT and technological upgradation of manufacturing facilities.
2. ₹234.33 Lakh for expanding the solar facility for power generation.
3. ₹255.95 Lakh for civil construction of a new factory shed cum storage facility in Kerala.
4. ₹505.55 Lakh for advertising, marketing, and brand building.
5. ₹1,420.00 Lakh for funding incremental working capital requirements.
6. General corporate purposes.

Investment Recommendation

While Newmalayalam Steel is a well-established player in the steel pipe manufacturing sector, the negative PAT for the period ending September 2024 and the high post-issue P/E ratio compared to the industry suggests a cautious approach. Given the GMP trend and financial uncertainties, we recommend avoiding the Newmalayalam Steel IPO for listing gains.

The Upcoming IPOs in this week and coming weeks are Anya Polytech, Citichem India, Solar91 Cleantech, Rosmerta Digital, Indo Farm, and Avanse Financial. The Current active IPO is Unimech Aerospace, Ventive Hospitality, Senores Pharmaceuticals, Carraro India.
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