Adishakti Loha and Ispat coming with an IPO to raise upto Rs 2 crore

Adishakti Loha and Ispat

• Adishakti Loha and Ispat is coming out with an initial public offering (IPO) of 1820000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 11 per equity share.
• The issue will open on September 30, 2021 and will close on October 5, 2021.
• The shares will be listed on SME Platform of BSE.
• The share is priced 1.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Turnaround Corporate Advisors.
• Compliance Officer for the issue is Mohit Nehra.
  

Profile of the company

The company is engaged in the business of trading in metals with its core focus on trading in Iron and Steel. Initially the company was incorporated with the object of managing, undertaking, carrying on and engaging in the business of Real Estate Development, Land Development and associated activities. The company altered the main object clause of its Memorandum of Association vide shareholders resolution dated June 10, 2019, to enable it to pursue the business of trading in metals. The company operates as an intermediary to its customers. It is currently serving the corporate and other clients. It works on a B2B model and the procurement of goods is carried out by it on order basis, owing to which it does not maintain any inventory as the goods are supplied directly from supplier to its customer.

Proceed is being used for:

• Meeting the incremental working capital requirements.
• Meet General Corporate Purpose.

Industry Overview

The Indian steel industry has entered into a new development stage, post de-regulation, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 2nd largest producer of crude steel during 2018 and 2019 (prov), from its 3rd largest status in 2017. The country was also the largest producer of Sponge Iron or DRI in the world and the 3rd largest finished steel consumer in the world after China & USA in 2019 (prov.). In a de-regulated, liberalized economic/market scenario like India the Government’s role is that of a facilitator which lays down the policy guidelines and establishes the institutional mechanism/structure for creating conducive environment for improving efficiency and performance of the steel sector. In this role, the Government has released the National Steel Policy 2017, which has laid down the broad roadmap for encouraging long term growth for the Indian steel industry, both on demand and supply sides, by 2030-31. The Government has also announced a policy for providing preference to domestically manufactured Iron & Steel products in Government procurement.

The New Industrial policy opened up the Indian iron and steel industry for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario. The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects in different states of the country.

Pros and strengths

Existing client and supplier relationships: The company focuses on addressing the customer’s need for variety of its products. Its existing relationships help it to get repeat business from its customers. It is focusing on maintaining long term working relationship with its customers and improve its customer retention strategy. It is also focusing on having strong relationships with its customers so as to enable it to generate multiple repeat orders. The company’s existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

The company’s promoter’s network in the trading community: The company’s Promoter has strong network with the trading community of Delhi. He has circle of business associates who are into trading business. Owing to his already existing network, it is able to enter into the business of trading in metals. Further, its Promoter’s network has been instrumental in scaling up the turnover of the company within short span of time.

Experienced and qualified management team: The company is managed by a team of competent personnel having knowledge of core aspects of its Business. Its Promoter and Director, Pawan Kumar Mittal, guide the company and is well assisted by its Key Managerial Persons who help it to build relations with its customers.

Risks and concerns

Depends on continuing relationships with customers: The company’s business is dependent on its continuing relationships with its customers. The company neither has any long-term contract with any of customers nor has any marketing tie up for its products. Any change in the buying pattern of its customers can adversely affect the business of the company. The loss of or interruption of work by a significant customer or a number of significant customers or the inability to procure new orders on a regular basis or at all may have an adverse effect on its revenues, cash flows and operations. The company’s business depends on the continuity of its relationship with its customers. There can be no assurance that it will be successful in maintaining such relationships or increasing the number of such relationships.

Operations significantly located in Delhi region: Currently, the company’s office is situated in Delhi and it is carrying its business mainly with market players from Delhi itself. Hence, its revenues are generated from operations in this region only. In the event that demand for its products and services in general reduces or stops due to any reason including political discord or instability or change in policies of State, then its financial condition and operating results may be materially and adversely affected. Geographical and functional expansion of its business domain requires establishment of adequate network. As the company seek to diversify its regional focus it face the risk that its competitors may be better known in other markets, enjoy better relationships with customers. Its lack of exposure in geographical boundaries outside its operating region could impact its future revenues.

Limited operating history: The company was incorporated as a private limited company on January 08, 2015. Further, the company had on June 10, 2019, altered the main object clause of its Memorandum of Association vide shareholders’ resolution, to enable it to pursue the business of trading in metals. As on date it do not have significant operating history, and owing to the same it may be difficult to evaluate its current or future prospects on the basis of historical results. Its past performance should not be construed as an indication of its future performance. Given its limited operating history in the business in which it operate, there will be only limited information based on which the business and its current or future prospects can be evaluated and investment decision be made.

Outlook

Adishakti Loha and Ispat is engaged in the business of trading in metals with its core focus on trading in Iron and Steel. It operate as an intermediary to its customers. It is currently serving the corporate and other clients. It works on a B2B model and the procurement of goods is carried out by it on order basis, owing to which it do not maintain any inventory as the goods are supplied directly from supplier to its customer. The company’s top management and key executives enjoy the confidence of several corporate and other clients and it currently market only to a selected setup of clients. It interact with its customers to get the feedback on the quality of products and services and improve the same as well. On the concern side, owing to the Covid-19 Pandemic, the company’s business operations were impacted, which resulted in the company incurring loss in the last financial year (FY 2019-20). Its business and assets could suffer damage from fire, natural calamities, misappropriation or other causes, resulting in losses, which may not be compensated by insurance as the company has no insurance coverage.

The company is coming out with a maiden IPO of 1820000 equity shares of Rs 10 each at a fixed price of Rs 11 per share to mobilize around Rs 2 crore. On performance front, the company’s total revenue increased to Rs 1,138.01 lakh for the year ended on March 31, 2021, as compared to Rs 1,094.86 lakh for the year ended on March 31, 2020. Profit before tax was Rs 0.33 lakh during the year ended March 31, 2021 as compared to loss before tax of Rs (2.14) lakh during the year ended March 31, 2020. The company is currently located in Delhi. The company is going forward with its plans to establish its presence in the other regions. Its emphasis is on expanding the scale of its operations as well as growing its supply chain network, which will provide attractive opportunities to grow its client base and revenues. Going forward, the company proposes to diversify its product portfolio and add more products to its portfolio based on its own assessment of market, demand and supply position.