Located in steel hub of Raipur Chhattisgarh, Earthstahl & Alloys Limited is engaged in the business of manufacturing Cast Iron Lumps and Ductile Iron Pipe Fittings. Cast Iron Lumps are used as raw material in the steel foundries to manufacture products like: cast iron pipe fittings, machine components such as latche machines, fan components, manhole covers, decorative cast iron pieces, cast iron pipe fitting and other units engaged in manufacturing of steel or cast iron products. Ductile Iron Pipe Fittings are used in public water supply systems as connectors of pipes. Company started the operations of manufacturing cast iron in the year 2012 with one submerged electric arc furnace with capacity of 3.6 MVA to manufacture 10,500 tonnes p.a. of Cast iron Lumps and thereafter in the year 2017 the company forayed into the Ductile Iron Pipes fittings segment for which they commissioned Lost Foam based Steel Foundry consisting of one induction furnace with two crucibles, one of 500 KG and another 1000 KG to produce Ductile iron pipe fittings of different dimensions, shapes and sizes used in water supply system. The foundry is also capable of producing parts or components of plant and machinery / automobiles using foam molds and therefore they can produce various parts of Pellet plants, Cement plants, Sponge iron plants, Power plants, Automobile Sector, Railway & Ductile Iron Pipes Fittings. In the year 2022 company also commissioned another 5.5 MVA submerged electric arc furnace to manufacture 15,750 tonnes p.a. of cast iron lumps. Company's manufacturing unit is located in the village Duldula about 50 KMs from Raipur, Chhattisgarh and is spread across an area of around 4.73 hectares of land. They are using waste generated by integrated steel plants, sponge iron plants and rolling mills in the manufacturing process as raw material and recover iron from the left out waste, thus conserving the environment. The plant is located near to the source of raw material i.e. Bhilai Steel Plant of SAIL and other pellet and sponge iron plants located in Raipur and surrounding area. Currently Company sells the products primarily in the state of West Bengal, Punjab, Orissa, Gujarat, Madhya Pradesh and Maharashtra. As on September 30, 2022, the Company has employed approximately 161 employees at various levels of the Organization. As per financial performance, Earthstahl & Alloys Limited has posted total income/net profits of Rs 31.81 Cr / Rs (0.33) Cr (FY20), Rs 24.57 Cr / Rs 2.67 Cr (FY21), Rs 49.07 Cr / Rs 7.45 Cr (FY22) and Rs 48.24 Cr / Rs 5.80 Cr (upto H1 FY23). So company has shown good results especially in last one and half year. Company has posted an average EPS of Rs 5.07 and average RoNW of 51.25% for last three fiscals. Issue is priced at a P/B of 2.20 as per NAV of Rs 18.19 as on 30.09.22. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 6.57 and as per annualised FY23 earnings P/E is 4.22. As per RHP, there are no listed peers. On BRLM's front, Hem Securities Limited associated with this SME IPO and handled 19 SME IPOs in last 3 years. From last 10 IPOs all opened above issue price. As of now from last 10 IPOs, one is trading below and remaining are trading above issue price or at par. ( As on 24.01.23 ) As per financials Earthstahl & Alloys Limited, has shown good results, RoNW is 70.53% and P/E is respectively 6.57 and 4.22 as per FY22 and annualised FY23 earnings, which looks very cheaply priced. Company has shown exceptional results in last 18 months and it may be difficult to maintain same margins in future. Company is in business of manufacturing Cast Iron Lumps and Ductile Iron Pipe Fittings. We may see good growth in this segment, but this segment is highly competitive. Performance of BRLM is good. So we are giving SUBSCRIBE rating to this IPO, one may apply for listing gains.
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