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Mangalam Worldwide NSE SME IPO review (May apply)

Review By Dilip Davda on Jun 22, 2022

•    MWL is engaged in the manufacturing and marketing of SS billets/flat bars.
•    It posted average performance with steady growth till FY21.
•    It posted super-profits for FY22 following a surge in commodity prices. 
•    Sustainability of super performance raises concern post-cooling of commodity markets.
•    The issue is aggressively priced; risk seekers/cash surplus investors may park their funds.

ABOUT COMPANY:
Mangalam Worldwide Ltd. (MWL) is mainly engaged in manufacturing Stainless Steel (SS) Billets and rolling SS Flat Bars with its fully integrated infrastructure consisting of steel melting shops, rolling mills and finishing machines at plants located at Halol (Unit-I) and Changodar (Unit-II), Gujarat. The company also does the manufacturing of Stainless Steel (SS) Billets on a job-work basis. To cater for the demand of customers for SS Round bars and SS Bright bars, it gets manufacturing of such products on a job-work basis from third-party manufacturers. 

MWL is also engaged in the trading of steel - scrap, ferroalloys, etc. It manufactures a wide range of stainless steel of 200 series, 300 series (including series 304 and series 316), 400 series - grades in Austenitic, Ferritic, Martensitic and special chemical composition grades steel like 17/4 PH, Duplex and Super Duplex Steel. 

The company had taken the Units along with plant and machinery on a lease & license basis from the lessors' M/s. Agarwal Mittal Concast Private Limited (Lessor company) and M/s. Vicor Stainless Private Limited (Lessor company) having their plants located at Halol (Unit-I) and Changodar (Unit - II) respectively on November 29, 2019, in order to tap the opportunities in the steel industry. Now they are amalgamated with MWL post-NCLT / IBC resolutions. As of May 31, 2022, it has 137 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 52 cr.) and general corporate purposes (Rs. 13 cr.), MWL is coming out with a maiden IPO of 6493200 equity shares of Rs. 10 each at a fixed price of Rs. 101 per share to mobilize Rs. 65.58 cr. The issue opens for subscription on June 30, 2022, and will close on July 04, 2022. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.50% of the post-IPO paid-up capital of the company. MWL is spending Rs. 0.58 cr. for this IPO process. 

The issue is solely lead managed by Beeline Broking Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker for this IPO. 

Having issued initial equity capital at par, MWL raised further equity in the price range of Rs. 33 to Rs. 435 per share between March 2019 and February 2022. It has also issued bonus shares in the ratio of 50 for 1 in September 2021. The average cost of acquisition of shares by the promoters is Rs. 4.59, Rs. 14.78 and Rs. 14.79 per share. 

Post-IPO, MWL's current paid-up equity capital of Rs. 18.01 cr. will stand enhanced to Rs. 24.50 cr. At the IPO pricing, the company is looking for a market cap of Rs. 247.46 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last xxx fiscals, MWL has (on a consolidated basis) posted turnover/net profits of Rs. 303.32 cr. / Rs. 2.65 cr. (FY21) and Rs. 533.48 cr. / Rs. 12.31 cr. (FY22). While it posted growth in its top line, but jump in the bottom-line many folds for FY22 can be attributed to the surge in commodity prices globally. The sustainability of such performance going forward raises concern. 

On a standalone basis, for the last three fiscals, MWL has posted an average EPS of Rs. 5.51 and an average RoNW of 22.77%. While on a consolidated basis, for the last two fiscals, MWL has posted an average EPS of Rs. 6.85 and an average RoNW of 24.90%. The issue is priced at a P/BV of 4.00 based on its NAV of Rs. 25.25 as of March 31, 2022, and at a P/BV of 2.23 based on its post-IPO NAV of Rs. 45.33 per share. 

If we attribute FY22 consolidated earnings on post IPO fully diluted equity capital, then the asking price is at a P/E of 20.12. Thus the issue is priced greedily. 

COMPARISON WITH LISTED PEERS:
As per the offer document, MWL has shown Shah Alloys and India Steel as its listed peers. They are currently trading at a P/E of 1.34 and 00 (as of June 22, 2022). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
MWL paid a dividend of 2% / 4% (on DVR shares) for FY19 and FY20 and thereafter it skipped. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 15th mandate from Beeline Broking in the last five fiscals (including the ongoing one). Out of the last 10 listings, 3 opened at a discount, 3 at par and the rest with premiums ranging from 1.59% to 9% on the day of listings. Thus it has a poor track record.


Conclusion / Investment Strategy

MWL has posted average performance with steady growth till FY21. Its super earnings in FY22 i.e. pre-IPO year raises eyebrows as well as the concern over sustainability. The surge in commodity prices may not last for long and will have a cascading impact on this company’s performance. Based on the super earnings of FY22, the IPO is priced greedily. Risk seekers/cash surplus investors may consider investment with a long term perspective.

Review By Dilip Davda on Jun 22, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Mangalam Worldwide IPO FAQs

  1. 1. Why Mangalam Worldwide IPO?

    The initial public offer (IPO) of Mangalam Worldwide Limited offers an early investment opportunity in Mangalam Worldwide Limited. A stock market investor can buy Mangalam Worldwide IPO shares by applying in IPO before Mangalam Worldwide Limited shares get listed at the stock exchanges. An investor could invest in Mangalam Worldwide IPO for short term listing gain or a long term.

  2. 2. How is Mangalam Worldwide IPO?

    Read the Mangalam Worldwide IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Mangalam Worldwide IPO what should investors do?

    Mangalam Worldwide IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Mangalam Worldwide IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Mangalam Worldwide IPO good?

    Our recommendation for Mangalam Worldwide IPO is to subscribe for long term.

  5. 5. Is Mangalam Worldwide IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Mangalam Worldwide IPO.

  6. 6. When will Mangalam Worldwide IPO allotment status?

    The Mangalam Worldwide IPO allotment status will be available on or around Jul 7, 2022. The allotted shares will be credited in demat account by Jul 11, 2022. Visit Mangalam Worldwide IPO allotment status to check.

  7. 7. When will Mangalam Worldwide IPO list?

    The Mangalam Worldwide IPO will list on Monday, July 11, 2022, at NSE SME.