Jainam Ferro Alloys(I) Limited, was originally incorporated in March 2014. They are currently manufacturing two types of Ferro Alloys namely, Ferro Manganese (FeMn) and Silico-manganese (SiMn). Both the alloys are largely used in Steel industry. Company also generates revenue from its trading activities of manganese ore, used as a raw material in manufacturing Ferro alloys. In the year 2016, the Company took over the ferro alloy plant of M/s Raghuvir Ferro Alloys Private Limited vide Sale deed dated June 21, 2016. Pursuant to the sale deed the company acquired the entire factory of M/s Raghuvir Ferro Alloys Private Limited having its factory located at Sector-C, Urla Industrial Area, Raipur, Chhattisgarh- 492003, India including Super Structure Factory Shed, Administrative Buildings, Plant and Machinery, Weigh Bridge, Electrical Installation, Office equipment together with all rights, concessions, licenses and other privileges and the allotted manganese ore mines at Village Jagantola, Tehsil – Baihar, District Balaghat, Madhya Pradesh with valid lease period upto 2028 which was later extended upto 2058 by the State Government vide Extension Lease Deed dated April 11, 2018. The Company has not yet started extraction of manganese ore from these mines as the transfer of said mines to the name of the company in records of State Govt of Madhya Pradesh is yet pending. Company started commercial production of Ferro alloys of the different grades with one furnace having designed capacity of 9 MVA with 5000 KVA power load. In June 2017, the company started another furnace having designed capacity of 6 MVA with 4000 KVA power load for the same manufacturing activity. The products manufactured by the Company are primarily used in manufacturing of steel and in foundry activities. Apart from using manganese alloys for alloying the steel, they are also widely used for deoxidizing, desulphurization & refining of steel. Phosphorus and other elements can also be controlled depending on customer specification. Smaller quantities of alloys are used as reductant in order to produce other metals. Besides their use in plain carbon steel and alloy steel plants, Ferro alloys are consumed by the foundries and electrode industries. A very specific application of refined manganese alloys is a constituent in the coating of welding electrodes. In ceramic industries, manganese alloys are used in small quantities. On the financial performance front, Jainam Ferro reported turnover/net profits (loss) of Rs. 132.39 cr. / 2.46 cr. (FY19), Rs. 122.33 cr. / (0.36) cr. (FY20), and Rs. 102.51 cr. / 4.84 cr. (FY21). So company has shown decline in sales, but surprisingly profit has been increased in FY21 significantly. For the last three years, company has posted average EPS of Rs. 2.52 and RoNW of 10.51%. The issue is priced at a P/BV of 2.24 based on its NAVs of Rs. 31.26 post issue. As per FY21 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 24, which looks very fully priced. We may find better options available in open market. Comparison between listed peers is shown in above table. On BRLM's front, Hem Securities limited associated with this SME IPO and handled 10 IPOs in last 3 years. From last 10 IPOs, five opened below issue price and remaining above issue price. As of now from 10 IPOs, five are trading below and remaining are trading above issue price or at par. ( As on 22.09.21 ) For Jainam Ferro Alloy Limited financials are average, RoNW is 10.51%, P/E is around 24 for FY21. So issue looks fully priced, but sudden jump in net profit is surprising and if company can maintain it in future, is big question. Performance of BRLM is poor. So we give AVOID rating to this SME IPO.
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