What you must know about Goyal Salt IPO?

Goyal Salt Ltd was incorporated in the year 2010 to engage in the business of refining raw salts. These salts are typically procured from sub-soil brine in Rajasthan for use as industrial salts and also as edible salts. Goyal Salt Ltd refines and supplies pure, refined, and quality range of triple-refined free-flow iodized salt. In addition, it also supplies industrial salts, double-fortified salt, and triple-refined half-dry salt. Goyal Salt Ltd basically sources raw materials from the open market accounting for about 75% of the total requirement of raw salt. In addition, salt land harvesting also brings them adequate supplies. Its industrial salts find application in industries like soaps, detergents, textiles, glass, polyester, plastics, rubber, leather, and chemicals. It has a full-fledged refinery located in the Nawa City, spread across 1.45 Hectares of land. In addition, the government of Rajasthan has also assigned the company lease rights to harvest raw salt over 18.66 Hectares of land.

Key terms of the Goyal Salt IPO (SME)

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

• The issue opens for subscription on 26th September 2023 and closes for subscription on 29th September 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The issue price band for the book built IPO has been fixed in the range of ₹36 to ₹38 per share. Since it is a book built issue, the eventual price will be discovered by book building process.
   
• The IPO of Goyal Salt Ltd has a fresh issue component but no 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, Goyal Salt Ltd will issue a total of 49,02,000 shares (49.02 lakh shares), which at the fixed IPO price of ₹38 per share aggregates to a total fund raising of ₹18.63 crore.
   
• As there is no offer for sale portion, the fresh issue size will also be the total size of the IPO. As a result, the total issue size of Goyal Salt Ltd will also entail the issue and sale of 49,02,000 shares (49.02 lakh shares), which at the upper end of the IPO price band of ₹38 per share aggregates to a total fund raising of ₹18.63 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 2,46,000 shares. The market maker for the issue is Holani Consultants Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Rajesh Goyal, Pramesh Goyal, Lokesh Goyal, Radhika Goyal, Priyanka Goyal, Rekha Goyal, Kunj Bihari Goyal HUF, Rajesh Goyal HUF, Parmesh Goyal HUF, and Lokesh Goyal HUF. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares and the OFS, the promoter equity holding share will get diluted to 72.61%.
   
• The fresh issue funds will be used by the company for meeting capital expenditure for quality enhancement, brand creation and marketing expenses, funding working capital expenses and also to partially fund general corporate expenses.
   
• While Holani Consultants Private Ltd will be the lead manager to the issue, Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Holani Consultants Private Ltd.

IPO allocation and minimum lot size for investment

Out of the total shares on offer, the company has allocated 2,46,000 shares for the market maker, Holani Consultants for providing liquidity post listing and reducing basis risk. The net offer (net of market maker allocation) will be distributed between the QIB investors, retail investors and the HNI / NII investors. Net offer in the below table refers to the issue size net of the market maker quota.

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹114,000 (3,000 x ₹38 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 6,000 shares and having a minimum lot value of ₹228,000. 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 Goyal Salt IPO (SME)

The SME IPO of Goyal Salt Ltd IPO opens on Tuesday, September 26th, 2023 and closes on Friday, September 29th, 2023. The Goyal Salt Ltd IPO bid date is from September 26th, 2023 10.00 AM to September 29th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is September 29th, 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 Goyal Salt Ltd

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

Data Source: Company DRHP filed with SEBI

The business is largely a commoditized business with typically low margins, especially with respect to industrial consumers. Competition from the unorganized sector is also high. Investors will have to keep these risks in mind while investing.