M&B Engg. IPO review (May apply)

•    The company is one of the leading PEB players for variety of needs to various segments.
•    It has completed around 9500 projects till March 31, 2025 under its Phenix and Proflex divisions.
•    While its PAT grew over the years, its top line marked inconsistency for the last three fiscals.
•    Based on recent financial data, the issue appears aggressively priced.
•    Only well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
M&B Engineering Ltd. (MBEL) is one of India’s leading Pre-Engineered Buildings (“PEBs”) players (installed capacity being greater than 100,000 MTPA). The Company has installed capacity of 103,800 MTPA related to PEB structures and 1,800,000 square meters per annum for Self-Supported Roofing solutions as on March 31, 2025. (Source: CRISIL Report). Its business is structured into (a) Phenix division which provides comprehensive solutions for PEBs and complex structural steel components; and (b) Proflex division which provides self-supported steel roofing solutions. It offers comprehensive turn-key solutions which includes project design, engineering, manufacturing and erection in accordance with customer requirements across industrial and infrastructure segments. 

It has delivered solutions for customers engaged in diverse sectors including general engineering and manufacturing, food and beverages, warehousing and logistics, power, textiles, and railways. It has undertaken execution of over 9,500 projects until the end of March 2025 under its Phenix and Proflex Divisions. The Indian PEB industry expanded at a CAGR of ~8.3% over Fiscals 2019-2025 growing from INR 130 billion in Fiscal 2019 to INR 210 billion in Fiscal 2025 (Source: CRISIL Report). The self-supported roofing market in India logged a CAGR of 6.1% between Fiscals 2019 and 2025 to reach INR 3.0 billion in Fiscal 2025 (Source: CRISIL Report). As per the CRISIL Report, brand, design capabilities, prior experience, pricing, manufacturing capability, project management expertise and pan-India presence are key selection criteria for PEB suppliers. MBEL believes that its extensive track record, domain experience, established brand presence and market position, paired with in-house design and engineering, manufacturing, supply, and on-site project management capabilities for the installation and erection of PEBs and self-supported steel roofing supplied by it, positions to benefit from this growth.

Its Phenix Division (i) provides comprehensive solutions for PEBs which includes estimation, designing, engineering and manufacturing of PEBs and their components within the controlled environment of its Manufacturing Facilities, which are then supplied, installed and erected under company’s team’s supervision at customers’ manufacturing sites; and (ii) manufactures complex structural steel components for customers across a variety of end-user industries for projects including the construction of bridges, flyovers, power plant structures and other industrial applications. It has a dedicated design and engineering in-house team of 98 employees as on March 31, 2025 who create 3D models of PEBs and structural steel using software including STAAD PRO, STAAD PRO ADVANCED, MBS, TEKLA/ TRIMBLE, ZWCAD and BricsCAD. For business process efficiency, its operations are run on SAP-H4 Hana. The integrated Manufacturing Facilities of Phenix Division have an annual installed capacity of 103,800 MT as on March 31, 2025 which enable it to provide comprehensive solutions to customers. 

Over 15 years of operating Phenix Division, it has been involved in the execution of over 1,600 projects involving the supply of around 640,000 MT of PEBs and structural steel across a diverse set of customers across end-user industries in 22 countries. Over 23 years of its operations, it has undertaken execution of over 9,500 projects. In Fiscal 2025, Fiscal 2024, and Fiscal 2023, the company has served more than 2,000 customer groups from across diverse industries including from general engineering and manufacturing, food and beverages, warehousing and logistics, power, textiles and railways. 

Some of its notable customers include Adani Green Energy Limited, Adani Ports and Special Economic Zone Limited, Adani Logistics Limited, AIA Engineering Limited, Alembic Pharmaceuticals Limited, Tata Advanced Systems Limited, Balaji Wafers Private Limited, Elecon Engineering Co Limited, Gujarat Tea Processors and Packers Limited, Intas Pharmaceuticals Limited, Lubi Industries LLP, PSP Projects Limited, Everest Food Products Private Limited, Arvind Limited, Inductotherm (India) Private Limited, Haldiram Foods International Private Limited, SMC Power Generation Limited, Oriental Rubber Industries Limited, Shree Ram Industries, Satyam Plastfab Private Limited and Laxmi Hydraulics Private Limited. It enjoys relationship with of more than 15 years with some of its customers. As of March 31, 2025, it had 1631 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO worth Rs. 650.00 cr. for 16883117 equity shares at the upper cap. The issue consists 7142857 fresh equity shares worth Rs. 275.00 cr. at the upper cap and an Offer for sale worth Rs. 375.00 cr. for 9740260 equity shares at the upper cap. The company has announced a price band of Rs. 366 – Rs. 385 per equity shares of Rs. 10 each. The issue opens for subscription on July 30, 2025, and will close on August 01, 2025. The minimum application to be made is for 38 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 29.55% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 130.58 cr. for capex on purchase of equipment and machinery, building works, solar rooftop grid, transport vehicles, Rs. 5.20 cr. on IT software upgradation, Rs. 58.75 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The company has reserved equity shares worth Rs. 2.00 cr. (approx. 51948 equity shares at the upper cap) for its eligible employees and offering them a discount of Rs. 36 per share, from the rest, it has allocated not less than 75% for QIBs, not more than 15% for HNIs, and not more than 10% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are Equirus Capital Pvt. Ltd., and DAM Capital Advisors Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. Equirus Securities Pvt. Ltd., and Sharekhan Ltd. are the syndicate members.

The company has issued entire initial equity shares at par value. It has also issued bonus shares in the ratio of 1 for 1 in March 2011, and 3 for 2 in October 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.42, Rs. 0.94, Rs. 1.21, Rs. 2.00, and Rs. 2.02 per share. 

Post-IPO, its current paid-up equity capital of Rs. 50.00 cr. will stand enhanced to Rs. 57.14 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 2200.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 889.00 cr. / Rs. 32.89 cr. (FY23), Rs. 808.26 cr. / Rs. 45.63 cr. (FY24), Rs. 996.89 cr. / Rs. 77.05 cr. (FY25). Quantum jump in net profit from FY24 raises eyebrows. 

For the last three fiscals, the company has posted an average EPS of Rs. 11.90 and an average RoNW of 22.28%. The issue is priced at a P/BV of 6.28 based on its NAV of Rs. 61.31 as of March 31, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 28.56. Based on FY24 earnings, the P/E stands at 48.19. 

The company has posted PAT margins of 3.70% (FY23), 5.65% (FY24), 7.73% (FY25), its RoCE margins of 19.70%, 19.17%, 24.80%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy in March 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Pennar Ind., Bansal Roofing, BirlaNU, Everest Ind., and Interarch Building, as their listed peers. They are trading at a P/E of 28.3, 29.2, NA, NA, and 35.5 (as of July 25, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The two BRLMs associated with the offer has handled 29 pubic issues in the past three fiscals, out of which 7 issues closed below the offer price on listing date.