SK Minerals BSE SME IPO review (Not Rated)

•    The company is engaged in the business of trading and manufacturing of specialty chemicals with primary focus on food and feed additives.
•    The company posted inconsistency in its top lines for the reported periods.
•    Boosted bottom lines from FY24 onwards raise eyebrows as in pre-IPO period it has reported spectacular earnings, which appears to be a window dressing for fancy valuations.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed/risk seekers may park moderate funds for long term.

ABOUT COMPANY:
SK Minerals & Additives Ltd. (SMAL) is engaged in the business of trading and manufacturing of specialty chemicals, with a primary focus on food and feed additives. Over the years, it has established itself as a reliable partner catering to the diverse needs of customers across multiple industry segments. Its product portfolio comprises a wide range of ingredients and additives that play a crucial role in enhancing the nutritional value, functionality, and shelf life of various end products.

Its key products include chelated minerals such as Glycinates and EDTAs (Ethylenediaminetetraacetic Acid) in variants of Zinc, Copper, and Magnesium; essential Mineral Mixtures; Calcium Propionate; Ferric Pyrophosphate; Technical Grade Urea; Virgin Base Oil; Magnesium Oxide; By-Pass Fat and other allied specialty chemicals. These products serve critical functions in various applications, particularly in the food and bakery, animal feed, petroleum, plywood, and other allied industries. It operates through a flexible business model that integrates domestic trading, imports, and in-house production. A significant portion of trading products is imported from global suppliers, particularly specialty chemicals, which are then stored at warehouses at ports before dispatch to customers. This model enables it to ensure better control over inventory, product quality, and timely deliveries.

SMAL’s manufacturing operations are supported by a dedicated in-house Research and Development (R&D) unit, located at DSIR-certified facility in Khanna, Ludhiana, Punjab. Its R&D efforts focus on innovation, product differentiation, process improvement, and customer-centric formulation development. Every manufactured product is developed in-house to ensure cost-efficiency, nutritional integrity, and performance enhancement. It is committed to upholding good quality and safety standards across all operations. SMAL’s Quality Management System is ISO 9001:2015 and ISO 22000:2018 certified, reflecting adherence to international standards in product safety and management. 

The company also follows Good Manufacturing Practices (GMP) and ensures each batch is released only upon approval from internal quality control team, accompanied by a Certificate of Analysis (CoA). Its customer base spans several regions in domestic market. It has built strong relationships across the value chain, supported by a dedicated sales and marketing team that ensures customer feedback is effectively channelled into product development and service improvement. As of August 31, 2025, it had 95 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3240000 equity shares worth Rs. 41.15 cr. at the upper cap. The company has announced a price band of Rs. 120 – Rs. 127 per share of Rs. 10 each. IPO opens for subscription on October 10, 2025, and will close on October 14, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.47% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 31.00 cr. for working capital, Rs. 5.05 cr. for capex on purchase of plant and machineries, and the rest for general corporate purposes.

The IPO is solely lead managed by Khambatta Securities Ltd., while Maashitla Securities Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is the market maker.

The company has issued/converted entire initial equity shares at par value, and issued bonus shares in the ratio of 4 for 5 in February 2025. The average cost of acquisition of shares by the promoters is Rs. 4.22, Rs. 5.11, and Rs. 5.56 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 9.00 cr. will stand enhanced to Rs. 12.24 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 155.45 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 132.59 cr. / Rs. 1.90 cr. (FY23), Rs. 108.94 cr. / Rs. 3.10 cr. (FY24), Rs. 212.15 cr. / Rs. 10.94 cr. (FY25). For 5M of FY26 ended on August 31, 2025, it earned a net profit of Rs. 5.03 cr. on a total income of Rs. 85.38 cr. Thus, in a pre-IPO year, it posted rosy financial data which is perhaps for fetching fancy valuations.

For the last three fiscals, the company has reported an average EPS of Rs. 13.17, and an average RoNW of 36.30%. The issue is priced at a P/BV of 3.98 based on its NAV of Rs. 31.87 as of August 31, 2025, but its post-IPO NAV data is missing from the offer documents. 

If we attribute its FY26 super annualized earnings on post-IPO expanded equity base, then the asking price is at a P/E of 12.89, and based on its FY25 earnings, the P/E stands at 14.21. Thus, the issue appears fully priced.

The company has posted PAT margins of 1.43% (FY23), 2.85% (FY24), 5.17% (FY25), 5.89% (5M-FY26), and RoCE Margins of 9.73%, 10.18%, 22.88%, 6.92%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORDS:
This is the 15th mandate from Khambatta Securities in the last four fiscals (including the ongoing one). Out of the last 12 listings, 3 opened at a discount, and the rest with premium ranging from 3.33% to 181.46% on the listing date.