Shri Kanha NSE SME IPO review (Not Rated)

•    The company is engaged in manufacturing of precision stainless steel cold rolled strips and other products.
•    The company posted setback in its top line for FY24, but posted higher net profits, that is surprising. Surge in net profits for FY25 and H1-FY26 raises eyebrows.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears aggressively priced. 
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Shri Kanha Stainless Ltd. (SKSL) is a manufacturer of precision stainless steel cold rolled strips, offering a wide range of thin and ultra-thin variants designed to meet diverse industrial requirements. The company’s products are widely used across various sectors including the textile, automotive, chemical
industries, as well as in flexible tubes, capillary tubes, clocks, watches, and electrical equipment. With a strong focus on quality, innovation, and customer satisfaction, the company aims to be a profitable, value-driven, and ethically sound enterprise.

It emphasizes understanding customer needs through clear communication, delivering exceptional service, and maintaining high ethical standards in all operations. The company manufactures coils in the 200, 300, and 400 stainless steel series, with thicknesses ranging from 0.08 mm to 2.00 mm, and offers slitting from 5 mm and above in hard or soft form based on customer requirements. The plant has a production capacity of 14,000 MTPA and is committed to ensuring the welfare of its employees, stakeholders, and local communities. As of September 30, 2025, it had 80 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 5142400 equity shares of Rs. 10 each at a fixed price of Rs.90 per share to mobilize Rs. 46.28 cr. at the upper cap.  The issue opens for subscription on December 03, 2025, and will close on December 05, 2025. Post allotment, shares will be listed on NSE SME Emerge. The minimum application to be made is for 3200 shares and in multiples of 1600 shares thereon, thereafter. The issue constitutes 33.00% of the post-IPO paid-up capital of the company. The company is spending Rs. 5.79 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 12.00 cr. for upgrading of existing manufacturing facility with new machine, Rs. 18.00 cr. for repayment/prepayment of certain borrowings, Rs. 5.48 cr. for working capital, and Rs. 5.00 cr. for general corporate purposes. 

The IPO is solely lead managed by Kreo Capital Pvt. Ltd., while MAS Services Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker.

The company has issued initial equity capital at par value, and has also issued bonus shares in the ratio of 11 for 1 in July 2025. The average cost of acquisition of shares by the promoters is Rs. 0.64, Rs. 0.71, and Rs. 0.83 per share.  

Post-IPO, company’s current paid-up equity capital of Rs. 10.44 cr. will stand enhanced to Rs. 15.58 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 140.24 cr. Prospectus is showing post-IPO paid up capital as Rs.15.88 cr. which is wrong (refer page no. 76).

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total income / net profit, of Rs. 136.47 cr. / Rs. 0.72 cr. (FY23), Rs. 131.00 cr. / Rs. 2.60 cr. (FY24), Rs. 146.39 cr. / Rs. 5.79 cr. (FY25). For H1 of FY26 ended on September 30, 2025, it posted a net profit of Rs. 4.26 cr. on a total income of Rs. 110.30 cr. The company marked inconsistency in its top lines for the reported periods, but sudden boost in its bottom lines from FY24 onwards raise eyebrows and concern over its sustainability. 

For the last three fiscals, the company has posted an average EPS of Rs. 3.72, and an average RoNW of 40.61%. The issue is priced at a P/BV of 7.73 based on its NAV of Rs. 11.65 per share as of March 31, 2025, and at a P/BV of 2.26 based on its post-PO NAV of Rs. 39.81 per share.

If we attribute annualized super earnings of FY26 on post-IPO paid-up capital, then the issue price is at a P/E of 16.48, and based on its FY25 earnings, the P/E stands at 24.19. Thus, the issue appears exorbitantly priced. It is operating in a highly competitive and fragmented segment.

For the reported periods, the company has posted PAT margins of 0.53% (FY23), 2.00% (FY24), 3.97% (FY25), 3.86% (H1-FY26), and RoCE margins of 7.37%, 13.22%, 19.20%, 11.64% respectively for the referred periods. Its net debt to EBIDTA at 5.85 as of September 30, 2025 raises alarm.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has adopted a dividend policy in March 2025, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Hisar Metal, Quality Foils, as its listed peers. They are currently trading at a P/E of 38.0, and 13.9 (as of November 28, 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 Kreo Capital in the last two fiscals. Out of the last 2 listings, 1 listed at discount, and the rest at par on the date of listing. The merchant banker has a poor track record.