What you must know about Atmastco IPO?

Atmastco Ltd was incorporated in the year 1994 to undertake turnkey and EPC contract work. The company provides multi-disciplinary services and project management solutions in the ferrous and non-ferrous sectors. Atmastco Ltd is involved in the manufacture of various precision equipment and heavy fabrication structures that find applications in various industrial uses. The products manufactured by Atmastco Ltd go into the manufacture of ceiling girder, railway girder, columns & bracings, bolted structures, box columns, and more. These products of Atmastco Ltd  find applications in a slew of user-industries like power & energy, steel plants, cement plants, railway bridges, water treatment plants, refinery & fertilizer plants etc. The business model of Atmastco Ltd is broadly run along 3 verticals; EPC & Turnkey Projects, Fabrication & Manufacturing, and defence. The company currently has nearly 14 ongoing projects as of date.

The operating revenues have grown more than 2.50 times over the previous year, based on the last full year financial reported by the company for FY23. Atmastco Ltd has 2 manufacturing facilities. While one of the manufacturing facilities is located in Bhilai in the state of Chhattisgarh, the other unit is also located in Dhamdha, in the same state. The company has floated a separate defence subsidiary to make the best of the large defence contract domestic manufacturing plan initiated by the government of India. The major products of the defence vertical of Atmastco Ltd include bulletproof jackets and helmets specifically for military use. It also manufactures specialized full-body protectors for female troops and related activities. Atmastco Ltd employs 276 people on its rolls.

Key terms of the Atmastco IPO

Here are some of the highlights of the Atmastco IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 15th February 2024 and closes for subscription on 20th February 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a fixed price issue. The price for the IPO is set at a fixed price level of ₹77 per share. Being a fixed price issue, the issue of price discovery does not arise at all.
   
• The IPO of Atmastco Ltd has a fresh issue component and an offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Atmastco Ltd will issue a total of 54,80,000 shares (54.80 lakh shares), which at the fixed IPO price of ₹77 per share aggregates to fresh fund raising of ₹42.20 crore.
   
• As part of the offer for sale (OFS) portion of the IPO, the issue will entail the sale / offering a total of 18,25,600 shares (18.256 lakh shares), which at the fixed IPO price of ₹77 per share aggregates to total OFS size of ₹14.06 crore.
   
• The entire OFS of 18.256 lakh shares will be by the promoter shareholders of the company. Among the promoters, Subramaniam Swaminathan Iyer will 10.954 lakhs shares while Venkataraman Ganesan will offer 7.302 lakh shares in the OFS.
   
• As a result, the overall IPO size will be a combination of the fresh issue and the offer for sale as explained above. Therefore, the overall IPO size will comprise of the issue and sale of 73,05,600 shares (73.056 lakh shares) which at the upper band IPO price of ₹77 per share will aggregate to overall IPO size of ₹56.25 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,66,400 shares. Asnani Stock Brokers Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Subramaniam Swaminathan Iyer, Venkataraman Ganesan, Jayasudha Iyer and Apex Steel & Technology (India) Private Ltd. The promoter holding in the company currently stands at 97.39%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 68.43%.
   
• The fresh issue funds will be used towards the working capital needs of the company and for repayment / prepayment of some high cost loans. Part of the proceeds will also go towards meeting general corporate expenses.
   
• Affinity Global Capital Markes Private Ltd will be the lead manager to the issue, and Cameo Corporate Services Ltd will be the registrar to the issue. The market maker for the issue is Asnani Stock Brokers Private Ltd.

IPO allocation and minimum lot size for investment

Atmastco Ltd has already announced the market maker allocation at 3,66,400 shares as inventory for market making. Asnani Stock Brokers Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Atmastco Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹1,23,200 (1,600 x ₹77 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹2,46,400. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Atmastco IPO (SME)

The SME IPO of Atmastco Ltd IPO opens on Thursday, 15th February 2024 and closes on Tuesday, 20th February 2024. The Atmastco Ltd IPO bid date is from 15th February 2024 at 10.00 AM to 20th February 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 20th February 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on February 22nd 2024, will be visible to investors under the ISIN Code – (INE05DH01017).

Financial highlights of Atmastco Ltd

The table below captures the key financials of Atmastco Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have growing at a rapid rate in the last 2 years. In fact, the sales revenues are up more than 3.5 times in the last 2 years. The PAT margins have sharply improved in the last 2 years from 0.87% to 5.28% and this largely on economies of scale.
   
• While net margins of the company moderate to robust, the return on equity (ROE) at 23.51% and the return on assets (ROA) at 5.41% in the latest year are very attractive and robust. That is more due to the rapid growth in profits in the last 2 years
   
• The asset turnover ratio or the sweating ratio has been just above 1X in the latest year, which is good. In addition, when you add the ROA at 5.41%, the future impact on the ROE could be quite substantial; especially since sales is still on a growth path.

The company has latest year EPS of ₹5.63 and even though previous data may not really be comparable, the weighted average EPS of last 3 years stand at ₹5.11. The latest year earnings are being discounted by the IPO price of ₹77 per share at 13.68 times P/E ratio. However, if we annualize the 5-month EPS of ₹4.24 for FY24, we are looking at relatively more reasonable valuations based on forward earnings numbers. The company is having an established presence in the industry for over 30 years and that is a distinct advantage in an industry where past relationships matter a lot. It is also poised to benefit largely from the flow of defence orders and offers IPO investors a good vehicle to bet on defence at reasonable valuations at this juncture.