Started in 1994, Century Metal Recycling Limited is a New Delhi based largest recycler in the aluminum recycling industry in India according to the CRISIL Report. They are focused on processing aluminium based metal scrap to manufacture aluminium alloys and supply them in liquid form and in the form of solid ingots. Company currently occupies an estimated market share of approximately 40 - 45% in north India and approximately 15 - 20% in south India, resulting in an overall market share of approximately 21% in the automotive segment of recycled aluminium industry in India (as per CRISIL Report). Since FY13 until FY18, the annual installed capacity has grown by approximately 70%, from 128,000 MT to 218,000 MT. CMRL primarily caters to the automotive manufacturing sector in India, specifically in the passenger vehicle, two wheeler and die casting segments. They supply the products to OEMs and Tier 1 companies (companies that directly supply to OEMs) in the automotive manufacturing sector in India. Some of the OEM customers include Maruti Suzuki India Limited, Honda Cars India Limited, Honda Motorcycle and Scooter IndiaPrivate Limited and India Yamaha Motor Private Limited, while the customers, who are Tier 1 companies include Rockman Industries Private Limited, Sunbeam Auto Private Limited, Rico Auto Industries Limited, Minda Industries Limited, Minda Corporation Limited, Jaya Hind Montupet Private Limited, Nemak Aluminium CastingIndia Private Limited, Toyota Industries Engine India Private Limited, Ahresty India Private Limited and ASK Automotive Private Limited, among others. Company operates through the seven manufacturing facilities, with a combined annual installed capacity of 218,000 MT, as on March 31, 2018, the largest in the domestic automotive aluminum recycling industry, as per the CRISIL Report. The installed capacities accounted for approximately 16% of the aggregate estimated installed recycling capacities domestically, as of March 2018, as per the CRISIL Report. These manufacturing facilities are present in some of the key auto clusters in north India and south India. Four of these facilities are situated at Tatarpur, Gurugram, Manesar and Bawal, in the state of Haryana while the other manufacturing facilities are situated at Haridwar, Bhiwadi and Chennai, in the states of Uttarakhand, Rajasthan and Tamil Nadu, respectively. CMRL was one of the initial suppliers of liquid aluminium and occupied approximately 70% of the market share in liquid aluminium space in Fiscal 2018, as per the CRISIL Report. They started supplying liquid aluminium, through the manufacturing facilities situated adjacent to the premises of the customers in September 2008, and through road transport in November 2013. Due to operational advantages and some other benefits like to saving inventory handling costs, supply of liquid aluminium eliminates the re-melting process thereby minimising oxidation losses and reducing power and fuel consumption for the customers. In order to strengthen the business operations in India, CMRL entered into joint venture agreements with two Japanese aluminium alloy manufacturers, Nikkei and Toyota Tsusho. Accordingly, in the year 2012, they set up the Subsidiaries, CMRN in Bawal, Haryana, where they presently hold 74% stake, and CMRT in Chennai, Tamil Nadu, where they presently hold 90% stake, in partnership with Nikkei and Toyota Tsusho, respectively. Pursuant to these arrangements, they started supplying liquid aluminium through road transport to the customers in November, 2013. Company is in the process of commissioning a new manufacturing facility in Gujarat through CMRN. Additionally, they are in the process of establishing a new facility in Chennai through CMRT to cater to the increasing demand of liquid aluminium in southern India. In addition to the manufacture of liquid aluminium alloys and aluminium alloy ingots, Company is also engaged in the business of segregation and sale of metal scrap as a part of the manufacturing process (with a specific focus on stainless steel, brass, copper and zinc). The Company generated a revenue of Rs 2,476.51 million and Rs 2,012.21 million from sale of scrap, segregated scrap, ash and residue sales which accounted for 10.25% and 11.08% of the revenue from operations (gross) for the year ended March 31, 2017 and the nine month period ended December 31, 2017, respectively. As on March 31, 2018, company has 440 permanent employees and 2,204 contractual workmen. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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