Neetu Yoshi BSE SME IPO review (May apply)

•    The company is a foundry and is manufacturing and marketing customized products for railways.
•    It marked growth in its top and bottom lines for the reported periods.
•    Spurt in bottom lines from FY24 onwards raise eyebrows and concern over its sustainability.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Neetu Yoshi Ltd. (NYL) is a foundry with integrated CNC machine shop engaged in the business of manufacturing of customised products in different grades of ferrous metallurgical products. Its product portfolio covers different grades of mild steel, spheroidal graphite iron, cast iron and manganese steel, from as small as 0.2 Kgs to 500 Kgs finished metallurgical products. It is a RDSO certified vendor for manufacturing and supply of over 25 casting products for Indian Railways. The company is also ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 accredited company which certifies its quality management, environmental management and occupational health & safety management system respectively, employed by it in manufacturing facility. NYL combines modern manufacturing technology and engineering expertise with cost efficient processes, to deliver quality products at competitive prices. NYL’s manufacturing operations are strengthened by its technical capabilities, infrastructure, and process knowledge.

The company offers to its customers a comprehensive range of both standard and customised products. It has a diverse product portfolio of over 25 products supplemented by its ability to make customised products for customers. As on the date of this Red Herring Prospectus, it is majorly catering and serving Indian Railways through finished metallurgical products which are used for production of critical safety products i.e., braking solutions, suspensions, propulsion aids & coupling attachments for trains of Indian railways and therefore serves as bogie components, LHB bogie component, coupler component for wagons, coach component for coach, locomotive component, railway track component for Indian Railways. NYL started its journey in the year 2020 as a trading company dealing in sale of specific grade raw materials to the original equipment manufacturers of Indian Railways. 

In order to convert the concept into reality, the Company rented a factory shed in Rudrupur with CNC machines and commenced commercial activity of machining railway components for original equipment manufacturers where it was procuring the casted, fabricated & forged parts from other manufacturers & supplying them OEMs after machining them as per their drawing & specification. Further, supported and motivated by the market response, it established own Manufacturing Facility which enabled it to enter in a full-fledged business of metallurgical engineering to provide customised products in different grades of ferrous metallurgical products. Further as on date, its manufacturing facility is certified as Class “A” facility by RDSO and NYL is a certified vendor for manufacturing and supply of various types of products for Indian Railways.

As of March 31, 2024, the aggregate installed capacity of its Manufacturing Facility was 4,493 metric tonnes per annum (“MTPA”) and as on the date of this Red Herring Prospectus, the installed capacity has been expanded to 8,087 metric tonnes per annum. Its Manufacturing Facility is equipped with requisite infrastructure including melting facility, pouring facility, moulding facility, core making facility, sand preparation facility, fettling facility, machining facility, heat treatment facility, fabrication and forging and painting facility thereby facilitates smooth manufacturing process. The company has generated on an average 95+% revenues annually from Indian Railways, for the last three fiscals. As of March 31, 2025, it had 86 employees on its payroll.

According to the management, their cost-effective manufacturing process has helped them to realise more margins and such trends will continue in coming years as well. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 10272000 equity shares to mobilize Rs. 77.04 cr. at the upper cap. The company has announced a price band of Rs. 71 – Rs. 75 per share of Rs. 5 each. The issue opens for subscription on June 27, 2025, and will close on July 01, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.47% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity shares, the company will utilize Rs. 50.78 cr. for setting up of new manufacturing facility, and the rest for general corporate purposes. 

The IPO is solely lead managed by Horizon Management Pvt. Ltd., and Skyline Financial Services Pvt. Ltd., is the registrar to the issue. NNM Securities Pvt. Ltd., R K Stockholding Pvt. Ltd., and Choice Equity Broking Pvt. Ltd. are the market makers. Horizon Management Pvt. Ltd. is a syndicate member. The issue is underwritten to the tune of 15% by Horizon Management, 29% by NNM Securities Pvt. Ltd., 28% by R K Stockholding, and 28% by Choice Capital Advisors

The company has issued initial equity shares at par value. It has issued further equity capital in the price range of Rs. 10 and Rs. 62 (based on Rs. 5 FV) between January 2023, and July 2024. It has also issued bonus shares in the ratio of 25 for 10 in May 2024.The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 1.43, and Rs. 2.45 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 14.27 cr. will stand enhanced to Rs. 19.41 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 291.09 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 4.63 cr. / Rs. 0.07 cr. (FY22), Rs. 16.33 cr. / Rs. 0.42 cr. (FY23), Rs. 47.45 cr. / Rs. 12.58 cr. (FY24), For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 11.99 cr. on a total income of Rs. 51.47 cr. It posted growth in its top and bottom lines for the last three fiscals. Boosted net profits from FY24 onwards raise eyebrows and concern over its sustainability going forward. 

For the last three fiscals, the company has reported an average EPS of Rs. 4.32 and an average RoNW of 53.85%. The issue is priced at a P/BV of 5.33 based on its NAV of Rs. 14.06 as of December 31, 2024, but its post-IPO NAV data is missing from the documents. 

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 18.20. Based on FY24 earnings, the P/E stands at 23.15. The issue relatively appears fully priced. 

For the reported periods, the company has posted PAT margins of 1.53% (FY22), 2.61% (FY23), 26.58%, (FY24), 23.35% (9M-FY25), and RoCE margins of 4.76%, 6.28%, 43.74%, 32.02% respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the last five fiscals. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Gujarat Intrux, Nelcast Ltd., and Steelcast Ltd., as their listed peers. They are trading at a P/E of 15.5, 35.1, and 30.7 (as of June 25, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 17th mandate from Horizon Management in the last three fiscals, including the ongoing one.  From the last 16 listings, 5 opened at discount, 4 at par, and the rest with a premium ranging from 8.48% to 141.23% on the listing date.