Vraj Iron and Steel Limited IPO: Get Date, Price, Review and Details

Introduction:

Vraj Iron and Steel Limited was incorporated on 16^th June 2004. Currently, the company is engaged in manufacturing of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. The company operate through two manufacturing plants which are located at Raipur and Bilaspur in Chhattisgarh spread across 52.93 acres. As of December 31, 2023, the aggregate installed capacity of our manufacturing plants was 2,31,600 tons per annum

IPO Details:

Objectives of Issue:

• Repayment or prepayment of borrowings from HDFC Bank obtained by the company for the capital expenditure towards the "Expansion Project" at Bilaspur Plant
• Capital expenditure towards the "Expansion Project" at Bilaspur Plant.
• General Corporate Purposes.

Key Strengths:

• Diversified Product Mix- The company has primarily 3 products which contributes more than 90 % of company revenue. However company is not dependent on a single product as each product contributes at least 10 percent to company’s turnover thereby eliminating the company’s dependency on a single product.
• Consistent Performance – The company focus on operational and functional excellence has led to health financial performance with total Income having grown at a CAGR of 33.4% between Fiscal 2021 and Fiscal 2023, EBITDA having grown at a CAGR of 67.2% between Fiscal 2021 to Fiscal 2023 and Profit After Tax at a CAGR of 121.7% between Fiscal 2021 and Fiscal 2023
• Increasing Operational Capability and Capacity- The Company manufacturing set-up consists of Sponge Iron with 120,000 TPA, MS Billets with 57,600 TPA, TMT Bars with 54,000 TPA and our captive power plant with 5 MW. It is is proposing to expand these capacities by adding capacity of Sponge Iron in Bilaspur with 115,500 TPA, MS Billets with 153,000TPA and captive power plant with 15MW. Company has been able to continuously in the last 3 fiscal years have been able to increase their capacity utilization for all products.

Risks:

• Non-existence of long-term contracts with customers – The company’s top 10 customers contribute more than 60% of the revenue. However the company does not have long term contracts with major of the customers. Hence if company fails to retain the customers, it will significantly affect its operations.
• Charge over immovable property-The company secured the loans/facilities by creating a charge over movable and immovable assets. Default in repayment of the loan and interest thereon, may result into enforcement/confiscation by the lender which in turn may have a significant adverse effect on the business and its operations.
• Dependency on Real Estate, Infrastructure and other related industries- Our products are mainly used in real estate, infrastructure and related fields. Adverse conditions or uncertainty in these markets could reduce demand for our products or delay the purchase or payment for those products. The performance of these industries, and therefore the demand for our products in those industries depends on economic and other factors such as government policies, regulations and budget allocations and investments in and on these industries
• Conflict of Interest – The company promoter have goals similar to the company’s business and may offer products related to the company’s business. The promoter and the group company primarily manufacture and/or steel products. There can be no assurance that our promoters or group companies will not compete with our current or future business or that their interest will not conflict with us

Financial Snapshot:

Interest Coverage Ratio –

Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.

Debt to Equity Ratio -

The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.

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