VMS TMT IPO

With reported sales of 42,023.16 MT and revenue of Rs 212.26 crore in the period ended June 30, 2025, the company claims to be positioned within a steadily growing steel bars and rods market, which has recorded a production compound annual growth rate (CAGR) of 9.2 percent and a consumption CAGR of 9.7 percent over the past six years.

VMS TMT claims to have a history of customer retention, with four of its top 10 customers as of June 30, 2025, associated with the company for more than three years. The company derives nearly all its revenue from operations in Gujarat and markets its products under the Kamdhenu brand. It claims to operate a distribution network comprising 3 distributors and 227 dealers, structured across central, north, and south Gujarat, which it uses to optimise market penetration and service delivery.

The company claims to have completed a backward integration project in September 2024, enabling it to manufacture TMT bars from scrap and reduce reliance on billets. It has installed a 30 tonne induction furnace with an annual billet production capacity of 216,000 metric tonnes (MT) and claims to have set up a 22,000 kilovolt-ampere-hour (kVA) substation for uninterrupted operations.

The company is ISO 9001:2015 certified for its quality management systems, ISO 45001:2018 certified for its occupational health and safety management systems, and ISO 14001:2015 certified for its environmental management systems.

The company has witnessed a consistent increase in profit after tax (PAT). It increased from Rs 4.19 crore in FY23 to Rs 13.47 crore in FY24 and Rs 14.74 crore in FY25.

The company has reported a consistent decrease in revenue from operations. It decreased from Rs 882.01 crore in FY23 to Rs 872.96 crore in FY24 and Rs 770.19 crore in FY25.

VMS TMT is heavily dependent on its retail licence agreement with Kamdhenu Limited, which allows the company to market and sell TMT bars under the Kamdhenu brand in Gujarat. It derived Rs 203.74 crore from the sale of TMT bars, which accounted for 95.99 percent of the company’s revenue in the period ended June 30, 2025; Rs 705.74 crore (91.63 percent) in FY25; Rs 821.11 crore (94.06 percent) in FY24, and Rs 854.20 crore (96.85 percent) in FY23. The agreement is non-exclusive and includes obligations such as royalty payments, minimum sales quotas, branding, and packaging requirements. Any adverse termination, breach, or dispute related to this agreement could materially impact the company’s business, results of operations, and financial condition.

VMS TMT manufactures TMT bars from scrap and billets at its facility using a 30-tonne induction furnace in its continuous casting machine division and a reheating furnace and rolling mill. The company’s major raw materials include mild steel scrap, billets, sponge iron, and coal. Consumption of these raw materials accounted for 82.58 percent, 70.25 percent, 87.86 percent, and 96.63 percent of the company’s total expenses for the three months ended June 30, 2025, and FY25, FY24, and FY23, respectively. Any adverse fluctuations in the availability or pricing of these raw materials could materially affect the company’s production costs, operations, and finances.

The top three suppliers accounted for Rs 64.15 crore (33.69 percent) of the company’s total purchases for the period ended June 30, 2025; Rs 132.78 crore (19.92 percent) in FY25; Rs 167.28 crore (21.74 percent) in FY24; and Rs 259.09 crore (30.24 percent) in FY23. Furthermore, the top supplier alone accounted for Rs 32.26 crore (19.04 percent) of the company’s total purchases for the period ended June 30, 2025; Rs 60.32 crore (9.05 percent) in FY25; Rs 66.72 crore (8.67 percent) in FY24; and Rs 94.93 crore (11.08 percent) in FY23. Any disruption in supplies from one or more of these suppliers could adversely affect the company’s business and finances.

The top three customers accounted for Rs 184.51 crore (86.93 percent) of the company’s revenue for the period ended June 30, 2025; Rs 605.82 crore (78.66 percent) in FY25, Rs 700.48 crore (80.24 percent) in FY24; and Rs 701.13 crore (79.49 percent) in FY23. Furthermore, the top customer alone accounted for Rs 64.08 crore (30.19 percent) of the company’s revenue for the period ended June 30, 2025; Rs 231.93 crore (30.11 percent) in FY25; Rs 253.97 crore (29.09 percent) in FY24; and Rs 251.77 crore (28.55 percent) in FY23. Any failure to retain these key customers or a loss of business from them could adversely affect the company’s business and financial standing.

VMS TMT sells its TMT bars through a non-exclusive distribution network comprising three distributors and 227 dealers as of July 31, 2025. The company does not have formal arrangements with these distributors or dealers, making its sales dependent on their ability to effectively market, sell, and deliver products. Any failure to maintain relationships, timely appoint replacements, receive payments, fulfil orders, or manage delivery logistics could materially affect the company’s revenue, cash flows, and operations.

VMS TMT has a high debt-to-equity ratio of 3.78 times as of the period ended June 30, 2025, 3.77 times in FY25, 4.25 times in FY24, and 5.28 times in FY23. A significant portion of cash flow may be required to service debt, which could reduce funds available for capital expenditures and general operations. Furthermore, defaults under financing arrangements could trigger the enforcement of security interests or restrict the company’s ability to obtain additional financing on favourable terms.

The company recorded negative cash flow from operating activities amounting to Rs 22.42 crore for the period ended June 30, 2025, Rs 17.94 crore in FY25, and Rs 11.35 crore in FY23. This was primarily due to changes in working capital, including increases in inventories and other current assets, partially offset by trade payables and taxes paid (net of refund). Additionally, negative cash flow from investing activities amounted to Rs 4.94 crore for the period ended June 30, 2025, Rs 55.18 crore in FY25, Rs 50.02 crore in FY24, and Rs 26.97 crore in FY23. Negative cash flows in the future could materially affect the company’s financial condition.

The company’s manufacturing facility and sales are concentrated in a single location, Gujarat. It accounted for 98.93 percent of the company’s revenue for the period ended June 30, 2025, 96.71 percent in FY25, 98.75 percent in FY24, and 97.42 percent in FY23. This heavy reliance on a single region exposes the company to risks associated with economic fluctuations, competitive pressures, or demographic changes in Gujarat, any of which could significantly impact its revenue and overall financial performance.

A portion of VMS TMT’s raw material expenditures is denominated in foreign currencies, primarily the US dollar, following the completion of its backward integration project. The company does not hedge its assets or liabilities against exchange rate movements. Any adverse fluctuations in the exchange rates between the Indian rupee and the US dollar or other foreign currencies could materially impact the company’s financial condition and cash flows.

The company’s inventory turnover ratio has decreased from 12.60 in FY23 to 8.60 in FY24, 6.45 in FY25, and 5.45 in the period ended June 30, 2025. This indicates slower inventory movement, which could increase holding costs and tie up working capital. If VMS TMT is unable to manage inventory effectively in line with customer demand, it may face stockouts or delays in fulfilling orders, which could hurt its business, results of operations, and financial condition.

As of June 30, 2025, the company had trade receivables of Rs 11.65 crore, representing 5.49 percent of its revenue. An inability to collect these receivables on time or in full could negatively impact the company’s business, results of operations, and financial condition.

The company, its directors, promoters, and group companies are involved in certain ongoing legal proceedings, including criminal and tax-related cases. Any adverse judgments in any of these cases could be detrimental to the company’s business prospects.

As of June 30, 2025, the company had outstanding financial indebtedness of Rs 331.49 crore. Failure to service or repay these loans can hurt the company’s operations and financial position.