Nilachal Carbo BSE SME IPO review

•    The company is engaged in the business of manufacturing LAM Coke.
•    The company claims to be the most preferred partners for big corporates engaged in ferro chrome/alloys sectors.
•    It posted static top lines with erratic bottom lines for FY23 and FY24.
•    FY 25 it marked a set back amidst shift of new product line following government policy.
•    Based on its recent financial data, the issue appears greedily priced.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Nilachal Carbo Metalicks Ltd. (NCML) is engaged in the business of manufacturing of Low Ash Metallurgical (“LAM”) Coke. The Company has specialized in making Ferro Alloy Grade coke and building a long-term customer relationship with most of the top ferro chrome manufacturers in the country. Its owned Plant is located at Baramana, Jajpur, Odisha where it currently operates 3 (three) batteries with 32 ovens in each battery (total 96 ovens) with an annual manufacturing capacity of 60,000 Metric Tonnes Per Annum (MTPA). 

The Company also has second Plant having manufacturing facilities on leased basis from Srinivasa Coke Private Limited at Visakhapatnam, Andhra Pradesh which is having one battery with 18 ovens with the installed capacity of 18,000 MTPA. The total aggregating capacity of the Company (owned + leased) is 78,000 MTPA for both the units. It also has a tie-up for contract manufacturing for product with Om Avi Carbon Resources Private Limited and make use of their 24,000 MTPA capacity for its use. The Company is now proposing to install one more additional battery with 36 ovens to install additional capacity of 34,400 MTPA of LAM Coke at existing vacant land available at existing Plant at Baramana, Jajpur, Odisha. After implementation of the proposed expansion, its own total capacity will be 94,400 MTPA and total capacity (including leased one) shall be 1,12,400 MTPA. 

NCML has a specialized focus on producing high-quality Ferro Alloy Grade Coke, since establishment in 2003, thus it has positioned itself as one of the key players in the metallurgical industry. Its expertise lies in producing LAM Coke that meets the stringent requirements of the Ferro-Alloys sector. The company ensures quality performance in smelting processes and contributing to the production of high-grade alloys. It specializes in manufacturing specific sizes of metallurgical coke, particularly 10-30 mm and 10-40 mm, which are Low in both Phosphorus and Ash content. Its coke is recognized for its high Coke Reactivity Index (CRI), making it especially suitable for Ferro Alloy Producers (FAP) who rely on its product to achieve optimal furnace operating KPIs during the reduction process.

Over the years, it has successfully built robust supply chain relationships with all major Ferro Chrome manufacturers in the region. In addition to its primary manufacturing operations, it has also optimized the handling of by products, such as Low Phosphorus Coke Fines or Coke Breeze. This has allowed it to establish steady supply chains with major Iron Ore Pellet manufacturers and also has enhanced the efficiency and sustainability of operations.

Around 91% average revenue comes from Odisha and the rest from Andhra Pradesh. Its capacity utilization remained at 49% for FY25 against 61.51% for FY24 and 64.57% for FY23. Top 10 customers contribute around 97% of its total revenue on an average for the last three fiscals. As of July 05, 2025, it had 65 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 6600000 equity shares of Rs. 10 each,  at a fixed price of Rs. 85 per share to mobilize Rs. 56.10 cr. The IPO opens for subscription on September 08, 2025, and will close on September 10, 2025. The minimum application to be made is for 3200 shares and in multiple of 1600 shares thereon, thereafter. The IPO consists of 2600000 equity shares worth Rs. 22.10 cr. and an Offer for Sale (OFS) of 4000000 equity shares worth Rs. 34.00cr. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.48% of post-IPO paid-up equity capital of the company. The company is spending Rs. 2.93 cr. for this IPO (fresh equity issue) process, and from the net proceeds of the issue, the company will utilize Rs. 13.46 cr. for capex on installing one coke over plant for expanding capacity, Rs. 3.03 cr. for modernising existing plant, and Rs. 2.67 cr. for general corporate purposes.

The IPO is solely lead managed by Sun Capital Advisory Services Pvt. Ltd., while KFin Technologies Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd., is the market maker. The issue is underwritten to the tune of 15.15% by Sun Capital Advisory, and 84.85% by NNM Securities Pvt. Ltd.

The company has issued/converted entire initial equity shares at par value. The average cost of acquisition of shares by the promoters is Rs. 10.00 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 22.33 cr. will stand enhanced to Rs. 24.93 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 211.88 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/ - (loss), of Rs. 268.46 cr. / Rs. – (0.13) cr. (FY23), Rs. 267.13 cr. / Rs. 0.60 cr. (FY24), and Rs. 202.79 cr. / Rs. 4.75 cr. (FY25). Surge in bottom lines for FY25 on a declined top line raise eyebrows. According to the management, due to change in government policy, they preferred to modify their product line that caused fall in its top and bottom lines. 

For the last three fiscals, the company has reported an average EPS of Rs. 6.61, and an average RoNW of 22.25%. The issue is priced at a P/BV of 2.42 based on its NAV of Rs. 35.07 as of March 31, 2025, and at a P/BV of 2.11 based on its post-IPO NAV of Rs. 40.28 per share.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 44.74, and based on its FY24 earnings, the P/E stands at 354.17. Thus, based on its recent financial data, the issue appears greedily priced.

The company has posted PAT margins of 5.57% (FY23), 5.97% (FY24), 6.96% (FY25), and RoCE Margins of 27.90%, 23.54%, 22.74%, 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 Stratmont Ind., as its listed peer. It is currently trading at a P/E of around 174.0 (as of September 04, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 5th mandate from Sun Capital in the last four fiscals (including the ongoing one). Out of last 4 listings, 1 opened at discount, and the rest with premium ranging from 5.00% to 12.18 % on the date of listing. Thus, it has posted an average track record so far.