Newmalayalam Steel IPO

In 2019, the company expanded its production capabilities by installing an additional electric resistance welding (ERW) tube mill with a capacity of 4,000 MT at its manufacturing unit.

The company claims to have a strong brand presence and a significant customer base across Kerala. The company states that this is because of the products which are designed to effectively address the continuous damage to houses caused by the region's harsh and unpredictable weather conditions.

The company has an in-house laboratory at its manufacturing unit where the Quality Division conducts thorough quality tests on raw materials, semi-finished products, and finished goods.

The company claims it maintains a quality control and assurance division at its manufacturing facility. This division conducts essential tests on raw materials before they are used in production, as well as on the final products, ensuring consistent quality standards.

The company manufactures multiple products under one roof at its production unit. This approach allows for cost savings by sharing overhead costs and resources across different product categories.

A major portion of the company’s revenue comes from its dealer network. Dealers contributed Rs 135.72 crore (88.01%) for the six months ending September 30, 2024, and Rs 259.04 crore (86.3%), Rs 313.92 crore (88.48%), and Rs 265.94 crore (83.65%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Any decline in sales or revenue from key dealers could negatively impact the company’s business operations and financial results.

The company depends on Jaihind Steel Private Limited, a Promoter Group entity, for a substantial share of its revenue. Jaihind Steel contributed Rs 44.67 crore (28.77%) as of September 30, 2024, and Rs 101.05 crore (33.44%), Rs 156.65 crore (44.05%), and Rs 107.82 crore (33.87%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Additionally, the company procures raw materials from Jaihind Steel Private Limited and Jaihind Tubes Private Limited, both part of the Group. Any loss of business or delay in receiving raw materials from these entities could disrupt operations and adversely affect the company’s finances.

The company’s manufacturing unit and operations are primarily located in Kerala. Any disruption of the business environment in the state or at the manufacturing unit could adversely impact the company’s business performance.

The Group companies – Vyttila Steel Pvt Ltd, Jaihind Steel Pvt Ltd, Jaihind Tubes Pvt Ltd and Jaihind Metals Hypermart Pvt Ltd – may have a conflict of interest with Newmalayalam Steel as they are engaged in similar industry segment and may compete with Newmalayalam as they have not entered into any non-compete agreements. Any conflict of interest could adversely affect Newmalayalam’s business.

Steel manufacturing involves hazardous processes that could pose risks of personal injury, loss of life, and severe damage to property or equipment. Such incidents could lead to significant liabilities, revenue losses, and high operating costs.

As of September 30, 2024, the company had availed secured loans totalling Rs 61.61 crore and unsecured loans amounting to Rs 2.8 crore. Any inability to repay or service these loans could adversely affect the company’s financial position.