What you must know about Kalyani Cast Tech IPO?

Kalyani Cast Tech IPO is an ISO certified casting unit with in-house machining facility. The company produces a wide range of castings that conform to Indian and Global Standards and specifications. The company has a diverse sectoral client base including Indian Railways, Mining industry, cement industry, chemical and fertilizer plants, and power industries. The company has adopted the No-bake system of moulding and having automatic sand plant starting from knock out, screening, cooling, and mixing of sand. The company makes a wide product range of castings, including finished components. Kalyani Cast Tech offers specialization in various types of cargo containers; including dwarf containers, cuboid containers, special containers for parcel cargo, and containers for two & three wheelers as per International Standards. The company has its manufacturing facility located at Rewari in the state of Haryana.

The manufacturing unit located at Rewari in Haryana is built on 3.5 acres or approximately 14,000 square metres (SQM) of land. The manufacturing facility has a total covered area of over 6,000  SQM. Kalyani Cast Tech Ltd has 4 self-contained workshop sheds, each of which is fully equipped with wide range of plant and machinery. It has several state-of-the art machinery to enhance output and quality. This includes Test Rig for testing of containers as per extant ISO standards for dry containers. It also has Automatic Welding Machines for welding of side wall panels, roof panels, and Front End panels. Apart from jigs and fixtures for Side Wall. End Wall, Under-frame, Front panels, rear Panels, doors, and boxing of Containers; Kalyani Cast Tech also has sand blasting equipment, paint booth and water testing equipment as part of its existing facilities.

Key terms of the SME IPO of Kalyani Cast Tech IPO

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

• The issue opens for subscription on 08th November 2023 and closes for subscription on 10th November 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book building issue. The issue price for the fresh issue IPO has been fixed in the price band of ₹137 to ₹139 per share. Being a book built issue, the final price will be discovered via book building process.
   
• The IPO of Kalyani Cast Tech Ltd has only a fresh issue component with no book built 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 portion of the IPO, Kalyani Cast Tech Ltd will issue a total of 21,66,000 shares (21.66 lakh shares), which at the upper IPO band price of ₹139 per share aggregates to a total fund raising of ₹30.11 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 21.66 lakh shares, which at the upper price band of ₹139 per share will aggregate to ₹30.11 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 3,62,000 shares. The market maker for the issue is Gretex Share Broking 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 Naresh Kumar, Javed Aslam, Nathmal Bangani, Kamala Kumari Jain and Muskan Bangani. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 69.83%.
   
• The fresh issue funds will be used by the company for meeting its working capital funding gap and for general corporate expenses of the company. Part of the funds will also go towards issue related expenses.
   
• Gretex Corporate Services Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Gretex Share Broking Ltd.

IPO allocation and minimum lot size for investment

Kalyani Cast Tech Ltd has allocated 16.71% of the issue size for the market makers to the issue, Gretex Share Broking Ltd. The net offer (net of market maker allocation) will be divided between the qualified institutional buyers (QIBs), retail investors and the HNI / NII investors. The breakdown of the overall IPO of Kalyani Cast Tech 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 1,000 shares. Thus, retail investors can invest a minimum of ₹139,000 (1,000 x ₹139 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 2,000 shares and having a minimum lot value of ₹278,000. 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 Kalyani Cast Tech IPO (SME)

The SME IPO of Kalyani Cast Tech IPO opens on Wednesday, November 08th, 2023 and closes on Friday, November 10th, 2023. The Kalyani Cast Tech IPO bid date is from November 08th, 2023 10.00 AM to November 10th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is November 10th, 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 Kalyani Cast Tech Ltd

The table below captures the key financials of Kalyani Cast Tech 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 revenue spike has been sharp in the last two years, although that is due to a very low base in FY21. That also makes the numbers not comparable over the last 3 years. The latest year has seen a near 6-fold growth in sales over a two year period.
   
• The net margins have been in the range of 12-13% in the latest year. However, here again, the comparisons are tough since the company has seen a sharp spike in margins only in the latest year, so sustainable markets will be the key. Even ROE is only meaningful for the latest year of FY23, and once again sustenance will be the key.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 2 on a consistent basis. This may not be too representative as here the expenses ratio would matter more than the asset turnover ratio, in this sector.

The company has latest year EPS of ₹16.03 and weighted average EPS of ₹8.93 for the last 3 years. However, a lot will depend on what level the EPS sustains in the long run since growth has been quite robust only in the latest year. By latest year valuations, the company looks reasonably priced at about 8 times earnings or P/E ratio, so it is the sustainable EPS that will matter. The focus would be on the next few quarters. This is generally a non-cyclical business so investors must keep the competition from the unorganized market in view. It is suited for the investors willing to take on higher risk and wait for longer period of time.