Parmeshwar Metal BSE SME IPO review (Apply)

•    The company is engaged in the manufacturing and marketing of copper wire/rods etc.
•    It marked steady growth in its top lines for the reported periods.
•    Decline for FY24 profits attributed to highly volatile copper prices.
•    Based on its recent financial performance, the issue appears reasonably priced. 
•    Investors may park funds for long term. 

ABOUT COMPANY:
Parmeshwar Metal Ltd. (PML) is engaged in the business of manufacturing of copper wire and copper wire rods by recycling of copper scrap. Its manufacturing facility is situated at Survey No. 130P, 131, 130/1 & 130/2 State Highway No. 69 Sampa Lavad Road, Village Suja Na Muvada, Post-Sampa Gandhinagar, Dehgam, Gujarat- 382315, India. It manufactures copper wire and copper wire rods that are ideally suited for a wide array of applications. These applications include power cables, building wires, transformers, the automotive industry, household cables as well as bare and enamelled wires. 

PML’s object is to create consistent value for its customer by delivering good quality products and best services at optimum cost through continue improvement, maintaining integrity and excellence in all the aspects of operations. Its Product Portfolio offers 1.6 MM copper wire and 8 MM & 12.5 MM copper wire rods and each available tailored made to meet customer specifications. At its manufacturing facility, the company has an in-house testing lab, for testing raw materials and finished products to match the quality standards as specified and required by customers. 

Copper is one of the most recycled metals of all the metals. The recycling of copper scrap is gaining importance worldwide simply because of the fact that recovery of copper metal from scrap requires much less energy than its recovery made from primary source. Besides, it enables conservation of natural resources. As of October 31, 2024, it had 26 employees on its payroll and additional 45 contract labour in various departments.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4056000 equity shares of Rs. 10 each to mobilize Rs. 24.74 cr. at the upper cap. The company has announced a price band of Rs. 57 –  Rs. 61 per share. The issue opens for subscription on January 02, 2025, and will close on January 06, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.50% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 2.18 cr. for setting up of new manufacturing facility, Rs. 1.87 cr. for capex on furnace renovations, Rs. 13.92 cr. for working capital, and the rest for general corporate purposes

The IPO is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and Link Intime India Pvt. Ltd., is the registrar to the issue. Spread X Securities Pvt. Ltd. is the market maker for the company, as well as the syndicate member.

The company has issued entire equity shares capital at par value so far. It also issued bonus shares in the ratio of 1 for 2 in May 2024. The average cost of acquisition of shares by the promoters is Rs. 1.46, Rs. 1.54, Rs. 1.58, Rs. 3.14, Rs. 5.68, and Rs. 6.67 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 11.25 cr. will stand enhanced to Rs. 15.31 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 93.37 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 902.28 cr. / Rs. 6.85 cr. (FY22), Rs. 972.71 cr. / Rs. 8.90 cr. (FY23), and Rs. 1102.46 cr. / Rs. 7.22 cr. (FY24). For 7M of FY25 ended on October 31, 2024, it earned a net profit of Rs. 5.70 cr. on a total income of Rs. 757.31 cr. The fall in bottom lines for FY24 it attributed to highly volatile prices of copper. However, the management is confident of maintaining the trends in coming years for its volume and margins. It is operating in a high volume/low margin segment.

For the last three fiscals, the company has reported an average EPS of Rs. 6.81 (simple average) and an average RoNW of 25.00%. The issue is priced at a P/BV of 1.60 based on its NAV of Rs. 38.14 as of October 31, 2024, and at a P/BV of 1.38 based on its post-IPO NAV of Rs. 44.20 per share (at the upper cap).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 9.55, and based on FY24 earnings, it stands at 12.92. The issue relatively appears reasonably priced.

For the reported periods, the company has posted PAT margins of 0.76% (FY22), 0.92% (FY23), 0.66% (FY24), 0.75% (7M-FY25), and RoCE margins of 21.92%, 22.39%, 17.51%, 11.72%, for the referred periods respectively. 

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 performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Rajnandani Metal, as their listed peers. It is trading at a P/E of 144.0 (as of December 31 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 54th mandate from Beeline Capital in the last three fiscals, out of the last 10 listings all listed with premiums ranging from 10.69% to 146.91% on the date of listing.