Introduction
The Parmeshwar Metal IPO is one of the most anticipated public offerings in January 2025. As a leading manufacturer of copper wire and rods, the company caters to high-growth industries such as power cables, automotive, transformers, and household applications2. This IPO provides investors an opportunity to participate in the growth story of a niche player in the engineering sector.
Company’s Background and Business Model
Established in 2016, Parmeshwar Metal specializes in manufacturing copper wire and rods through recycling copper scrap. The company operates a state-of-the-art manufacturing facility in Dehgam, Gujarat, with a focus on quality, innovation, and environmental sustainability2. The company’s product portfolio includes precision-engineered copper wire rods in various dimensions (1.6 mm, 8 mm, and 12.5 mm), serving crucial industries such as power cables, automotive, transformers, and household applications.
IPO Price and Valuation
- IPO Opening Date: January 2, 2025
- IPO Closing Date: January 6, 2025
- Price Band: ₹57 to ₹61 per equity share
- Face Value: ₹10 per share
- Lot Size: 2,000 shares
- Issue Size: Fresh Issue: ₹24.74 crore
- Listing Exchange: BSE SME
Financial Performance
The company’s financials highlight its consistent growth and profitability. Here’s a summary of key metrics for the fiscal year ending March 31, 2024:
- Revenue: ₹97,270.61 lakhs
- Profit After Tax (PAT): ₹19,000 lakhs
- Earnings Per Share (EPS): ₹4.75
- Return on Net Worth (RoNW): 18.5%
- Debt-to-Equity Ratio: 0.25
- EBITDA Margin: 17.5%
- PAT Margin: 9.8%
Grey Market Premium (GMP)
The Parmeshwar Metal IPO GMP today is ₹20 per share, indicating that in the grey market, Parmeshwar Metal shares are trading higher by ₹20 apiece than its issue price. This suggests strong investor interest ahead of the IPO.
Use of IPO Proceeds
The company plans to utilize the net proceeds from the IPO for setting up a new manufacturing facility at Gandhinagar, Dehgam, Gujarat, for manufacturing Bunched Copper Wire and 1.6 MM Copper Wire, and for funding capital expenditure for furnace renovation. The proceeds will also be used to meet working capital requirements and for general corporate purposes3.
Company’s Management and Leadership
The company is led by a strong promoter group, including Mr. Shantilal Kailashchandra Shah and Mr. Suchitkumar Maheshbhai Patel, who bring extensive expertise to the business. The company has earned ISO 9001:2015 certification, demonstrating its commitment to quality management systems2.
Industry and Market Risks
- High Competition: The company operates in a competitive market with established players like Hindalco and Vedanta.
- Raw Material Price Fluctuations: Copper prices are highly volatile, which can impact profitability.
- Supply Chain Issues: Risks such as production delays and supply chain disruptions could impact performance.
- Export Risks: International trade policies and geopolitical tensions could affect the company’s export business.
Legal Risks and Pending Litigations
There are no significant pending litigations or legal risks reported for Parmeshwar Metal as of the latest available information.
IPO Subscription Data
The IPO has received a strong response from the primary market investors. By the second day of bidding, the IPO had been subscribed 29.02 times, with the retail portion of the public issue booked 54.12 times and the NII segment filled 14.39 times1.
Company’s Competitors
- Hindalco
- Vedanta
- Welspun India
IPO Exit Strategy
Investors should consider their investment horizon and financial goals before investing in the IPO. A long-term investment horizon is recommended to benefit from the company’s growth potential.
Pros and Cons
Pros:
- Rising Industry Demand: Growing demand for copper wire and rods in various industries offers significant growth potential.
- Strong Financials: Healthy margins, consistent revenue growth, and a strong RoNW reflect operational efficiency.
- Competitive Valuation: The IPO is priced attractively compared to peers, offering potential upside.
- Sustainable Business Model: Focus on recycling copper scrap positions the company favorably in an environmentally conscious market.
- Utilization of Funds: Proceeds from the IPO will be used for capacity expansion and debt repayment, driving long-term growth.
Cons:
- High Competition: The company operates in a competitive market with established players like Hindalco and Vedanta.
- Sector Dependence: Revenue is heavily reliant on the copper industry, which is cyclical in nature.
- Operational Challenges: Risks such as production delays, raw material price fluctuations, and supply chain issues could impact performance.
- Export Risks: International trade policies and geopolitical tensions could affect the company’s export business.
- Valuation Risks: While the valuation is attractive compared to peers, the P/E ratio is on the higher side for a mid-sized company.
Final Verdict
The company has strong finances and good value. It also has growth potential. Therefore, the Parmeshwar Metal IPO looks like a good investment for long-term investors. However, potential investors should conduct their own due diligence and consult with financial advisors before making any investment decisions.
Disclaimer: Investments in initial public offerings are subject to market risks. Please consult with financial advisors and read the red herring prospectus thoroughly before placing bids.