What you must know about the Mangalam Alloys IPO?

Mangalam Alloys Ltd was incorporated in the year 1988 and is a key manufacturer of stainless-steel-based products. In terms of its product portfolio, Mangalam Alloys Ltd manufactures SS Ingots, SS Black Bar, SS RCS, SS Bright Round Bar, Bright Hex Bar, Bright Square Bar, Angle, Patti, Forgings etc. The company manufactures fasteners in more than 30 international grades and in the size range from 3 mm to 400 mm. Typically, Mangalam Alloys Ltd makes stainless steel ingots through 3 furnaces by melting stainless steel scrap, rolling ingots to stainless steel rounds & flats followed by heat treatment annealing. The manufacturing facility of Mangalam Alloys is spread across an area of 40,000 square metres (SQM) with an existing installed melting capacity of 25,000 tonnes per annum (TPA). The revenues of the company have shown steady and secular growth over the last 3 years.

Key terms of the Mangalam Alloys IPO (SME)

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

• The issue opens for subscription on and closes for subscription on 25th September 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price IPO issue. The issue price for the IPO has been fixed at ₹80 per share. Since this is not a book building issue, there is no price discovery that needs to be done.
   
• The IPO of Mangalam Alloys Ltd has a fresh issue component as well as an offer for sale (OFS) portion. It must be remembered that the fresh issue portion of an IPO 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 portion of the IPO, Mangalam Alloys Ltd will issue a total of 61,26,400 shares (61.26 lakh shares approximately), which at the fixed IPO price of ₹80 per share aggregates to a total fresh fund raising of ₹49.01 crore.
   
• As part of the offer for sale (OFS) portion of the IPO, there will be a sale of 7,37,600 shares (7.38 lakh shares approximately), which at the fixed IPO price of ₹80 per share aggregates to a total OFS size of ₹5.90 crore.
   
• Therefore, the total IPO size of the Mangalam Alloys Ltd issue will be of 68,64,000 shares (68.64 lakh shares), which at the fixed IPO price of ₹80 per share aggregates to a total fresh fund raising of ₹54.91 crore.
   
• The OFS of 7.38 lakh shares is being offered by  two sellers in the IPO. Unison Forgins Private Ltd, part of the promoter group, will offer 3.17 lakh shares while early investor, Kamal Krushna Mishra will offer 4.21 lakh shares in the OFS.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation although the name of the market maker and the market maker inventory quota is yet to be announced. The market maker will offer liquidity two-way quotes on the stock post listing and ensure that basis risk is kept low.
   
• The company has been promoted by Uttam Chand Mehta and Tushar Mehta. With the IPO being a combination of fresh issue and offer for sale, the promoter stake will get diluted post the IPO.
   
• The fresh issue funds will be used by the company for meeting its working capital funding gaps and for capex for business expansion and R&D. Part of the monies raised will also go towards general corporate expenses.
   
• While Expert Global Consultants Private Ltd will be the lead manager to the issue, Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is yet to be announced.

IPO allocation and minimum lot size for investment

Mangalam Alloys Ltd will only have a retail category and a non-retail category. After making an allocation to the market maker (which his normally around 5% of the issue size), the net offer size will be distributed equally between the retail investors and the non-retail investors. The break up in terms of minimum and maximum allowed quota has been approximately 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 ₹128,000 (1,600 x ₹80 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 ₹256,000. 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 Mangalam Alloys IPO (SME)

The SME IPO of Mangalam Alloys Ltd IPO opens on Thursday, September 21st, 2023 and closes on Monday September 25th, 2023. The Mangalam Alloys Ltd IPO bid date is from September 21st, 2023 10.00 AM to September 25th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is September 25th, 2023.

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.

Financial highlights of Mangalam Alloys Ltd

Here is what you need to know about the financials and valuations of Mangalam Alloys Ltd.

• The company is yet to report full numbers for FY23, so FY22 is the last financials we have. It may be a tough call to take a view on the IPO based on data that is nearly 18 months old.
   
• The company has shown steady sales in the last 2 years, but the company continues to make losses. This makes it slightly tough to take a call on the valuation of the stock as losses make it tough to bring about a valuation opinion on the stock.

In the absence of key latest financials, it would be best to tread carefully since the last known numbers are still loss making and the data is too old to take a call. Investors can either wait for the full data for FY23 to be announced or they can skip the issue for now and later look at taking positions once the stock is listed on the bourses.