KVS Casting BSE SME IPO review

•    The company belongs to KVS Premier group and engaged in quality ferrous castings.
•    It delivers comprehensive castings solutions tailormade to meet specific customers’ requirements.
•    While it posted declining top lines for the reported periods, its bottom line marked improvement.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
KVS Castings Ltd. (KCL) is as the Foundry Division of the KVS Premier Group, the Company specializes in quality ferrous castings. The Company is involved in the manufacturing and production of Cast Iron and Ductile Iron castings. It delivers comprehensive casting solutions tailored to meet customers' needs. From cast iron to stainless steel, the company offers a total casting solution under one roof, with a portfolio of more than 150 products, including Suspension Brackets, Brake Drums, Gear Box Housing, Pump Body, Oil Filters and more. It ensures maintaining the required quality standards, it is accredited with certifications in IATF 16949:2016, ISO 9001:2015 and Certified by the RDSO (Research and development organization under the Ministry of Railways in India). Its vision is to be the most admired Green Sand-Casting Company delivering superior value to investors, customers, communities and employees through innovation and leadership in operational excellence.

Its castings are essential in the railway sector, where safety and reliability are of utmost importance. KCL provides castings for vital railway components, including brake systems, bogie frames, and couplers, ensuring they meet the stringent standards set by railway authorities. Its castings support manufacturers of heavy machinery and equipment in industries such as construction, mining, rolling mills. The company delivers robust and durable castings for gearbox housings, hydraulic pump components, and other critical parts, ensuring reliability and performance. Further, KCL also supply castings for turbines, generators, and other components used in power plants and renewable energy projects. KCL’s castings are engineered to endure the demanding conditions of power generation environments, ensuring reliable performance and longevity. 

The company specializes in precision-engineered castings for engine components, transmission systems, chassis parts, and more. Its castings adhere to the rigorous standards of the automotive industry, guaranteeing optimal performance and durability. This includes Two wheelers, Passenger Cars, Medium and Heavy Vehicles and Electric Buses. As of March 31, 2025, it had 121 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4970000 equity shares to mobilize Rs. 27.83 cr. at the upper cap. It has announced a price band of Rs. 53 – Rs. 56 per share of Rs. 10 each.  The IPO opens for subscription on September 26, 2025, and will close on September 30, 2025. The minimum application to be made is for 4000 shares and in multiple of 2000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.50% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 21.50 cr. for capex expenses, and the rest for general corporate purposes.

The IPO is solely lead managed by Narnolia Financial Services Ltd., while Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Prabhat Financial Services Ltd. is the market maker. Nexgen Financial Solution Pvt. Ltd. is a syndicate member. The issue is underwritten to the tune of 15.01% by Narnolia Financial, and 84.99% by Prabhat Financial.

The company has issued initial equity shares at par, and issued further equity shares in the price range of Rs. 42.00 – Rs. 457 per share between January 2022, and August 2024. It has also issued bonus shares in the ratio of 40 for 1 in June 2024. The average cost of acquisition of shares by the promoters is Rs. Negligible, Rs. 0.01, Rs. 0.42, Rs. 5.40, and Rs. 10.20 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 13.78 cr. will stand enhanced to Rs. 18.75 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 105.02 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 57.61 cr. / Rs. 4.84 cr. (FY23), Rs. 54.70 cr. / Rs. 5.95 cr. (FY24), Rs. 50.43 cr. / Rs. 6.63 cr. (FY25). The company posted degrowth in its top lines, but bottom lines marked improvements for the reported periods. Its debt-equity ratio of 1.52 as of March 31, 2025, raises a concern.

For the last three fiscals, the company has reported an average EPS of Rs. 4.52, and an average RoNW of 24.33%. The issue is priced at a P/BV of 2.24 based on its NAV of Rs. 24.99 as of March 31, 2025, and at a P/BV of 1.69 based on its post-IPO NAV of Rs. 33.21 per share (at the upper cap).

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 11.61, and based on its FY24 earnings, the P/E stands at 17.52. Thus, the issue appears fully priced.

The company has posted PAT margins of 8.45% (FY23), 10.99% (FY24), 13.22% (FY25), and RoCE Margins of 30.66%, 31.64%, 23.78%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Universal Auto, Thaai Casting, as its listed peers. They are currently trading at a P/E of 41.8 and 24.5 (as of September 26, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 24th mandate from Narnolia Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, and the rest with premium ranging from 2.60% to 90.00% on the date of listing.