What you must know about Owais Metal and Mineral Processing IPO?

Owais Metal and Mineral Processing Ltd was incorporated in the year 2022 to engage in the business of production and processing of metals and minerals. Under the metals and minerals vertical, the products of the company find applications in a variety of industries. Manganese oxide (MNO) finds extensive application in the fertilizer industry as well as in the manganese sulphate plants. Secondly, the MC Ferro Manganese manufactured by Owais Metal and Mineral Processing Ltd is generally used in the steel and casting industry. The company is also a major producer of charcoal, which is extensively used in furnaces in industries that require high heat for manufacturing, like in the steel making process.

In addition, Owais Metal and Mineral Processing Ltd also processes minerals such as ferroalloys, quartz, and manganese ore, which are extensively used in the hotel industry, the ceramics industry, and in the glass industry. Some of its key markets in India are located in the states of Madhya Pradesh, Maharashtra, Punjab, Delhi, and Gujrat. The manufacturing facility of Owais Metal and Mineral Processing Ltd is located at Meghnagar in Madhya Pradesh. The company currently employs about 25 personnel on its rolls.

Key terms of the SME IPO of Owais Metal and Mineral Processing IPO

Here are some of the highlights of the Owais Metal and Mineral Processing IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 26th February 2024 and closes for subscription on 28th February 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a book building issue. The price for the book building issue is set in the price band of ₹83 to ₹87 per share. Being a book built issue, the price will be discovered in the above band.
   
• The IPO of Owais Metal and Mineral Processing Ltd has only a fresh issue component and 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, Owais Metal and Mineral Processing Ltd will issue a total of 49,07,200 shares (49.07 lakh shares approximately), which at the upper band of IPO price of ₹87 per share aggregates to fresh fund raising of ₹42.69 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 49,07,200 shares (49.07 lakh shares approximately) which at the upper band IPO price of ₹87 per share will aggregate to overall IPO size of ₹42.69 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,44,000 shares. Gretex Share Broking 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 Saiyyed Owais Ali, Sayyad Akhtar Ali, and. Saiyyed Murtuza Ali. 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 73.01%.
   
• The fresh issue funds will be used by the company towards the purchase of manufacturing equipment and for working capital requirements. Part of the proceeds will also be used for general corporate purposes.
   
• 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 Brokers Private Ltd.

IPO allocation and minimum lot size for investment

Owais Metal and Mineral Processing Ltd has already announced the market maker allocation at 3,44,000 shares as inventory for market making. Gretex Share 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 Owais Metal and Mineral Processing 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 ₹139,200 (1,600 x ₹87 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 ₹278,400. 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 Owais Metal and Mineral Processing IPO (SME)

The SME IPO of Owais Metal and Mineral Processing Ltd IPO opens on Monday, 26th February 2024 and closes on Wednesday, 28th February 2024. The Owais Metal and Mineral Processing Ltd IPO bid date is from 26th February 2024 at 10.00 AM to 28th February 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 28th 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 01st March 2024, will be visible to investors under the ISIN Code – (INE0R8M01017).

Financial highlights of Owais Metal and Mineral Processing Ltd

The company, Owais Metal and Mineral Processing Ltd, was only incorporated in the year 2022 and hence the full year financials are only available for the year FY23. Obviously, a 1 year financial history is too short a period to take a view on the stock, and we will require not less than 3 years of data to take an informed view. For FY23, the company has made a small loss and it is only in the first 9 months of FY24 that it has shown profits. Hence, the data is insufficient to take any informed view on the valuations story.

However, one can look at the qualitative story of the company in this case. Owais Metal and Mineral Processing Ltd seems to enjoy some qualitative moat in the industry. It already has a vast captive client base and that is holding them in good stead even after their conversion to a public limited company. Apart from a fully integrated manufacturing facility, the company also has a very well developed distribution network. Investors wanting to put money in the IPO must take a risk in the absence of a history of financial information available in the RHP.