Owais Metal and Mineral Processing
- Owais Metal and Mineral Processing is coming out with initial public offering (IPO) of 49,07,200 shares of Rs 10 each in a price band Rs 83-87 per equity share.
- The issue will open for subscription on February 26, 2024 and will close on February 28, 2024.
- The shares will be listed on NSE SME Platform.
- The face value of the share is Rs 10 and is priced 8.30 times of its face value on the lower side and 8.70 times on the higher side.
- Book running lead manager to the issue is Gretex Corporate Services.
- Compliance Officer for the issue is Vishaka Gujrati.
Profile of the company
Owais Metal and Mineral Processing is efficient and effective manufacturer and processor of various metals and minerals. Uniquely diversified across the broad spectrum of natural resources with main interests in manufacturing and processing metal and minerals. The company is engaged in the manufacturing and processing of the products like; Manganese Oxide (MNO); MC Ferro Manganese; Manufacturing of Wood Charcoal; and Processing of Minerals such as Ferro Alloy, Quartz and Manganese Ore.
The company’s products like Manganese Oxide is used in fertilizer industry and is also used by the Manganese Sulphate Plants. Manganese Ore is used in manufacturing of Ferro Manganese, Silico Manganese, Manganese Oxide, Batteries and other Ferro products also it can be directly sellable in the market. MC Ferro Manganese is used in steel and casting industries, as it assists in removing sulphur from steel and improve properties, like durability, machinability and malleability. It can deoxidize molten metal. Its Wood Charcoal is used in furnaces of industries which requires high heat for their manufacturing process such as Steel industry. Processed Quartz is being used hotel industry, Ferro Alloys industry, tiles & ceramic industry, glass industry and industry of interiors & furniture. Its major products are being supplied to the state of Madhya Pradesh, Maharashtra Punjab, Delhi and Gujrat. The company has recently added new products to its portfolio these products are Wood Charcoal and Processed Quartz. The company has a manufacturing unit for wood charcoal at Rajasthan and Meghnagar. Processing of Quartz has been done through its Meghnagar plant.
The company’s factory is situated in Meghnagar which is a Strategic location as it is situated on the border of Gujarat, Madhya Pradesh and Rajasthan. Gujarat, Madhya Pradesh and Rajasthan are the three major consumers of Manganese oxide and MC Ferro Manganese. This location helps the company in minimizing its transportation cost and labour cost. It tries to attain maximised output of its products through its operational excellence, processing capability and state of the art infrastructure. It focuses on large scale expansion of product portfolio in India and aims to emerges as a well-known natural resource processing company. For manufacturing and processing of minerals and metals both machine and labour are required. It has a semi-automatic plant and machines available and also, it works in the Tribal area where there is sufficient availability of cheaper labours. The company has sufficient land and factory shed for manufacturing and processing of metals and minerals with other necessary infrastructural facilities such as power, water, labour etc.
Proceed is being used for:
- Purchase of equipments to facilitate manufacturing
- Working capital requirements
- General corporate purposes.
Industry overview
India holds a fair advantage in production and conversion costs in steel and alumina. Its strategic location enables export opportunities to develop as well as fast-developing Asian markets. As of FY22, the number of reporting mines in India were estimated at 1,425, of which reporting mines for metallic minerals were estimated at 525 and nonmetallic minerals at 720. Minerals are precious natural resources that serve as essential raw materials for fundamental industries, so the growth of the mining industry is essential for the overall industrial development of a nation. The vast resources of numerous metallic and nonmetallic minerals that India is endowed with serve as a foundation for the expansion and advancement of the nation's mining industry. India is largely self-sufficient in metallic minerals including bauxite, chromites, iron ore, and lignite as well as mineral fuels like coal and lignite. The industry has the potential to significantly impact GDP growth, foreign exchange earnings, and give end-use industries like building, infrastructure, automotive, and electricity, among others, a competitive edge by obtaining essential raw materials at reasonable rates.
Production level of important minerals in February, 2023 were: Coal 861 lakh tonnes, Lignite 41 lakh tonnes, Natural gas (utilized) 2595 million cu. m., Petroleum (crude) 22 lakh tonnes, Bauxite 1995 thousand tonnes, Chromite 330 thousand tonnes, Copper conc. 9 thousand tonnes, Gold 9 kg, Iron ore 245 lakh tonnes, Lead conc.31 thousand tonnes, Manganese ore 278 thousand tonnes, Zinc conc. 144 thousand tonnes, Limestone 336 lakh tonnes, Phosphorite 183 thousand tonnes, Magnesite 10 thousand tonnes and Diamond 17 carat. In FY23, production of crude steel at 125.32 million tonnes (MT), finished steel at 121.29 MT and consumption of finished steel at 119.17 MT has exceeded their respective levels achieved over the corresponding period of not only COVID affected last two years but also pre COVID years as well. India's iron ore production stood at 250 MT in FY22, increase of 23% compared with 204 MT in FY21. India's overall coal production has seen a quantum jump to 893.08 MT in FY23 as compared to 728.72 MT in FY19 with a growth of about 22.6%. The world production of Aluminum during October-December 2021 was about 16.62 million tonnes against world consumption of 16.56 million tonnes.
There is a significant scope for new mining capacities in iron ore, bauxite and coal and considerable opportunities for future discoveries of sub-surface deposits. Infrastructure projects continue to provide lucrative business opportunities for steel, zinc, and aluminum producers. Iron and steel make up a core component for the real estate sector. Demand for these metals is set to continue given strong growth expectations for the residential and commercial building industry. The Government of India has also helped in the development of the metals and mining sector in India by launching key policy initiatives. The National Mineral Policy, which was approved by the government in February 2019, has ensured improved regulation and enforcement, more transparency, balanced social and economic growth, and sustainable mining techniques. The policy grants industry status to the mining activities and boost private sector funding.
Pros and strengths
Well-developed distribution network: The company has developed and implemented a wide range of networking channels throughout the industry and society to strengthen the scope of identifying core customer base and designing right marketing strategies for procurement and liaising of projects to deliver customized solutions for clients. Its distribution and marketing network ensures its product availability to its customers translating into efficient supply chain, focused customer service and short turnaround times for product delivery.
Fully integrated manufacturing facility: The company does continuous endeavor to maintain the requisite infrastructure and technological up gradation for the smooth running of the manufacturing process as well as to cope with the changing market demand situation. There is a continuous change in the technology and the markets are very dynamic to the change in technology. It keeps itself technologically upgraded with the latest machines and infrastructure.
Existing client base: Since the company’s promoters were already active in the manufacturing and processing business of metals and minerals whether directly or indirectly, it is successful in building a strong client base for its business. Its existing relationships help it to get repeat business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. The company has strong existing client relationships which generates multiple repeat orders. The company’s existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.
Risks and concerns
Limited operating history: The company was originally incorporated as a Private Limited Company under the Companies Act, 2013 with Registrar of Companies, Central Registration Centre through a certificate of incorporation dated December 16, 2022. After incorporation, company has taken-over the running business of Proprietorship firm of its Promoter i.e., M/s Owais Ali Overseas for expansion of the business of Company. It has very limited operating history in terms of a company from which one can evaluate its business, prospects and viability. Its future revenues and profitability are difficult to estimate and could fluctuate significantly and as a result the price of its Equity Shares may be volatile. The business of manufacturing and processing of various metals and minerals was earlier carried by proprietorship firm which is recently taken over by the company, although the proprietorship has placed the growth in past years, and will continue to place by the company but there is no assurance that this growth will be met successfully in future. The company may not be able to increase revenue or maintain profitability on a quarterly or an annual basis. If this occurs, its results of operations and financial condition will be adversely affected.
Maximum revenue comes from few customers: The company’s top 10 customers accounted for approximately 95.99% of its revenue from operations in period ended on December 31, 2023. Since it is dependent on certain key customers for a significant portion of its sales, the loss of one or more of such customers or a reduction in demand from such customers, for any reason, including due to loss of contracts, delay in fulfilling existing orders, failure to negotiate or agree upon acceptable terms in negotiations, disputes or a loss of market share or a downturn in the spending on healthcare by them, if not suitably replaced with another customer, could adversely affect its business, financial condition and results of operations. The company’s revenues and profitability may also be adversely affected if there’s a significant reduction in the volume of its business with such customers, or if its customers prefer its competitors over it, and it may not remain the preferred products and solutions provider for certain of its customers.
Dependent upon few suppliers for raw material: The company’s top 10 suppliers for the period ended on December 31, 2023 have contributed 50.93% respectively, of its total purchases. While it is not significantly dependent on any single raw material supplier, raw material supply and pricing can be volatile due to a number of factors beyond its control, including demand and supply, general economic and political conditions, transportation and labour costs, labour unrest, natural disasters, competition, import duties, tariffs and currency exchange rates, and there are inherent uncertainties in estimating such variables, regardless of the methodologies and assumptions that it may use. Therefore, the company cannot assure that it will be able to procure adequate supplies of raw materials in the future, as and when it need them on commercially acceptable terms. Further, there may be volatility in prices of its raw material and if it is not able to compensate for or pass on its increased costs to customers, such price increases could have a material adverse impact on its result of operations, financial condition and cash flows. Additionally, it may not be able to pass on every instance of increase in input cost and may have to pursue internal cost control measures.
Outlook
Owais Metal and Mineral Processing was established in 2022 and is engaged in the production and processing of metals and minerals. The company's manufacturing facility is located in Meghnagar, Madhya Pradesh. As of December 31, 2023, the company had 25 permanent employees. On the concern side, the company has been formed specifically for the purpose of acquisition of the business of M/s Owais Ali Overseas (Proprietorship firm of its Promoter) thus it has limited operating history as a Company which may make it difficult for investors to evaluate its historical performance or prospects. Moreover, substantial portion of its revenues has been dependent upon few customers, with which it does not have any firm commitments. Loss of its key customers or significant reduction in demand from, its significant customers may materially and adversely affect its business and financial performance.
The company is coming out with an IPO of 49,07,200 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 83-87 per equity share. The aggregate size of the offer is around Rs 40.73 crore to Rs 42.69 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations was Rs 3,952.02 lakh for the period ended December 31, 2023 on account of increase in expansion of business. The company’s other income was Rs 25.52 lakh which comprised of Interest income and Other non-operating income. Moreover, the company’s profit after tax was Rs 765.47 lakh for the period ended December 31, 2023.
The company focuses on getting new products and one of the products that is been identified by the company is Ferro Chrome. The company is expanding by starting the manufacturing of Ferro Chrome. Ferrochrome, an alloy of chromium and iron, is used in various industrial applications, primarily in the metallurgical and steel industries. Its primary use is as an alloying agent to impart specific properties to steel and other alloys. Also, the company is planning to mining activities, its strategic entry into the mining business, will be a move that underscores its commitment to diversification, sustainability, and growth. The company’s foray into the mining sector aligns with its long-term vision of expanding its portfolio and contributing to global resource sustainability. Going Forward, the company’s focus is on increasing sales volume through expansion, diversification and spread in geographical outreach. The company’s growth in local market can fetch it to new business expansion and opportunities.
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