(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.
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
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 ManagingDirector 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.
(i) Authorized Share Capital
2,51,00,000 Equity shares at FV@10)
(ii) Issued, Subscribed,& Paid-up Share Capital Before Issue
(1,84,19,000 Equity Shares at FV@10)
(v) Reservation for Market Maker 3,32,000 Shares at FV@10)
(vi) Reservation for QIB & HNI 3,12,000 Equity Shares at FV@10)
(vii) Reservation for Retail 3,12,000 Equity Shares at FV@10)
(viii) Paid Up Share Capital after the issue
Financials of Supreme Engineering Limited IPO:
1. Assets and Liabilities Key Parameters
2. Profit n Loss Key Parameters
3. Cash Flow Statement(all figures in lacs)
(i) Net Cash Generated from Operation
(ii) Net Cash Generated from Investment
(iii) Net Cash Generated from Financing Activity
(iv) Total[ (i)+(ii)+(iii) ]
(v) Cash and Cash Equivalents at the Beginning of the Year
(vi) Cash and Cash Equivalents at the end of the Year
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] =1.86d) P/E(post issue)= 17.20e)P/B(post issue)= 1.59f)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 ]