Systematic Ind. BSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing and supplying of various steel wires and cables used by power, infra, telecommunication, agri industries.
•    The company marked growth in its top and bottom lines for the reported periods.
•    It is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Systematic Industries Ltd. (SIL) is an ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified company operating in the steel wire industry and engaged in the business of manufacturing and supplying of various steel wires and cables, catering to the needs of power transmission, infrastructure, telecommunications, agro-based and allied industries. Its product portfolio includes Steel wires such as Carbon steel wire (MS Wire), High carbon wire (HC Wire), Mild Steel (MS) Wire, Galvanized Iron (GI) Wire, Cable Armour Wire, Aluminium conductor steel-reinforced cable (ACSR Core wire), Aluminium Clad Steel (ACS) Wire etc. along with Optical Ground Wires (OPGW) and Optical Fibre Cable (OFC), which has electrical and mechanical properties that are suitable for applications in power generation, data transmission and distribution, thus, ensuring efficiency and reliability across various aforementioned industries.

The company started its operations with a factory situated at Village Sayli, Silvassa in Dadra & Nagar Haveli and Daman & Diu, whereby it manufactured and supplied Steel Wires. Gradually, the company expanded its verticals by venturing into manufacturing of various other Steel wire products such as Mild Steel (MS) Wire, Galvanized Iron (GI) Wire, Aluminium Clad Steel (ACS) Wire etc.

It has own Research & Development department that adheres to safety and quality standards as required by the customers. Its emphasis on R&D enables it to constantly develop quality products, offering technological & economical solutions to customers. Its factories are staffed with a workforce of approximately 413 employees as of July 31, 2025, of which 17 employees are there in Quality Department & 15 employees are there in Research & Development Department.

SIL’s factories have a combined installed capacity of 1,00,000 MTPA for producing various steel wires such as galvanized wire, wires for power industries, high and low carbon steel wires etc. and are equipped with various machines such as Wire Drawing Machine, GI Plant, Flattering Machine, Fiber coloring Machine, Buffering Machine, SZ standing Machine, Sheathing Machine, Wire Drawing Machine, ACS Rewinding Machine, Lath Machine, Drilling Machine, High carbon machine, Torsion machine etc. As of July 31, 2025, it had 413 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 5928000 equity shares to mobilize Rs. 115.60 cr. at the upper cap. The IPO comprises of 5528000 fresh equity shares (worth Rs. 107.8 cr. at the upper cap), and an Offer for Sale (OFS) of 400000 equity shares (worth Rs. 7.80 cr. at the upper cap). It has announced a price band of Rs. 185 – Rs. 195 per share of Rs. 10 each.  The IPO opens for subscription on September 24, 2025, and will close on September 26, 2025. The minimum application to be made is for 1200 shares and in multiple of 600 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.55% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 95.00 cr. for repayment/pre-payment of certain borrowings, and the rest for general corporate purpose.

The IPO is solely lead managed by Hem Securities Ltd., while Cameo Corporate Services Ltd. is the registrar to the issue. HEM group’s Hem Finlease Pvt. Ltd. is the market maker, as well as a syndicate member.

The company has issued initial equity shares at par, and issued further equity shares in the price range of Rs. 20 – Rs. 280 per share between March 2004, and March 2014. It has also issued bonus shares in the ratio of 16 for 1 in September 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 4.42, Rs. 16.97, and Rs. 37.06 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 16.80 cr. will stand enhanced to Rs. 22.33 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 435.46 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 321.90 cr. / Rs. 6.31 cr. (FY23), Rs. 372.60 cr. / Rs. 12.41 cr. (FY24), Rs. 449.21 cr. / Rs. 18.46 cr. (FY25). While its top and bottom lines marked growth, surge in earnings from FY24 onwards is a bit surprising. 

For the last three fiscals, the company has reported an average EPS of Rs. 9.75, and an average RoNW of 20.17%. The issue is priced at a P/BV of 4.05 based on its NAV of Rs. 48.10 as of March 31, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 23.58, and based on its FY24 earnings, the P/E stands at 35.07. Thus, based on its recent consolidated financial data, the issue appears fully priced.

The company has posted PAT margins of 1.97% (FY23), 3.35% (FY24), 4.13% (FY25), and RoCE Margins of 9.90%, 15.01%, 16.44%, 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 the offer document, the company has shown Advait Energy and Bansal Wire as its listed peers. They are currently trading at a P/E of 58.1, and 36.3 (as of September 22, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 57th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at par, and the rest with premium ranging from 3.43% to 61.92% on the date of listing.