Supreme Engineering Limited IPO

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(i) Supreme Engineering Limited was Incorporated in 1987, Mumbai based Supreme Engineering Limited (SEL) is a company engaged in the business of manufacturing special alloys and special wire products.
The company has two manufacturing units :

a) Unit I- Being the Special Steels division, located at Khopoli, and engaged with the manufacturing of special alloys such as Superalloys, Precipitation Hardening Steels, Martensitic Stainless Steel, Austenitic Stainless Steel, Ultra High Strength Steel and High Speed Steels which have their end use in sectors such as aerospace, space, defence, nuclear power thermal power, oil & gas, and heavy engineering.

b)Unit II Being the Wire division, located at Rabale, Navi Mumbai, engaged with the manufacturing of Wires, Bright Bars, Fine wires, and Profiles. These products find their end use in sectors such as automotive, oil & gas, industrial machinery, and hand tools industries.

(ii) In the year of 2004, Supreme Special Steels was set-up with a special emphasis on the manufacturing of special steels and exotic alloys. This resulted in a dramatic expansion of the company’s offerings. Today, SEL offers Nickel-based Superalloys, Duplex & Super-duplex steel, Super-austenitic stainless steel, hot and cold work die steel and high-speed steel bars for various applications both domestically and internationally.

(iii) The company has developed exotic alloy steel bars indigenously; thereby making it the only manufacturer of exotic alloys steel bars in the private sector in India.

(iv) The Company has 36 full-time employees in addition to the management, who look after the administrative, secretarial, legal, marketing, accounting functions, business operations and factory management. Apart from these permanent employees, it has also hired approximately 100 contract labor for the processing units.

Supreme Engineering Limited IPO Stock Quote & Charts

25.00

+4.17%

  • Open: 25.00
  • High - Low: 25.00 - 25.00
  • Previous Close: 24.00
  • Total Traded Volume: 4000
  • Updated On: 14-Nov-2018

Objects of the Supreme Engineering Limited IPO:

Objective of Supreme Engineering Limited IPO are: 1. Part finance the Working Capital requirements 2. Part repayment of High-Cost Debt 3. Finance Capital expenditure for the following purpose: (a) Acquisition of Plant & Machinery (b) Up-gradation of existing technology 4. Meet General Corporate Expenses

Supreme Engineering Limited IPO Details:

Open Date: Aug 24 2018
Close Date: Aug 29 2018
Total Shares: 6,579,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 21.05 Cr.
Lot Size: 4000 Shares
Issue Price: ₹ 27-32 Per Equity Share
Listing At: NSE Emerge
Listing Date: Sep 06 2018

Promoters And Management:

Promoters of Supreme Engineering Limited Company are: (i) Mr. Abhinav Chowdhri, aged 29 years, is an executive director of the Company. He has been associated with the Company since the year 2011. He has done his Bachelor of Science with a major in Industrial Engineering from The Pennsylvania State University. The company has received approvals from various Defence Public Sector Undertakings, Public Sector Undertakings, Ordnance factories and undertakings belonging to aerospace, automotive and energy sectors, under his able guidance. Mr. Abhinav Chowdhri is also a participating member of the prestigious organization, ASTM International that is responsible for updating & preparation of metallurgical standards. (ii) Mr. Sanjay Chowdhri, aged 54 years, is the Promoter and Managing Director of the Company. He is a Qualified Engineer in the field of Electronics and Communication, having attained a Bachelor of Engineering Degree from Karnataka University (Dharwad) in the year 1985. He has an experience of more than three (3) decades in the field of metallurgy thus being the guiding force behind the strategic decisions of the Company. (iii) Ms. Lalita Chowdhri, aged 51 years, is the non-executive Director and Chairperson of the Company. She has been redesignated as such since 2017. She has done her Bachelor of Arts in Economics from Chennai. She ensures efficient administration and reviews accounts of our Company. (iv)Dr. Jayaraman Kannan, aged 62 years, is an Independent Director of the Company in the year 2018. He has done his graduation in Aeronautical Engineering from M.I.T, Madras, and post-graduation in Aeronautical Engineering from I.I.T, Madras. He was conferred with the degree of Doctor of Philosophy by Singhania University, Rajasthan. He is a retired Distinguished Scientist of DRDL (Defence Research and Development Laboratory), the mother laboratory of DRDO , the premier Research organization in India.

Capital Structure:

(i) Authorized Share Capital 2,51,00,000  Equity shares at FV@10) 25 Cr
(ii) Issued, Subscribed,& Paid-up Share Capital Before Issue (1,84,19,000 Equity Shares at FV@10) 18.419 Cr
(iii) Present Issue Fresh shares upto ( 65,76,000 Equity Shares at FV@10) 6.576 Cr
(iv) OFS upto (8,000 Equity Shares at FV@10) 80K
(v) Reservation for Market Maker 3,32,000 Shares at FV@10) 33.2 Lacs
(vi) Reservation for QIB & HNI 3,12,000 Equity Shares at FV@10) 50%
(vii) Reservation for Retail 3,12,000 Equity Shares at FV@10) 50%
(viii) Paid Up Share Capital after the issue 24.995 Cr

Financials of Supreme Engineering Limited IPO:

1. Assets and Liabilities Key Parameters
Year Asset(lacs) Liabilities(lacs) Net Worth(lacs) Book Value D/E (<2) RONW Receiveable days
FY13 8,332.22 7,078.19 1254.03 42 5.6 31% 106
FY14 10,494.81 9,221.78 1273.03 42 7.2 1% 137
FY15 12,410.33 11,063.53 1346.8 45 8.2 5% 118
FY16 11,356.75 9,897.66 1459.09 49 6.8 8% 88
FY17 14,174.01 12,499.88 1674.13 56 7.5 13% 122
FY18 17,564.51 14,661.61 2902.9 16 5.1 16% 126
Post Issue 5007.22 20.03 2.93 9%
2. Profit n Loss Key Parameters
Year Revenue(lacs) PAT(lacs) EBITDA Margins Profit Margins Outstanding Shares(lacs) EPS
FY13 5,844.62 392.93 13.41% 6.7% 30 13.10
FY14 7,727.54 19 9.13% 0.2% 30 0.63
FY15 7,959.85 73.77 10.7% 0.9% 30 2.46
FY16 11,364.69 112.29 9.00% 1.0% 30 3.74
FY17 12,086.04 215.04 10.2% 1.8% 30 7.17
FY18 15,226.13 465.36 17.0% 3.1% 184.19 2.53
Post Issue 249.95 1.86
 
3. Cash Flow Statement(all figures in lacs)
Particulars FY18 FY17 FY16 FY15 FY14 FY13
(i) Net Cash Generated from Operation 599.3 766.13 991.84 -1,335.63 -1,023.93 195.46
(ii) Net Cash Generated from Investment 121.68 -309.59 58.69 -741.43 -616.96 -505.64
(iii) Net Cash Generated from Financing Activity -547.41 -398.84 -1,033.28 1,958.61 942.31 1,118.35
(iv) Total[ (i)+(ii)+(iii) ] 173.57 57.7 17.25 -118.45 -698.58 808.17
(v) Cash and Cash Equivalents at the Beginning of the Year 324.34 266.64 249.39 367.86 1,066.44 258.28
(vi) Cash and Cash Equivalents at the end of the Year 497.91 324.34 266.64 249.41 367.86 1,066.45
Key Notes: a) The Revenue is growing at CAGR of 18.48% from FY14 to FY18. b) The PAT is growing at CAGR of 122% from FY14 to FY18. c) The Annualized EPS[ Post Issue] =1.86 d) P/E(post issue)= 17.20 e) P/B(post issue)= 1.59 f) D/E(post issue) =2.93( High) . The Company has a landbank of (24,341.2 sq mtrs) in Khapoli and they have given around 8,640 sq meters of land to developers who in turns will give valuation approx. 20 Cr to the company. The company will also reduce debt from IPO proceeds as well. So going forward we believe the debt will be reduced which will improve operational efficiency. g) Mcap/Sales(ideally <2)= .525 on FY18 sales(Ideal). h) The Company has excellent EBITDA Margins of 17% in FY18. We believe once the high-cost debt reduces going forward the margins will improve further.[ Positive]. i) The Company is generating positive cash flows in the last 3 years.[Positive]

Comparison With Peers:

The Peer Mishra Dhatu is trading at P/E of 19 and M.cap/Sales=3.88( as on 17.08.2018 CMP) while Supreme Engineering Limited Issuing shares at P/E of 17.2 and M.Cap/Sales=0.50. Hence the issue seems to be reasonably priced.

Recommendation on Supreme Engineering Limited IPO:

Review and Recommendation of Supreme Engineering Limited IPO from IZ Team is: 6/10 [ The Issue seems to be reasonably priced. The business model looks good. The Company has good clients in the form of PSUs. High-Cost of debt seems to be the only problem, however, as management clarified that they have plans to minimize it in future, if that happens the company's Margin going forward will improve which in turns improve bottom-line and EPS ] 1-5: Fair 5-7: Good 7-10: Excellent.

Lead Manager of Supreme Engineering Limited IPO:

  1. CKP Financial Services Private Limited

Registrar of Supreme Engineering Limited IPO:

  1. Bigshare Services Private Limited

Company Address:

Supreme Engineering Limited R-223, M.I.D.C. Complex, Rabale, Thane Belapur Road Navi Mumbai 400 701 Phone: +91 22 2769 2232 Fax: +91 22 2769 0341 Email: info@supremesteels.com Website: www.supremesteels.com

25th Sep 2018 - 27th Sep 2018 => Aavas Financiers IPO

Bid Details of Supreme Engineering Limited IPO as on
29-Aug-2018 18:00:00 IST

Category No.of shares offered No. of shares bid
3,124,500 4,388,000
3,124,500 3,140,000
330,000 330,000
6,579,000 7,858,000
QIBs No
QIBs+HNIs Subscription 1.40X
Retail Subscription 1.00X
Total Subscription 1.20X

Discussion on Supreme Engineering Limited IPO:

      Nice Congrats!!! Hope listing would be positive and you will get gain. Share your experience after lsiting as well.

    On Supreme closing today. Answers to our queries-:

    1)EBITDA margins for businesses-:
    A)Special wires-:(15-20% of total sales)

    8-10% earlier but now with new products can expect 12-13%
    (Will be around 15-20% of total sales)

    B)Special steels-:(80-85% of total sales)
    This can be further divided into private and govt orders.
    Previously 75% of the orders were private and 25% were govt,hence the low EBIDTA in the financials.They are planning to invert this.This year 40% of the orders would be govt and 60% private.
    Govt orderbook-:
    30cr orderbook + 40cr bids.
    EBITDA margins in govt orders is 25-40% but WC cycle is 6-12 months.
    Bil discounting is being worked upon to reduce WC cycle by around 2 months.
    We have to understand that its not capacity but the WC that is the bottleneck in this business.

    2)He was fighting to get IPO around 42 with merchant banker.This is why IPO got delayed.But few investors and merchant bankers convinced him that mkts are bad and you should keep something on the table for investors.

    3)Tremendous tailwinds going on for business as many tenders are being floated by the govt.

    4)Land story-:
    Approx 4.78 cr land is sold off.A JV in affordable housing going on in khopoli which should give them around 24cr as per mkt value.
    Apart from this their factory land which is 6 acre.Only 1 acre is utilized is worth approx 36cr.
    Was open to the idea of shifting factory to remote area and monetizing factory land as well.
    Land monetisation would be used to repay debt (Around 60cr total)
    Since WC is the bottleneck this could lead to increased sales too.

    5)Currently not working on titanium based alloys but 2-3 yrs down the line will see the scenario and if favourable would jump into it.

    6)Change in auditors -:
    There have been only 2 change in auditors.Previous auditors were partners.But since 1 of them became their full time CA the other partner was the auditor.Hence just change of name.Similar scenario happened with other auditor as well.

    7)Focus of promoter is on bottomline and not on revenues.Expecting around 9-10 cr Pat in this year without including real estate proceeds.

    8)In SMEs the bet you are taking is on promoter and I was mighty impressed by his passion, knowledge and focus.

    Please don’t take all above points on face value.Please do your own scuttlebutt too.

    Too many issues .it will be best to chose only the best ones. Since P/e is not cheap it has high chance of listing flat and one can take a call post listing . I will avoid

    Supreme Engineering i.e Rs.15 to Rs. 17. In SME IPO the P.E should always be Half of the Mainboard company competitor, in this case, Midani Debt Free PSU is available at P.E of 19 so why should one invest in Supreme at the same P.E. If one is interested in Buying can Buy at price of Rs.15-17 if/when it comes otherwise Midani is better. Think wisely with your hard earned money.

    Supreme Engineering Ltd.
    A Mumbai based company engaged in manufacturing of special alloys As well as wire products.
    It is the only company of private sector which is manufacturing exotic alloys steel bars.
    Some features of SEL-
    1. PAT is growing @ 122% and revenue is growing @ 18.5% since last four years.
    2. EPS (before issue) 2.5 and post issue 1.85
    3.P/E (before issue) 12.75 and after issue 17.5
    4. P/B (post issue) 1.6
    (ALL CALCULATION @ UPPER PRICE BAND OF 32)
    5.EBITDA Margin is 17% (FY18)
    6. Company has long term debt of 26 cr and short term debt of 55 cr. Total 81 cr debt is the only concern but as the company has a land bank of 24350 square meters so it can easily reduce debt by selling it.
    Management has also clarified that they will reduce debt in near future.
    I will apply and hold for the long term.

    Fwd – *8 reasons to apply for Supreme Engg IPO*

    1. *Size of company*: Unlike most other companies which come in SME exchange, Supreme is already a fairly decent sized company. For FY18, the company did a revenue of 151 cr and EBITDA of 18cr

    2. *Valuation*: At the upper end of the price band, the pre ipo mcap is just 59cr. So its available at preipo valuation of 0.39 times revenue and 2.8 times EBITDA on FY18 numbers. Remember, 5 year CAGR revenue growth is 18% and PAT growth is 122%

    3. *Strong Moat* : Co makes super critical alloys. It takes years of research and then years to get approved as a vendor. There is only one listed competitor, MIDHANI, which does 666cr sales and is available at 2700cr mcap

    4. *Import Substitute Product* : Given the fact that imports are becoming more expensive due to $ rise, and the govt pushing indigenous production under the make in India mandate, huge runway ahead for revenue growth

    5. *No major Capex* : The co can easily grow its revenue from 25cr in super critical alloy to 300cr++ with minimal capex ( funded through IPO ). Operating Margins in this business are upwards of 40%

    6. *Asset sale happening* : Co owns 9 acres of land which it has started monetizing. The plan is to retire all long term debt of 25cr within next 2 years using sale proceeds

    7. *NextGen in* : Abhinav Chaudhary, promoters son, is a smart ED who is hands on with the entire business. We can look to him to drive this for many years to come. He is well qualified having done his Major in Industrial Engineering from the University of Pennsylvania

    8. *Diverse and growing applications* : Special Steels cater to Space, Aerospace, Defense, Power, Oil and Gas, Nuclear Power etc. All thrust areas in India.

    ****************Peers Comparison******************
    (i) Mishra Dhatu( Financials as on FY18)
    1. EBITDA Margins= 31.65%.
    2. Profit Margins= 18%
    3. P/E=19.32
    4. Mcap=2584Cr

    (ii) Supreme Engineering ( Financials as on FY18)
    1. EBITDA Margins= 17%.
    2. Profit Margins= 3.1%
    3. P/E=17
    4. M.cap= 80 Cr

    ( EPS Story Before Issue )As on FY18

    (i) Profit After Tax= 4.65 Cr
    (ii) No. of Outstanding Shares= 1.8419 Cr
    (iii) EPS= 2.52
    (iv) P/E= 12.69 on cutoff price of 32.

    ( EPS Story After Issue )
    (i) Profit After Tax= 4.65 Cr
    (ii) No. of Outstanding Shares= 2.4995 Cr
    (iii) EPS= 1.84
    (iv) P/E= 17.39 on a cutoff price of 32.

    As per DRHP the Mishra Dhatu is shown as Peer. Let us see its financials.
    As on FY18
    (i) Profit After Tax= 131.2 Cr
    (ii) No. of Outstanding Shares= 18.734 Cr
    (iii) EPS= 7.14
    (iv) P/E= 19.32 at CMP of 138( on 17.08.2018)

    Conclusion: The Issue looks fully priced as compared to its peer Mishra Dhatu. Plus the Mishra Dhatu has very less debt on books( Almost negligible D/E).

    ( Debt Story )As on FY18

    (i) Long-term debt=25.77 Cr
    (ii) Short-term debt= 55.18 Cr
    (iii) Total Debt= 80.95 Cr
    (iv) Shareholder’s Equity= 29.21 Cr
    (v) D/E= 2.77
    Conclusion: High Debt

      Though as on date the debt is looking a menacing for the company at this juncture, however, the company has plans to reduce it.

      (i) The Company has a land bank, 6 acres (24,341.2 sq mtrs) of factory land at Khopoli, Khalapur is estimated to have a value of Rs. 18.66 Cr and they have recently alloted section of such land measuring 8,640 sq meters, for development by way of a development agreement entered into with M/s Babubhai Construction Co. and the total estimated sale area after development shall be approximately 1,84,440 sq ft (17,135.04 sqmtrs). As per said agreement, the developers shall hand over 40% of the sales proceeds post development to Supreme Engineering Ltd sale . As per the current valuation, the Company may receipt of an approximate amount of Rs. 20.21 Cr.

      (ii) The Company will also use some part of funds raised from IPO Proceeds towards Debt Reduction.

      So we can expect going forward the company will reduce its debt significantly which will reduce the dependency on high-cost debt and help to better manage the working capital requirements for their Company which in turn will aid in maintaining a good debt-equity ratio, improve profitability as well as make available funds for expansion of operations, if required.

    45% of the total Revenue of FY18 is generated from the Unit-1 which comes from PSU under government order in the defense, aerospace, nuclear power, and Heavy Industries.

    Supreme Special Steels has not made a payment of approx 350000(Rs three lakh fifty thousand) to its supplier Welknown Tools & Equipments for more than 4 years. The owners keep avoiding calls from staff and owners of Welknown Tools & Equipments. Supreme Engineering and Supreme Special Steels are one and the same.

      Vidyadharan, how you have collected this information can you please shed more light into this?

        I am Managing Partner of Welknown Tools & Equipments. I have details of outstanding Invoices raised by Welknown Tools & Equipments to Ms. Supreme Special Steels Khopoli(14 Invoices between 23 Feb 2015 to 18 May 2016 amounting to Rs. 3,44,891). I have details of un-reciprocated email communications from Welknown Tools & Equipments to Ms. Supreme Special Steels Khopoli and lots of conversations between myself and Staff of Supreme Special Steels as well as Mr Chowdhri. Today 21 August 2018 at 3pm, I have managed to talk to Mr Sanjay Chowdhri after trying for the past 4 days. Mr Sanjay Chowdhri promised me he will issue Post dated cheques of my entire outstanding in the First week of September 2018. Based on assurance received in this conversation, I hereby state that my dues have been settled(subject to actual receipt of payment) and retract my complaint of non-receipt of payment.
        I sincerely hope my dues are settled and wish Mr Chowdhri the best.

        For Welknown Tools & Equipments
        Vidyadharan A
        Managing Partner