What you must know about the Pattech Fitwell Tube Components SME IPO

Pattech Fitwell Tube Components Ltd, is an SME IPO on the NSE which has opened for subscription on 05th Aril 2023. The company, Pattech Fitwell Tube Components Ltd, was incorporated in 2012 to manufacture forging products for the non-automotive sector. The company has total installed capacity of 14,104 metric tonnes per annum (MTPA). In terms of specific product categories, Pattech Fitwell Tube Components Ltd manufactures forged flanges, complex and specialized machine components, welded assemblies in the area of open die forgings etc. Today, it has a factory area of more than 65,000 SFT.

Typically, the company converts semi-finished products into final output through value added processes. These include forming, blending, drilling, cutting, polishing, painting, blasting, welding, and punching. They are also into marking, testing, and packaging of these products. Some of their prestigious clients include, BPCL, Indian Oil, ONGC, SAIL, Petronet LNG, Larsen & Toubro, Reliance Industries, GSECL, and Thermal Systems. The fresh funds will be used by the company to fund its working capital requirements.

Key terms of the SME IPO of Pattech Fitwell Tube Components Ltd

Here are some of the highlights of the Pattech Fitwell Tube Components Ltd IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 05th April 2023 and closes for subscription on 12th April 2023; both days inclusive. This rather long IPO time frame is due to a number of holidays thrown in between.
   

• The company has a face value of Rs10 per share and the issue price for the fresh issue portion has a fixed price of Rs50 per share. That implies a premium of Rs40 over the face value of the shares.
   

• The company will issue a total of 24.00 lakh shares at the price of Rs50 per share aggregating to a total fund raising of Rs12.00 crore. The entire IPO will be by way of fresh issue and there is no offer for sale component in the IPO issue.
   

• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors. There is no allocation in the SME IPO of the company for Qualified Institutional Buyers (QIB).
   

• The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of Rs. 150,000 (3,000 x Rs50 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 Rs. 300,000. There is no upper limit on what the HNI / NII investors can apply for.
   

• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 126,000 shares. Pure Broking Private Limited will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   

• The company has been promoted by Bharatbhai Jivrajbhai Limbani and Jaysukhbhai Popatbhai Limbani. The promoter stake in the company stands currently at 100%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted to 69.06%.

While Fedex Securities Ltd will also be the lead manager to the issue, Bigshare Services Private Limited will be the registrar to the issue.

Key dates to be aware of in the Pattech Fitwell Tube Components Ltd IPO (SME)

The SME IPO of Pattech Fitwell Tube Components Ltd IPO opened on Wednesday, April 05th, 2023 and closes on Wednesday April 12th, 2023 due to the slew of holidays in between. The Pattech Fitwell Tube Components Ltd IPO bid date is from April 05th, 2023 10.00 AM to April 12th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 12th of April 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. This ensures that the funds never leave the bank account of the investor and only a block is created on the funds. This ensures that the investor does not lose money on the application money block in the interim period.

Financial highlights of Pattech Fitwell Tube Components Ltd

The table below captures the key financials of Pattech Fitwell Tube Components Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins have been fairly low which is quite normal in this specific industry where there is a lot of competition from the unorganized sector. The sales growth has been quite erratic over the last 3 years, but that is more due to the lag effect of the pandemic. However, the company has an established model with a defined and matured market. It also caters to some of the biggest names in the industry so client profile is not an issue. However, investors must remember that this is a traditionally low margin business. That could be an overhang on valuations.