Maiden Forgings coming with an IPO to raise upto Rs 23.84 crore

Maiden Forgings

• Maiden Forgings is coming out with a 100% book building; initial public offering (IPO) of 37,84,000 shares of Rs 10 each in a price band Rs 60-63 per equity share.
  
• The issue will open for subscription on March 23, 2023 and will close on March 27, 2023.
  
• The shares will be listed on SME Platform of BSE.
  
• The face value of the share is Rs 10 and is priced 6.00 times of its face value on the lower side and 6.30 times on the higher side.
  
• Book running lead manager to the issue is Share India Capital Services.
  
• Compliance Officer for the issue is Monika Negi.
  

Profile of the company

Maiden Forgings (MFL) is in the business of manufacturing and sales of diversified ferrous metal products and focuses on providing customized and specialized solutions to a diverse client base across different industries. Maiden specializes in design and manufacture of different type of ferrous metal products including carbon steel, stainless-steel and alloy steel, mainly in the form of drawn products like bright bars, wires, profiles and ground bars. Its fully integrated infrastructure consists of steel melting shops, rolling mills and finishing machines installed at its three manufacturing facilities (Unit-1, II & III), located at Kavi Nagar Industrial Area, Ghaziabad, Uttar Pradesh. These manufacturing facilities are spread over around 12,500 square yards land area having combined aggregated manufacturing capacity of 50000 MT/p.a.

The company manufactures its products in a large assortment of sizes starting from 0.19mm up to 100mm, from different grades of steel and in different shapes making it one of the few Indian manufacturing facilities offering such a diversified range of products. This product diversity helps it to maintain an edge over competition, since it can provide customized and specialized solutions to its customers. Further, the planned expansion into super alloys and other specialized products will help to transform the company to become one of the only few similar global manufacturing facilities offering widest range of products. With a large infrastructure, zero tolerance quality policies and an energetic team of experts, its makes sure that it can fulfil any special customer requirements for various critical product applications. Its products are used across industries like automobile, engineering, infrastructure, hardware, utensils etc. its major customers are spread across states Delhi, Rajasthan, Gujarat, Maharashtra and Uttar Pradesh. It has been exporting small volumes to mainly to US. The exports are likely to grow significantly as recently installed collated pneumatic nail plant becomes fully operational.

Proceed is being used for:

• Consolidation and expansion of the manufacturing facilities.
  
• Working Capital and General Corporate Purpose.
  
• Issue Expenses.
  

Industry overview

As of April 2022, India was the world's second-largest producer of crude steel, with an output of 10.14 MT. In FY22, the production of crude steel and finished steel stood at 133.596 MT and 120.01 MT, respectively. In April-July 2022, the production of crude steel and finished steel stood at 40.95 MT and 38.55 MT respectively. In FY22, the production of crude steel and finished steel stood at 133.596 MT and 120.01 MT, respectively. In FY22, crude steel production in India is estimated to increase by 18%, to reach 120 million tonnes, driven by rising demand from customers. The consumption of finished steel stood at 105.751 MT in FY22. In July 2022, the consumption of finished steel stood at 9.17 MT. Steel companies are looking to restart expansion projects on the back of burgeoning steel processes with a capacity addition of 29 MT. Between April 2021-January 2022, consumption of finished steel stood at 86.3 MT.

In FY22, demand for steel is expected to increase by 17% to 110 million tonnes, driven by rising construction activities. Tata Steel is planning to set up more scrap-based facilities that will have a capacity of at least a billion tonnes by 2025. Tata Steel in India is also planning to expand its annual capacity from 34 MTPA to 55 MTPA by 2030. In FY22, exports and imports of finished steel stood at 13.49 MT and 4.67 MT, respectively. In FY22, India's export rose by 25.1% YoY, compared with 2021. India’s per capita consumption of steel grew at a CAGR of 4.43% from 46 kgs in FY08 to 74.10 kgs in FY19. In July 2022 exports of finished steel stood at 3.80 lakh MT. Government has taken various steps to boost the sector including the introduction of National Steel Policy 2017 and allowing 100% Foreign Direct Investment (FDI) in the steel sector under the automatic route. According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT), between April 2000-March 2022, Indian metallurgical industries attracted FDI inflows of $ 17.1 billion.

Pros and strengths

Scalability: The company already has established a large product portfolio, market and customer base. While, the current volumes are moderate, the business model is highly scalable with significant global demand for the products manufactured by it. It intends to scale its operations continuously with aim to become the market leader in the industry both in India and globally. The company would continue to be investing in new plants & adding new product line to scale the operations.

Wide size and grade range: The company has created a large assortment of products which is a unique offering under one roof. Within production line of steel bright bars and steel wires, the company has size range starting from 0.19mm going up to 100mm. Secondly in terms of grades of steel, the company is producing almost all the grades in all three categories of steel that is stainless steel, alloy steel and carbon steel. Thus, in terms of size range and steel grades, the company is capable of supplying its customers entire product range from a single window, which is a competitive edge in current market scenario.

Specialty Products: The company along with the large number of sizes and grade ranges also caters to premium segment by producing complex shapes of bright bars such as hexagonal, square, d-sections, octagon and other special profiles. Also Pump Shaft Quality (PSQ) bars are a slightly new development from past 6 months, which is being sold at good margins and market is increasing gradually. Further, the company has installed plant for manufacturing collated pneumatic nails, which will start commercial production very soon. The company is also planning to install plant to manufacture oil tempered Induction Wire within next 12 months. These specialty products enable the company to target high end of market segments with premium rates adding to the gross margins of the company.

Risks and concerns

Seasonality or cyclicity of the business of the issuer: Steel is a cyclical industry that goes through alternate phases of boom and bust. The key reason for such cyclicity in the steel business is the nature of its customers. Steel production is consumed primarily by housing, infrastructure, automobile, shipbuilding, capital goods etc. Demand from all these industries is highly dependent on the state of the general economy. During the time of economic upcycle, demand for housing, automobiles as well as infrastructure investments increases, which leads to a higher demand for steel. The opposite situation prevails in downturns which may adversely affect the company’s business, financial condition and results of operations.

Depend on skilled personnel: The company’s services are skilled and creative manpower intensive and it engages a considerable number of skilled personnel every year to sustain its growth. Further, it spends significant time and resources in training the manpower it hire. Its success is substantially dependent on its ability to recruit, train and retain skilled manpower. High attrition and competition for manpower may limit its ability to attract and retain the skilled manpower necessary for its future growth requirements. It cannot assure that skilled manpower will continue to be available in sufficient numbers suitable to its requirements or that it will be able to grow its workforce in a manner consistent with its growth objectives, which may affect its business, financial condition, results of operations and prospects.

Require certain statutory and regulatory approvals, licenses: The company requires certain statutory and regulatory approvals, licenses, registrations and permissions to operate its manufacturing units, some of which have been granted for a fixed period of time and need to be renewed from time to time. The company cannot assure that in the near future there will not be any legal actions taken against it for the same. Further, these licenses and approvals are subject to several conditions, and the company cannot assure that it shall be able to continuously meet such conditions or be able to prove compliance with such conditions to statutory authorities, and this may lead to cancellation, revocation or suspension of relevant licenses, approvals and registrations.

Outlook

Maiden Forgings (MFL), an ISO & PED certified Company, roots back to 1989. The company specializes in all types of Bright steel bars, stainless steel bright bars & all grades of steel wires. Just 30 Kilometers away from Delhi airport, the company has its corporate office and plants located in Ghaziabad (Delhi- NCR). The core strength of the company is more than 25 years of experience in making its products & the team of technocrats who are working in a culture where product quality & on time delivery are practiced as the main objective. Therefore, over so many years it has able to deliver best quality products to its associated partners. On the concern side, the company is dependent upon the availability of equity, cash balances and debt financing to fund its operations and growth. Any fluctuations in interest rates may directly impact the interest costs of such loans and, in particular, any increase in interest rates could adversely affect its results of operations.

The company is coming out with an IPO of 37,84,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 60-63 per equity share. The aggregate size of the offer is around Rs 22.70 crore to Rs 23.84 crore based on lower and upper price band respectively. On performance front, the company’s total revenue increased by 5.75% to Rs 21,083.72 lakh for the financial year 2021-22 from Rs 19,937.49 lakh for the financial year 2020-21. Net Profit has increased by Rs 44.99 lakh or 26.63% from profit of Rs 168.94 lakh of financial year ended March 31, 2021 to profit of Rs 213.94 lakh in the financial year ended March 31, 2022. Meanwhile, the company is planning to expand its current business operations by optimum utilization of resources and adding new product line as per its forward & backward integration strategy and also consolidate and shift its manufacturing operating to a single large facility over next 12 months.