Chaman Metallics Limited IPO

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i. Incorporated in 2003, Chaman Metallics is primarily engaged in the business of manufacturing and selling of Direct Reduced Iron (i.e. sponge iron). Sponge iron is mainly used as a raw material for making steel in electric arc furnaces and induction furnaces. Through its sponge iron business, they cater to the metallic requirements of steel producers in selected geographies. The Company was under the control of MSP Group from 2006 to 2019. In 2019, the Company was acquired by Raipur-based GR Group which is in steel business since 1996. Their business operations are organized synergistically, and it derives benefits after its acquisition by GR Group, which operates in various segment of steel i.e. Ferro alloys, Sponge Iron, MS Ingots and re-rolled products.

ii. Their manufacturing unit is based at Chandrapur, Maharashtra and is spread across an area of around 63 acres of land. At their sponge iron manufacturing facility, they operate two Rotary kilns having an aggregate annual installed capacity of 72,000 MT (2 X 100 MTPD) for production of sponge iron as at March 31, 2022. The strategic location of its sponge iron manufacturing facility aids its access to
high-quality iron ore, iron ore pellets, coal and dolomite which are the major raw materials for sponge iron manufacturing.

iii. The key raw materials to produce sponge iron are iron ore/iron ore pellets, coal and dolomite. Sponge iron manufacturing is highly sensitive to raw material characteristics that would help obtain the rated capacity and the desired product quality. To ascertain the suitability of their raw materials in a rotary kiln, they have in-house testing laboratory that is responsible for conducting tests on raw
materials i.e .coal, iron ore and dolomite to check their chemical and physical properties, so as to ensure that the product conform with the pre-determined standards.

iv. Currently, the company sells its products primarily in the state of Maharashtra, Odisha and Chhattisgarh. Some of their customers include Rajesh Steel & Wire Industries (New), R.K. Steel Sales, SMW Ispat Pvt Ltd, Gajkesari Steels & Alloys Pvt. Ltd etc.

Competitive Strengths
i. Strategically located manufacturing unit
ii. Stringent quality control mechanism ensuring standardized product quality
iii. Long standing relationship with the customers

 

Objects of the Chaman Metallics Limited IPO:

The company intend to utilize the proceeds of the Issue to meet the following objects: - 1. To meet Working Capital requirements 2. General Corporate Purpose 3. To meet issue expenses  
DRHP of Chaman Metallics Limited IPO

Chaman Metallics Limited IPO Details:

Open Date: Jan 04 2023
Close Date: Jan 06 2023
Total Shares: 63,72,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Issue
Issue Size: 24.2136 Cr.
Lot Size: 3000 Shares
Issue Price: ₹ 38 Per Equity Share
Listing At: NSE Emerge
Listing Date: Jan 16 2023

Promoters And Management:

i. Chetan Agrawal is the Chairman and Managing Director of the Company. He holds a Bachelor’s degree in Industrial Engineering from University of Pune. He has been associated with the Company since June 17, 2019.He has over 16 years of experience in the steel industry. ii. Ramesh Kumar Agrawal is the Non- Executive Director of the Company. He holds a Bachelor’s degree in Commerce. He has been associated with the Company since June 17, 2019. He has a work experience of almost 30 years in the steel industry. iii. Keshav Kumar Agrawal is the Joint Managing Director and Chief Financial Officer of the Company. He has been associated with the Company since June 17, 2019. He is a chartered accountant from the Institute of Chartered Accountants of India and holds Bachelor’s degree in Business Administrations from University of Mumbai. He has a work experience of over 13 years in the steel industry.  

Financials of Chaman Metallics Limited IPO:

 
Particulars (Fig. In lakh) 2022 2021 2020
Sales 18,487 14,056 5,801
Raw Material Consumption 15,208 11,980 5,076
Change in Inventories 169.5 -105.68 -161.88
Employees Benefit Expenses 135.35 92.23 97.94
Other Expenses 1,416.86 1,006.24 788.36
EBITDA 1618 1102 39
OPM% 8.75% 7.84% 0.67%
D&A 171.64 152.47 135.23
Finance Cost 189.46 208.44 83.41
PBT 1,255.10 694.76 -181.42
Tax 320.45 171.69 -550.88
PAT 935 523 369
NPM% 5.06% 3.72% 6.37%
No.of Shares 241 241 241
EPS 3.9 2.2 1.5
Net Worth 3807.9 2873.3 2350.2
ROE (%) 24.54% 18.20% 15.72%
Capital Employed 5,616 3,445 3,827
ROCE (%) 22.35% 20.17% -4.74%
   

Comparison With Peers:

Name of the Company Revenue (in Cr) Profit (In Cr) EPS P/E CMP MCap (In Cr)
Chaman Metallics 185 9 4.0 9.5 38 91.58
Bihar Sponge Iron Limited 86 8 0.92 12 11 99
Lloyds Metals And Energy 692 97 2.78 92.8 258 11,456
 

Recommendation on Chaman Metallics Limited IPO:

Review and Recommendation of Chaman Metallic IPO from IZ Team is 5/10 a) Chaman Metallics Limited Incorporated in 2003 makes and sells Direct Reduced Iron (i.e. sponge iron). In electric arc and induction furnaces, sponge iron is utilised to make steel. They provide the metallic needs of steel makers in particular regions through their sponge iron business. b) Their manufacturing unit is based at Chandrapur, Maharashtra and is spread across an area of around 63 acres of land. As of March 31, 2022, they will be producing sponge iron at their sponge iron manufacturing facility using two Rotary kilns with a combined installed annual capacity of 72,000 MT (2 X 100 MTPD). c) Because of its advantageous position, their facility for producing sponge iron has easy access to high-quality iron ore, iron ore pellets, coal, and dolomite, which are the main raw materials used in the production of sponge iron. d) Manufacturing sponge iron is very sensitive to the properties of the raw materials that would enable attaining the rated capacity and the desired product quality. To verify the compatibility of their raw materials in a rotary kiln, they have an in-house testing laboratory that checks the chemical and physical qualities of coal, iron ore, and dolomite to ensure the product meets predetermined requirements. e) They mostly sell their goods in the states of Maharashtra, Odisha, and Chhattisgarh. Some of their customers include Rajesh Steel & Wire Industries (New), R.K. Steel Sales, SMW Ispat Pvt. Ltd, Gajkesari Steels & Alloys Pvt. Ltd etc. Competitive strengths: 1. strategically placed production plant. 2. strict quality control mechanism ensuring standardised product quality. 3. long standing relationship with clients. 4. well-qualified and experienced management team. f) The Revenue has Increased from 58 Crore in FY20 to 185 Crore in FY22. g) The PAT has Increased from 3 Crore in FY20 to 9 Crore in FY22. h) The EBITDA has Increased from 37 Lakhs in FY20 to 16 Crore in FY22. i) As per FY22, EPS is 3.87, Market Capitalization is 91 Crore & P/E is 9.8. The IPO looks fairly priced.

Lead Manager of Chaman Metallics Limited IPO:

  1. Hem Securities Limited

Registrar of Chaman Metallics Limited IPO:

  1. Link Intime India Private Limited

Company Address:

16/167, G.R. House, Agrawal Complex, Opposite Pandey Nursing Home, Samta Colony, Raipur, Chhattisgarh - 492001  

Discussion on Chaman Metallics Limited IPO:

6 Comments

    Chaman Metallics final subscription –

    Non Institutional Buyers 209x
    Retail Investors 135x

    Total Subscription 172x

    Reply

    Chaman Metallics IPO Subscription Details (times) Day 2 till 3pm –

    NII 5.05x
    Retail 17.41x

    Total Subscription 11.23x

    Reply

    Chaman Metallics IPO Subscription Details (times) till 3pm –

    NII 0.60x
    Retail 3.29x

    TOTAL SUBSCRIPTION 1.95x

    Reply

    They make Sponge Iron. Sponge iron is used in the iron and steel industry as a substitute for scrap in induction and electrical arc furnaces. It means the company is dependent on Steel and Iron industry.

    Reply

    In the last 3 years, the company is not able to generate enough cash from operations. Total Cash generated in the last 3 years as follows.

    1. 2020 = – 6 Cr

    2. 2021 = 8 Cr

    3. 2022 = -6 Cr

    So, overall, cash generated from operation is -4 Crores.

    Reply

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