Atmastco
- Atmastco is coming out with an initial public offering (IPO) of 73,05,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 77 per equity share.
- The issue will open for subscription on February 15, 2024 and will close on February 20, 2024.
- The shares will be listed on NSE SME Platform.
- The share is priced at 7.70 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Affinity Global Capital Market.
- Compliance Officer for the issue is Varsha Sahbani.
Profile of the company
Atmastco is engaged in the business of executing turnkey/Engineering Procurement and Construction Company (EPC) contracts in ferrous and non-ferrous sector and providing end-to-end solutions offering multi-disciplinary services and project management solutions. The company has forayed into the business of providing EPC services in ferrous and nonferrous sector in the year 2020. It has acquired business in verticals like Metal (ferrous & nonferrous), Oil & Gas, Air Pollution Control, Lime & associated processing in last three years. The company is engaged in the business of design, manufacturing and supply of precision equipments and heavy fabrication structures for various industrial use. It undertakes designing, Engineering, Fabrication and Erection work for its clients as per their specifications and customizations. The company incorporated a separate legal entity for its wholly owned subsidiary namely Atmastco Defence Systems Private Limited on July 22, 2020 to carry on the business of manufacture of bullet proof jackets & helmets and paramilitary forces. Especially for military application and full body protector for female troops and related activities.
The company is also into manufactured products i.e. design, manufacturing and supply of precision equipments and heavy fabrication structures for various industrial use and other incomes such as Ceiling Girder, Railway Girder, Columns & Bracings, Bolted Structures, Equipment's and Pressure ducts, Box Columns etc. which are used in Power and Energy, Steel Plants, Cement Plants, Railway Bridges, Water Treatment Plants, Refinery & Fertilizer plants. Pre-Engineered Building etc. It has more than two decades of experience in executing projects involving manufacturing and fabrication work of heavy structures.
The company is also engaged in the business of trading steel, iron, chemical alloys, metals, grinding wheels, welding electrodes, abrasives, industrial helmets which are used extensively for industrial use. It has developed expertise in its line of operations which are characterized by its ability to minimize overheads, cost control and prevent overruns on project schedules along with required skill sets. It has a track record in designing, manufacturing, procuring, constructing, commissioning, and servicing various equipment. It aims to continue to build its strength in the field of manufacturing steel fabrication, and execution of EPC / turnkey projects. In the ferrous and non-ferrous sectors, mineral processing the company is recognized as an approved vendor in the Master list of Approved Vendors issued by the Quality Assurance Civil Directorate, Research Designs, Standards Organization, Ministry of Railways and Government of India for fabrication of Composite Girder and Other Steel Plate Girder Part B.
Proceed is being used for:
- Meeting the working capital requirements.
- Prepayment and repayment of all or a portion of certain secured and unsecured loan availed by the company.
- General corporate purpose.
- Meeting the offer expenses.
Industry overview
The India power EPC market is expected to rise at a CAGR of more than 3% during the forecast period of 2020-2025. Factors such as the increase in industrial operations and several government initiatives to provide electricity to all people in the country are likely to drive the India power EPC market. However, the low domestic investments and slow processing of projects are expected to restrain the India power EPC market. The conventional thermal segment, which comprises of power from coal, natural gas, and oil and contributes about 62.2% of the country's total energy generation capacity, is likely to dominate the India power EPC market during the forecast period. New and efficient technologies like supercritical and ultra-supercritical coal power plants, along with the government initiative to increase renewable energy share is likely going to create several opportunities for the India power EPC market in the future. The increasing power-related projects in the country are expected to drive the India power EPC market during the forecast period.
Increasing Number of Manufacturing Plants Are Propelling Market Growth. India's metal fabrication sector is expected to be driven by the rising demand for goods and services in many sectors, as well as the fact that global manufacturing companies are trying to diversify their production by setting up low-cost plants in countries like China and India. Additionally, the Indian manufacturing sector is expected to register a growth of more than six times its current value by 2025, to USD 1 trillion. This growth in the manufacturing sector in India is likely to lead to more manufacturing facilities in the country, which is expected to increase demand in the market studied. For instance, the number of mobile manufacturing plants that were set up in India has increased by more than 60 times since 2017. This shows that the number of manufacturing units in the country is making the market more and more popular. The Reserve Bank of India measures capacity utilization in the manufacturing sector through its quarterly order books, inventories, and capacity utilization survey. It shows not only how much companies are making, but also how much they might be able to invest in the future. This shows that the Indian metal fabrication market has more potential.
The Steel Fabrication Market was valued at $6.111 Billion in 2020 and is projected to reach $9.78 Billion in 2028, growing at a CAGR of 5.36 per cent from 2021 to 2028. The increase in the number of constructions, rise in the demand of metal 3D printing and increasing usage of steel fabrication in energy sector is the key market driver. Anti-corrosion and heat resistance properties are some of the major factors driving the steel fabrication market. The Indian steel fabrication market is expected to witness significant growth in the coming future owing to factors such as the increasing demand from manufacturing sector, the rising preference towards pre-engineered buildings, components and government initiatives for infrastructure development activities. The booming commercial building sector combined with government of India’s initiatives such as increasing the construction of green buildings, smart cities and make in India scheme will boost the Steel Fabrication market in India.
Pros and strengths
Pre-qualification credentials, strategic alliances and track record of organic growth: Pre-qualification is a basic requirement in EPC industry. It is necessary that bidder should have requisite qualification in terms of technical expertise, adequate capital, infrastructure, experienced manpower, value of projects executed in the past etc. The company’s track record of over 28 years with various completed projects enables it to meet customer’s prequalification requirements. Over the past three years, the company’s growth record in its total revenues and profitability also demonstrates the improvement, which were achieved by way of successful expansion of its business operations and its focus on quality.
Wide range of customized technical solutions covering different Industry verticals: The company is an engineering solution provider with well-equipped manufacturing facilities. It is a multidisciplinary engineering company engaged in the design, manufacture, supply & erection of fabricated structural items & mechanical equipment such as Ceiling Girder, Railway Girder, Columns & Bracings, Bolted Structures, Equipment and Pressure ducts, Box Columns, etc. used in Steel Plants, Energy & Power Sectors, Refineries, Railway Bridges, Industrial & Infrastructure sectors, etc. It also executes Engineering, Procurement, Construction and Supply works, for Industrial projects such as Power Plants, Refineries and Fertilizer Plants, Steel Plants, Railway Bridges, Cement Plants, Water Treatment Plants, Pre-Engineered Buildings etc. Therefore, the same skill set serving diverse systems and sectors, reduces its dependence on any one sector and also provides it the distinct advantage of executing multiple packages for a single project.
Efficient business model: The company’s growth is largely attributable to its efficient business model which involves careful identification of its projects and cost optimization, which is a result of executing its projects with careful planning and strategy. This model has facilitated it in maximizing its efficiency and increasing its profit margins. The company follows a strategic approach during the pre-bidding stage, which involves undertaking technical surveys and feasibility studies and analyzing the technical and design parameters and the cost involved in undertaking the project. The company’s strategic approach during the pre-bidding stage enables it to bid at competitive prices and helps it to successfully win projects. Once it wins a bid, its focus is to ensure high quality of construction during the execution stage of the project, as a result of which, it is able to reduce maintenance and repair costs and therefore realize higher margins during the operation and maintenance stage of the project.
Risks and concerns
Maximum revenue comes from few customers: The Revenue from 5 customers for the Period ended on August 31, 2023, FY 2022-23, FY 2021-22 and FY 2020-21 was 88.57%, 92.17%, 75.40% and 81.11% of the total turnover. However, such concentration of its business on a few customers may adversely affect it if it does not achieve its expected margins or suffer losses on one or more of these customer contracts. Significant revenue from a few customers increases the potential volatility of its results and exposure to individual contract risks with such customers, which may have an adverse effect on its results of operations. There can be no assurance that its significant customers in the past will continue to place similar orders with it in the future. A significant decrease in business from any such key customer, whether due to circumstances specific to such customer or adverse market conditions affecting the industry or the economic environment generally may materially and adversely affect its business, results of operations and financial condition.
Dependent on top 10 suppliers for raw material: The company procures its supply of raw materials from various approved suppliers depending upon the price and quality of raw materials. By collaborating exclusively with approved vendors, the company ensure a consistent supply of high-quality raw materials at agreed-upon rates and within specified timelines. Additionally, the expansive pool of suppliers within its industry mitigates the potential impact of the loss of any individual supplier on its production processes and, consequently, its overall profitability. However, its top 10 suppliers contribute significantly to supply of raw materials. The purchase from top ten suppliers for the Period ended on August 31, 2023, FY 2022-23, FY 2021-22 and FY 2020-21 was 62.01%, 52.19%, 67.04% and 66.81% of the total purchase of material. Raw materials, including packaging materials, are subject to supply disruptions and price volatility caused by various factors such as commodity market fluctuations, the quality and availability of raw materials, currency fluctuations, consumer demand, changes in government policies and regulatory sanctions. Any disruption of supply of raw materials from these suppliers will adversely affect its operations.
Industry is labour intensive: The EPC industry being labour intensive, is dependent on labour force for carrying out its project execution and manufacturing operations. Though, it has not experienced any major disruptions in its business operations due to disputes or other problems with its work force in the past. While, the company aims for uninterrupted operations, it acknowledges that unforeseen challenges may arise in the future, it is well-prepared to effectively manage any challenges that may arise. The company’s proactive approach positions it to address disruptions promptly, minimizing their impact on its business and results of operations. This resilience ensures that, even in the face of potential challenges, it is equipped to handle them efficiently, thereby mitigating the risk of increased costs.
Outlook
Atmastco Limited is a turnkey/EPC contractor, providing multi-disciplinary services and project management solutions in the ferrous and non-ferrous sectors. The company is also involved in the manufacturing of various precision equipment and heavy fabrication structures used in different industrial applications. The customer base encompasses a wide range of industries, including power plants, refineries, steel plants, railways, cement plants, industrial and infrastructure, chemicals, pharmaceuticals, petrochemicals, and oil and gas explorations. The company has two manufacturing facilities. One is located opposite Karuna Hospital in Bhilai, Durg, Chhattisgarh, and the second unit is located in Dhamdha, District Durg, Chhattisgarh. On the concern side, the company’s business is substantially dependent on certain key customers, from whom it derives a significant portion of its revenues. The loss of any significant customer may have a material and adverse effect on its business and results of operations. Moreover, the company is dependent on its top 10 suppliers for uninterrupted supply of Raw-Materials. Any shortfall in the supply of its raw materials, or an increase in its raw material costs and other input costs, may adversely affect the pricing and supply of its products with subsequently having an adverse effect on the business, results of operations and financial conditions of the company.
The company is coming out with an IPO of 73,05,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 77 per equity share to mobilize Rs 56.25 crore. On performance front, total Income for the Financial Year 2022-23 stood at Rs 24,27,875.62 thousand whereas the same stood at Rs 9,46,814.26 thousand in Financial year 2021-22, representing an increase of 156.43%. The same is mainly due to increase in revenue from operation from its new ongoing EPC and revenue from sale of its manufactured products i.e. design, manufacturing and supply of precision equipments and heavy fabrication structures for various industrial use and other incomes. Moreover, the company had reported net profit after tax of Rs 1,27,774.71 thousand, in financial year 2022-23, which marks a substantial increase when compared to the preceding financial year, 2021-22, where the PAT was Rs 32,300.40 thousand. There is an increase in PAT by 295.58% which is mainly due to an increase in revenue from operation from its ongoing EPC project from Orissa and increase in revenue from its Manufactured product in the financial year 2022-23.
The company has developed a reputation for successfully executing projects in ferrous and nonferrous sector. It has in place an experienced and well-qualified execution team, with skills in various fields, including civil, structural, mechanical and electrical. It also strives to optimize its operating costs to maximize its operating margins. The company is focusing on entering into segments such as Oil and Gas, Mineral processing, & Defense sectors to become one stop solution for all requirements of steel fabrication structures. It intends to focus on bidding for larger value EPC projects. Thus, it aims to expand its product portfolios in order to secure the EPC Contract of composite works of higher value either through collaboration or independently depending on the project requirements. Going forward, the company is in the process of augmenting resources like design tools, engineers, and equipment, tools to handle new opportunities and challenges.
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