Shining Tools BSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing of high-performance solid carbide cutting tools for various industries.
•    It marked growth in its top and bottom lines for the reported periods.
•    Boosted profits from FY24 onwards raise eyebrows and concern over its sustainability going forward. 
•    Based on its recent financial data, the issue appears aggressively priced. 
•    Tiny paid up equity capital post IPO, indicates longer gestation for migration.
•    There is no harm in skipping this pricey and dicey bet.

ABOUT COMPANY:
Shining Tools Ltd. (STL) is engaged in the designing and manufacturing of high-performance solid carbide cutting tools catering to various industries in India. Additionally, it provides reconditioning services for used tools, ensuring their extended usability and performance. With focus on innovation and precision, the company specializes in producing a wide range of high-performance cutting tools, including end mills, thread mills, drills, and reamers, offering innovative tooling solutions for modern manufacturing needs. 

These tools are widely used in commercial metal cutting operations across multiple industries. Its cutting tools are designed for use on CNC machines such as Horizontal Machining Centres (HMCs), Vertical Machining Centres (VMCs) and turn-mill centres. They operate at high speeds and feed rates, efficiently machining a variety of metals, including solid carbide, cast iron, forgings, steel, and aluminium. Its facility at Rajkot manufactures various categories of tools with diverse technical specifications in respect to shapes, geometries, step diameters, sizes, lengths, etc and of various grades including standard, fine, ultrafine, etc. This position it as a comprehensive solution for all cutting tool requirements, backed by its technical expertise, skilled personnel, and the advanced machinery utilized in production process.

STL’s facility at Rajkot is integrated with each operation thoroughly inspected for quality through noncontact optical CNC machines to minimise human error and also it is monitored by its experienced professionals, ensuring the product quality to meet the quality standards, precision and the specific requirements of customers. Apart from manufacturing standardized tools sets, the Company also has capabilities to produce customized tools to customers for their specific requirements. This is due to the trust bestowed on by clients and their confidence on it in getting the required tool designed and manufactured with a particular technical specification and of the desired quality in stipulated time frame. The company derives significant revenue (73.19% in FY 24-25 and average around 61.76% in the last 3 financial years) from manufacturing customized tools for clients. To cater to this segment, it has trained professionals who use modern software packages like Walter Helitronic Tool Studio, Siemens Powershape, etc to prepare the design. Once the designing is done, tools are manufactured as per the specification and quality desired.

Additionally, the Company also provides regrinding, re-sharpening, and coating services of the used tools. These processes improve the performance of the tool and also improves the life of these tools. It leverages its expertise of designing and manufacturing of new tools into regrinding, re-sharpening, and re-coating services of used tools to restore them to their original geometries and coatings due to the strong technical know-how of these tools and their technical specifications. As of the date of this offer document, it had 27 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1500000 equity shares of Rs. 10 each at a fixed price of Rs. 114.00 per share to mobilize Rs. 17.10 cr. The issue opens for subscription on November 07, 2025, and will close on November 11, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples of 1000 shares thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.51% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.70 cr. for this IPO process, and from the net proceeds, the company will utilize Rs. 3.85 cr. for working capital, Rs. 9.07 cr. for purchase and installation of plant and machinery for carbide prevision tools, Rs. 2.48 cr. for general corporate purposes. 

The IPO is solely lead managed by Sobhagya Capital Options Pvt. Ltd., and Maashitla Securities Pvt. Ltd., is the registrar to the issue. Aftertrade Broking Pvt. Ltd., is the Market Maker for the company. The issue is underwritten to the tune of 15% by Sobhagya Options and 85% by Aftertrade Broking. 

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 107.00 per share in October 2024. It has also issued bonus shares in the ratio of 1 for 1 in September 2024. The average cost of acquisition of shares by the promoters is Rs. 3.55, and Rs. 5.00 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 4.16 cr. will stand enhanced to Rs. 5.66 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 64.51 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit/ - (loss), of Rs. 10.46 cr. / Rs. – (0.08) cr. (FY23), Rs. 10.60 cr. / Rs. 1.58 cr. (FY24), and Rs. 14.77 cr. / Rs. 2.93 cr. (FY25). For 4M of FY26 ended on July 31, 2025, it earned a net profit of Rs. 1.47 cr. on a total income of Rs. 5.42 cr. It posted inflated profits from FY24 onwards to pave the way for fancy valuations for the IPO. 

For the last three fiscals, the company has reported an average EPS of Rs. 1.82 and an average RoNW of 32.25%. The issue is priced at a P/BV of 5.00 based on its NAV of Rs. 22.78 as of July 31, 2025, and at a P/BV of 2.68 based on its post-IPO NAV of Rs. 42.50 per share.

If we attribute FY26 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.65. Based on FY25 earnings, the P/E stands at 22.00. The issue relatively appears aggressively priced. Boosted earnings may not sustained for long, as it is operating in a highly competitive and fragmented segment.

For the reported periods, the company has posted PAT margins of – (0.77) % (FY23), 14.96% (FY24), 19.89%, (FY25), 27.19% (4M-FY26), and RoCE margins of 8.32%, 26.64%, 29.61%, 35.70%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. 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 Birla Precisions as its listed peer. It is currently trading at a P/E of 39.4 (as of November 04, 2025. However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash. 

MERCHANT BANKER’S TRACK RECORD:
This is the 3rd mandate from Sobhagya Capital in the two fiscals (including the ongoing one).  From the last 2 listings so far, 1 listed at discount and the one listed with a premium of 6.06% on the listing date. Thus, the lead manager has average track record.