Innomet Advanced Materials coming with IPO to raise Rs 34.24 crore

Innomet Advanced Materials

• Innomet Advanced Materials is coming out with an initial public offering (IPO) of 34,23,600 equity of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share.
• The issue will open on September 11, 2024 and will close on September 13, 2024.
• The shares will be listed on SME Platform of NSE.
• The share is priced 10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Aanchal Sethia.

Profile of the company

M/s Padmasree Enterprises registered as a partnership firm in the year 1984, which was a family concern started as a General Engineering later on converted into a Private Limited Company in the name of M/s Innomet Advanced Materials Private Limited (Innomet) during 2019, which is a family concern started as a General Engineering. The next generation took over and diversified in to other businesses like manufacture of diamond tools and later on through backward integration, started manufacture of Metal Powders (Ferrous, Non-Ferrous and various their Alloys). Further with R&D got into and manufacture of Tungsten Heavy Alloys (THA). The Promoters have vast experience in General Engineering, Manufacture of Diamond Tools, water atomised Metal /Alloy powders and Tungsten Heavy alloys.

The company is manufacture of “Metal Powders & Tungsten Heavy Alloys” comes under the gamut of “Powder Metallurgy”. The company has all the necessary infrastructure for the development and manufacture of Metal Powders and Tungsten Heavy Alloys. To update ourselves technologically, the company associates with the senior most scientists in the world and with renowned Research Organisations in India for continuous development of various Powder Metallurgy (PM) products. The Company has also started/conducted in-house experiments to develop products required by the end users. The company has been found to be in conformity with the Quality Management System Standard: ISO 9001:2015 with a scope of manufacturing and supply of Ferrous & Non-Ferrous Metal/Alloy Powders and Tungsten Heavy Alloy components.

Proceed is being used for:

• Funding working capital requirements of the company
• Funding of capital expenditure requirements of the company towards purchase of machinery and equipment
• Repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company, from banks and financial institutions
• General corporate purposes
• Issue expenses

Industry Overview

The global powder metallurgy market size was valued at $2.41 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 12.9% from 2023 to 2030. The increasing adoption of additive manufacturing to reduce the weight of parts or components used in the aerospace, defense, and healthcare sectors will drive the market over the forecast period. 3D printing, also called additive manufacturing, offers properties, such as reduced weight, cost-effectiveness, and complexity in designs, which have attracted various manufacturers to implement the technology in their manufacturing processes. 3D printing is used in various industries, such as jewelry, medical, food, footwear, and aerospace. This has positively influenced the market growth. The steel segment held the largest revenue share of over 46.0% in 2022. Steel is considered one of the cheapest materials in additive manufacturing, which can also be utilized in a mixture with other metals, such as bronze, titanium, etc. The low cost and easy availability of steel are expected to increase its utilization in the printing of large products, including machines, car frames, and transport equipment over the coming years. Other applications of steel include spare parts and fully functional components.

The automotive industry is one of the primary drivers of the powder metallurgy market. Globally over 80% of powder metallurgy applications are in the automotive industry. Powder metallurgy is widely used in automotive components such as engine parts, transmission systems, gears, bearings, and structural parts. The demand for lightweight & fuel-efficient vehicles has led to increased adoption of powder metallurgy, as it offers cost-effective manufacturing, design flexibility & improved performance. The exponential growth of the EV market is a significant driver for the powder metallurgy industry. Evs require lightweight, high-performance components to enhance battery efficiency and vehicle performance. Powder metallurgy techniques, such as sintering and metal injection moulding, enable the production of complex shapes and lightweight parts with excellent mechanical properties, making them ideal for EV applications.

Powder metallurgy incorporates a plethora of procedures with special designed metal powders in order to fulfil the continuously rising demand of a variety of drivetrain applications especially Powertrain. The powdered metal/PM procedure chain permits an energy efficient production of the powertrain components and hence leads to a green (environment friendly) production process. Thus, PM/powder metal powertrain components is regarded as a highly efficient price saving factor. This, in turn will cater to extensive opportunities for market progression in future. As per SMR, majority of the cars that were manufactured in USA had gasoline powertrain. In 2021, approximately 86.1% of the cars produced in the U.S. consisted of a gasoline powertrain, around 3% of EV powertrain, & almost 9% gasoline-hybrid powertrain respectively.

Pros and strengths

Global suppliers of metal and alloy powders: The company is global Suppliers of Metal and Alloy powders through water and air atomization route. The company has over 20 products including Copper, Bronze, Brass, Nickel, Tin and Stainless-Steel Powders for several industries and specialize in manufacturing customized grades of Metal/Alloy powders containing Iron, Copper, Nickel, Tin, Zinc and Cobalt. Applications it is currently catering to include Powder Metallurgy Components, Diamond tools, Welding and Brazing, Catalyst, Surface Coating’s, and many others.

Passion towards innovation and development of new products: The company has a lot of passion towards Innovation and developing new products for its customers. It encourages R&D divisions of the companies to work with it in their projects related to Powder Metallurgy and assist them with its infrastructure and expertise in whatever capacity it can. Innotung, is the brand name for “The Tungsten Heavy Alloys” series manufactured through Powder Metallurgy route by “Innomet Advanced Materials Limited”. It supplies the material in the form of bars, plates, cubes, spheres and assemblies of various sizes and shapes also in finished machined condition as per customer drawings.

ISO 9001:2008 certified company: The company is an ISO 9001:2008 certified company with Domestic and International customers based out of US, UK, Japan, Italy, New Zealand, Lebanon, Brunei and many other countries. Import substitution is one of the key focus areas for it and the company can proudly say that it has developed several import substitute products for its customers in India.

Risks and concerns 

Heavy reliance on the top 10 suppliers introduces a potential risk for significant purchases: The company’s most of the purchases are domestic. In the year 2023-2024, its total purchases worth Rs 926.80 lakh constituting 58.58% of the total purchases were made from top 10 suppliers. Though, they are very much regular in supply, and the company has not faced any problem in past from any of the supplier. However, the company cannot assure that the suppliers will continue to supply regularly in future at the same rate in future. Any disruption in the supply of material by any one or more will adversely affect the business of the Company and adversely affect the profitability and financial position of the company. 

Not signed any agreement with customers for sale of its products: The company sells its major production to the customers spread over the different states of its country as well as other foreign countries. The company has not entered in to any type of long/short agreement with any of the buyer. Though, it is getting order on regular basis from its customers, it cannot assure that in future it will be getting the orders from all the customers on regular basis. In absence of any type of written agreement with its customers, it is always at the risk of losing customers in this competitive market. Loss of any of the significant customer will lead the company in to loss of business, revenue and financial conditions.

Requirement of additional financing: The company may require additional capital for its business operations. The company’s ability to obtain additional financing on favourable terms, if at all, will depend on a number of factors including its financial condition, results of operations and cash flows, the amount and terms of its existing indebtedness, security, its track record of compliance of the covenants contained in its financial agreements, general market conditions and market conditions for financing activities and the economic, political and other conditions in the markets where it operates. The company cannot assure that it will be able to raise additional financing on acceptable terms in a timely manner or at all. Its failure to renew arrangements for existing funding or obtain additional financing on acceptable terms and in a timely manner could adversely impact its ability to incur capital expenditure, its business, results of operations and financial condition.

Outlook

Innomet Advanced Materials manufactures metal powders and tungsten heavy alloys. complies with the Quality Management System Standard: ISO 9001:2015 for the manufacturing and supply of Ferrous & Non-Ferrous Metal/Alloy Powders and Tungsten Heavy Alloy components. The company offers a diverse range of over 20 products, including copper, bronze, brass, nickel, tin, and stainless-steel powders for various industries. They specialize in producing custom grades of metal and alloy powders containing iron, copper, nickel, tin, zinc, and cobalt. On the concern side, the company may require additional financing for its business operations and the failure to obtain additional financing on terms commercially acceptable to it may adversely affect its ability to grow and its future profitability. Further, fluctuations in interest rates could adversely affect its results of operations. Moreover, any defaults or delay in payment by a significant portion of its customers, may have an adverse effect on its cash flows, results of operations and financial condition.

The company is coming out with a maiden IPO of 34,23,600 equity shares of Rs 10 each at a fixed price of Rs 100 per share to mobilize Rs 34.24 crore. On performance front, the company’s total income increased by 8.87% from Rs 2714.78 lakh in financial year ended March 31, 2023 to Rs 2955.45 lakh in financial year ended March 31, 2024 primarily due to increase in revenue from operations. Moreover, the company has reported 142.41% rise in profit after tax in FY24 at Rs 251.91 lakh as comparted to Rs 103.92 lakh in FY23. The company continues to invest in development of new technologies in the area of Powder Metallurgy. This the company will achieve by efforts both, in house and with help from reputed R&D organizations in the country and abroad. Moreover, the company is already working in this space with ARCI and a start-up named Altmin. It is poised to take the opportunity to build facility to produce Battery Materials. The future is Hydrogen economy as there is no pollution. However, there are challenges with materials and components supply. The company is actively working in this area to be ready to take the opportunity which is coming in a big way.