Mittal Sections BSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing and marketing of mild steel sections and structural steel products.
•    It is expanding its capacity from 36000 MTPA to 96000 MTPA.
•    The company posted rising profits on declining top line, and has surprised one and all.
•    Super earnings in pre-IPO year appears to be a window dressing to fetch fancy valuations.
•    Based on its recent financial data, the issue appears aggressively priced.
•    There is no harm in avoiding this pricey and dicey “High Risk/Low Return” bet.

ABOUT COMPANY:
Mittal Sections Ltd. (MSL) is a leading manufacturer of an extensive range of Mild Steel sections and structural steel products, including MS Flat Bars, MS Round Bars, MS Angles, and Channels. These products are produced in compliance with various BIS standards, primarily IS 2062:2011, ensuring consistent quality and high performance across all applications.

The company manufactures products in different grades, such as E250A offering versatility to meet the diverse needs of clients across multiple industries. The sizes it provides cover a wide spectrum, allowing for customized solutions in both small-scale and large-scale construction and industrial projects. Its entire product line is marketed under registered brand name, “MSL-MITTAL,” which stands for quality, durability, and adherence to industry standards. The company is dedicated to producing high-quality steel products that meet rigorous specifications, ensuring clients receive dependable and durable materials for their projects.

MSL currently operates through two manufacturing plants which are located at Changodar in Ahmedabad, Gujarat. As of May 31, 2025, the aggregate installed capacity of manufacturing plants were 36,000 metric tonnes per annum (“MTPA”). It is in the process of increasing the capacities of existing manufacturing plants which is expected to increase aggregate installed capacity from 36,000 MTPA to 96,000 MTPA. These proposed expansions are expected to become operational in FY2026. As of July 31, 2025, it had 51 employees on its payroll and also hires contract workers as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3700000 equity shares worth Rs. 52.91 cr. at the upper cap. The company has announced a price band of Rs. 136 – Rs. 143 per share of Rs. 10 each. IPO opens for subscription on October 07, 2025, and will close on October 09, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 31.99% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 15.00 cr. for working capital, Rs. 20.82 cr. for capex on acquisition of land, construction of factory building and purchase of plant and machineries, Rs. 5.00 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The IPO is solely lead managed by Wealth Min e Networks Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker as well as a syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital in the price range of Rs. 20 – Rs. 40 between September 2009 and March 2015. It also issued bonus shares in the ratio of 2 for 1 in December 2024. The average cost of acquisition of shares by the promoters is Rs. 3.33, and Rs. 3.61 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 7.87 cr. will stand enhanced to Rs. 11.57 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 165.42 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 167.53 cr. / Rs. 0.56 cr. (FY23), Rs. 161.65 cr. / Rs. 1.89 cr. (FY24), Rs. 137.07 cr. / Rs. 3.61 cr. (FY25). For 2M of FY26 ended on May 31, 2025, it earned a net profit of Rs. 1.47 cr. on a total income of Rs. 28.17 cr. Thus, in a pre-IPO year, it posted rosy financial data which perhaps for fetching fancy valuations.

For the last three fiscals, the company has reported an average EPS of Rs. 3.22, and an average RoNW of 28.76%. The issue is priced at a P/BV of 9.53 based on its NAV of Rs. 15.01 as of May 31, 2025, but its post-IPO NAV data is missing from the offer documents. 

If we attribute its FY26 super annualized earnings on post-IPO expanded equity base, then the asking price is at a P/E of 18.79, and based on its FY24 earnings, the P/E stands at 45.83. Thus, the issue appears greedily priced.

The company has posted PAT margins of 0.33% (FY23), 1.17% (FY24), 2.64% (FY25), 5.21% (2M-FY26), and RoCE Margins of 18.43%, 42.05%, 31.27%, 10.26%, 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 the offer document, the company has shown Rhetan TMT, Riddhi Steel, and Surani Steel, as its listed peers. They are currently trading at a P/E of 358.0, 9.28, and 118.0 (as of October 06, 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 2nd mandate from Wealth Mine in the ongoing fiscals. Out of the only listings, it opened at a discount. Thus, the LM has a poor track record.