Munish Forge NSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing and marketing of premium forged and cast components.
•    Its extra ordinary performance for FY25 raises eyebrows and concern over its sustainability.
•    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 funds for medium to long term.

ABOUT COMPANY:
Munish Forge Ltd. (MFL) is a manufacturer in the forging and casting industry, specializing in manufacturing premium forged and cast components. With the vision, it has established itself as a trusted name in producing forged components that cater to a wide range of industries. It has continuously evolved, combining innovation with a commitment to excellence, ensuring that it deliver engineered solutions that meet the ever-growing demands of customers across the globe.

MFL manufactures components like Flange, Scaffolding, Auto parts, Tank tracks chains, Bomb shells, Fence post and steel accessories as per customer specifications and International Standard catering to the requirements of Indian Army and various industries such as Defence, Oil and Gas, Automobile, Construction and Infrastructure. With over 40 years of legacy in precision engineering, the company has established itself as a trusted supplier in the Defence sector. Starting with a single machine shop, it has grown into a powerhouse, manufacturing critical components for the Indian Army, such as Battle Tank Track Chains and Bomb Shells. Detailed testing both in-house and at NABL-certified labs ensures that its products meet the Defence-level standards. With ongoing projects and approvals from Defence authorities, the company contributes significantly to India's Defense capabilities while also serving clients across developed markets like the USA, UK, Canada, and Europe.

As part of its growth strategy, the company is actively expanding into new sector like Railways, where it has recently begun registering for tenders to supply critical forged components. The Indian Railways, being one of the largest and fastest-growing rail networks, offers immense potential for growth through large-scale modernization, electrification, and expansion projects. The railway industry demands precision-engineered parts with exceptional durability, making it a natural extension of MFL’s capabilities. By participating in tenders, it aims to secure large-scale contracts that will not only enhance business portfolio but also establish as a reliable supplier in this sector too. 

Starting from April 1, 2024, Munish achieved a significant milestone by initiating operations in its new casting division at Dev Arjuna Cast and Forge Private Limited (DACF) now known as Munish Forge Casting Division. This strategic expansion involved acquiring all plant and machinery from DACF and leasing its land to establish a casting facility. This move has enabled Munish to venture into the production of intricate components, such as specialized track chains or JCB parts that are challenging to forge. By leveraging the casting capabilities at DACF, Munish has streamlined its production process, seamlessly integrating casting with further processing at its main facility. As of August 31, 2025, it had 788 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 7700400 equity shares to mobilize Rs. 73.92 cr. at the upper cap. It has announced a price band of Rs. 91 – Rs. 96 per share of Rs. 10 each. The issue comprises of 6356400 equity shares (worth Rs. 61.02 cr. at the upper cap), and an Offer for Sale (OFS) of 1344000 equity shares (worth Rs. 12.90 cr.at the upper cap. The IPO opens for subscription on September 30, 2025, and will close on October 03, 2025. The minimum application to be made is for 2400 shares and in multiple of 1200 shares thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. 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. 7.19 cr. for capex civil construction and purchase of additional plant and machinery, Rs. 30.00 cr. for working capital, Rs. 9.70 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The IPO is solely lead managed by Gretex Corporate Services Ltd., while Skyline Financial Services Pvt. Ltd., is the registrar to the issue. Gretex Share Broking Ltd. and NNM Securities Pvt. Ltd. are the market makers. As well as the syndicate members. Gretex Corporate, Gretex Share Broking, and NNM Securities have jointly underwritten the entire issue at undisclosed percentages.

After issuing/converting initial equity shares at par value, the company issued further equity shares in the price range of Rs. 20 – Rs. 89 per share between March 2003 and March 2025. It has also issued bonus shares in the ratio of 0.7 for 1 in September 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 5.88, Rs, 9.09, Rs. 15.04, and Rs. 89.00 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 17.71 cr. will stand enhanced to Rs. 24.07 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 231.07 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted total Income/Net Profit of Rs. 161.18 cr. / Rs. 1.97 cr. (FY23), Rs. 161.58 cr. / Rs. 4.39 cr. (FY24), and Rs. 178.63 cr. / Rs. 14.30 cr. (FY25). It posted surge in bottom lines for FY24 despite static top line. Bumper net profits for FY25 on modest hike in top line surprises one and all. Sustainability of such margins remains major concern.

For the last three fiscals, the company has reported an average EPS of Rs. 5.44, and an average RoNW of 18.04%. The issue is priced at a P/BV of 2.34 based on its NAV of Rs. 40.99 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 16.16, and based on its FY24 earnings, the P/E stands at 52.75. Thus, based on its recent financial data, the issue appears aggressively priced. Pre-IPO year earnings appears to be the window dressing for fancy valuations.

The company has posted PAT margins of 1.23% (FY23), 2.75% (FY24), 8.15% (FY25), and RoCE Margins of 7.06%, 9.89%, 16.44%, 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 Ramkrishna Forgings, Happy Forgings, as its listed peers. They are currently trading at a P/E of around 28.4 and 32.5 (as of September 30, 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 Gretex Corporate in the last three fiscals (including the ongoing one). Out of the last 11 listings, 2 opened at discount, and the rest with premium ranging from 0.40% to 22.81% on the date of listing.