A-One Steels India Plans ₹650 Crore IPO for Expansion and Debt Reduction

Bangalore-based A-One Steels India is set to raise ₹650 crore through an initial public offering (IPO) as part of its strategy to expand its manufacturing facilities and reduce debt. The IPO will consist of a fresh issuance of shares worth ₹600 crore and an offer-for-sale (OFS) of shares worth ₹50 crore by the promoters, who currently hold an 85.56% stake in the company. Public shareholders hold the remaining 14.14%. A-One Steels, a prominent backward integrated steel manufacturer in southern India, filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on December 30, 2024.

A Diversified Steel Manufacturer

A-One Steels India operates six manufacturing facilities across Karnataka and Andhra Pradesh, making it a significant player in southern India's steel industry. The company boasts a diversified portfolio that includes long and flat steel products and industrial items essential for steel manufacturing. With an installed capacity of 14.97 lakh metric tons per annum (MTPA) as of June 2024, the company has established a robust presence in the market.

The company's operations are vertically integrated, covering every aspect of steel production from raw material processing to finished goods. This integration not only ensures cost efficiency but also enhances quality control, making A-One Steels a preferred choice for various industries. The company competes with listed entities like MSP Steel and Power, Jai Balaji Industries, and Shyam Metallics and Energy, further underlining its strong market position.

Utilization of A-One Steels IPO Proceeds

Out of the ₹600 crore fresh issue proceeds, A-One Steels plans to allocate ₹344.4 crore for the expansion of its manufacturing facilities. This expansion is expected to enhance production capacity, enabling the company to meet growing demand in domestic and international markets. Additionally, ₹40 crore will be invested in a group captive power plant, which will improve energy efficiency and reduce operational costs.

Furthermore, ₹100 crore from the IPO proceeds will be used to repay a portion of the company’s total borrowings, which stood at ₹1,396.2 crore as of September 2024. This strategic move will help A-One Steels improve its financial health and reduce interest expenses, thereby enhancing profitability.

Promoters and Public Shareholding

The offer-for-sale component of the IPO involves ₹50 crore worth of shares sold by the company’s promoters. Post-IPO, the promoters’ stake will reduce from the current 85.56%, increasing the public shareholding. This move aligns with regulatory norms and allows greater public participation in the company’s growth journey.

Merchant Bankers for the IPO

PL Capital Markets and Khambatta Securities have been appointed as the merchant bankers for the issue. These financial institutions will play a crucial role in managing the IPO process, ensuring compliance with regulatory requirements, and attracting a broad base of investors.

Conclusion

The IPO marks a significant milestone for A-One Steels India, reflecting its commitment to scaling operations and achieving financial stability. With a focus on manufacturing expansion, energy efficiency, and debt reduction, the company is well-positioned to strengthen its competitive edge in the steel industry. As the IPO progresses, it presents a promising investment opportunity for those seeking exposure to a diversified and growth-oriented steel manufacturer in India.