Karbonsteel BSE SME IPO review

•    The company is engaged in the business of structural engineering and fabrication especially large-scale developments, that is ongoing.
•    The company enjoys niche place in the segment with high margin large structural works.
•    It marked growth in its top and bottom lines for the reported periods.
•    It has Rs. 330 cr. worth orders on hand as of July 31, 2025.
•    Based on its recent financial data, the issue appears fully priced.
•    Investors may park funds for the long term.

ABOUT COMPANY:
Karbonsteel Engineering Ltd. (KEL) is a structural engineering and fabrication company engaged primarily in the design, fabrication and assembly of heavy and precision steel structures, customized to meet clients’ requirements across various industrial and infrastructure segments. It has delivered structural engineering and fabrication solutions in diverse sectors including steel plants, railway bridges, oil & gas plants, refineries, chemical plants and other industrial units. Its fabricated structures form an integral part of the construction, expansion or modernization of industrial and infrastructure projects, including industrial plants, high rise buildings, railway bridges and other large-scale developments.

Some of its esteemed customers include Arcelor Mittal Nippon Steel India Limited, Tata Projects Limited, John Cockerill India Limited, Ray Engineering Private Limited, JSW Severfield Structures Limited and Panametrics Engineering Private Limited. In the past, KEL operated in both manufacturing and trading, with trading primarily involving steel products such as hot-rolled plates, mild steel plates, mild steel angles, mild steel rounds, and steel channels. It has two manufacturing facilities located at (i) Umbergaon, District Valsad, Gujarat, and (ii) Khopoli, District Raigad, Maharashtra, dedicated to the manufacturing of heavy and precision steel fabricated structures, PEBs and steel bridge structures, with a combined installed capacity of 36,000 MT per annum. 

Its Umbergaon facility commenced operations in 2017, while Raigad facility has been operational since 2014. Both manufacturing facilities are ISO 9001:2015 certified for Quality Management Systems and ISO 14001:2015 certified for Environmental Management Systems. A part of its manufacturing facility at Umbergaon Valsad, Gujarat, specifically Plot No. 17, Om Industrial Park, Near Coastal Road, GIDC, Umbergaon, Gujarat – 396171 is approved under RDSO (Research Designs and Standards Organization) under the Ministry of Railways, India, for the fabrication of steel bridge girders, including composite and other steel plate girders.

As of July 31, 2025, it has an order book worth Rs. 329.82 cr. As of the same date, it had 381 employees on its payroll and an additional 105 contract workers. Its top line included 96.63% for repeat orders in FY25 working and capacity utilization was 95.23% at Umbergaon unit and 67.46% for Khopoli unit.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 3729600 equity shares to mobilize Rs. 59.30 cr. (at the upper cap). It has announced the price band of Rs. 151 - Rs. 159 per share of Rs. 10 each. The IPO opens for subscription on September 08, 2025, and will close on September 10, 2025. The minimum application to be made is for 1600 shares and in multiple of 800 shares thereon, thereafter. The IPO consists of 3039600 equity shares worth Rs. 48.33 cr. (at the upper cap) and an Offer for Sale (OFS) of 690000 equity shares worth Rs. 10.97 cr. (at the upper cap). Post allotment, shares will be listed on BSE SME. The issue constitutes 26.37% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 25.25 cr. for working capital, Rs. 3.08 cr. for repayment of certain borrowings, Rs. 12.29 cr. for capex on expansion of existing unit, and the rest for general corporate purposes.

The IPO is solely lead managed by Seren Capital Pvt. Ltd., while Maashitla Securities Pvt. Ltd. is the registrar to the issue. SS Corporate Securities Ltd., and Rikhav Securities Ltd. are the market makers. 

The company has issued initial equity shares at par value. It has issued further equity shares in the price range of Rs. 15 – Rs. 145 between November 2011, and April 2024. It has also issued bonus shares in the ratio of 1 for 1 in December 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 2.29, and Rs. 3.26 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 11.10 cr. will stand enhanced to Rs. 14.14 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 224.86 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Income/Net Profit, of Rs. 149.08 cr. / Rs. 5.11 cr. (FY23), Rs. 218.77 cr. / Rs. 9.43 cr. (FY24), and Rs. 273.91 cr. / Rs. 14.16 cr. (FY25). boosted bottom lines from FY25 raise eyebrows. According to the management, due to focus on large scale industrial and infrastructure projects with higher margins, it improved its bottom lines and such trends are expected to be maintained in future. It is also panelled for Railway infrastructural work that has high margins. Though the segment is highly competitive and fragmented one, the company is able to generate high margin orders.

For the last three fiscals, the company has reported an average EPS of Rs. 10.38, and an average RoNW of 21.86%. The issue is priced at a P/BV of 2.92 based on its NAV of Rs. 54.47 as of March 31, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 15.88, and based on its FY24 earnings, the P/E stands at 23.84. Thus, based on its recent financial data, the issue appears fully priced.

The company has posted PAT margins of 3.28% (FY23), 4.32% (FY24), 5.19% (FY25), and RoCE Margins of 19.05%, 22.93%, 24.63%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Atmastco Ltd., Gooluck India, as its listed peers. They are currently trading at a P/E of around 28.4, and 24 (as of September 05, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 3rd mandate from Seren Capital in the ongoing fiscal. Out of last 2 listings, all opened with premium ranging from 18.06% to 29.17 % on the date of listing. Thus, it has posted an average track record so far.