VMS TMT Limited’s Bold Move: IPO Filing to Fund Growth and Innovation
Newzdaddy Business Updates
Summary of the Article
- VMS TMT Limited, a Gujarat-based manufacturer of TMT bars, files for an IPO with SEBI for mainboard listing.
- Plans to raise funds by issuing up to 1,50,00,000 equity shares.
- Proceeds will support capital expenditures, including setting up a solar power plant and repaying certain debts.
- 15MW solar plant aims to reduce power costs, with a backward integration project to cut operational expenses.
- Promoters hold a 96.28% stake; the remaining shares are owned by other promoter group members, including Chanakya Opportunities Fund I and Kamdhenu Limited.
- As of August 31, 2024, the total company debt was Rs. 25,251.83 lakhs.
- Annual TMT bar production capacity stands at 2 lakh MT, with output reaching 1,60,321 MT in Fiscal 2024.
- Strong demand in the TMT Bars industry is driven by urbanization, government infrastructure initiatives, and major projects.
- Arihant Capital Markets Limited serves as the book-running lead manager for the IPO.
VMS TMT Limited: IPO Filing for Mainboard Listing with SEBI
VMS TMT Limited, a key player in the Indian steel industry, has recently taken a significant step toward listing on the Indian mainboard. The company, known for manufacturing thermo-mechanically treated (TMT) bars, filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) on October 14, 2024. Here’s a closer look at the company’s plans, the purpose of the IPO, and the current market scenario.
What is VMS TMT Limited and Its Business?
Headquartered in Bhayla Village near Bavla, Ahmedabad, VMS TMT Limited specializes in producing high-quality TMT bars with a production capacity of 2 lakh metric tonnes per annum. TMT bars, widely used in the construction and infrastructure sectors, are known for their durability, flexibility, and resilience against stress, making them essential for modern infrastructure projects.
In the fiscal year 2024, the company achieved an output of 1,60,321 metric tonnes, indicating a strong utilization of its production capacity. With this IPO filing, VMS TMT Limited aims to raise capital that will further its growth plans, including projects to streamline operations, diversify its product line, and reduce operational costs.
IPO Structure: Details of the Equity Issue
The company plans to raise funds exclusively through a fresh issue of up to 1.5 crore equity shares, intending to secure substantial funding to support its expansion. The funds will play a crucial role in driving specific projects aimed at strengthening VMS TMT’s position in the market. A significant portion of the raised amount will focus on energy efficiency, debt reduction, and future operational needs.
Where Will the Funds Go?
VMS TMT Limited has outlined a detailed plan for the proceeds from this IPO. Here’s a breakdown of the proposed fund allocation:
- Capital Expenditure on Solar Power Plant (Rs. 4640.00 lakhs): A key investment includes setting up a 15MW solar power plant. This project aligns with VMS TMT’s goal to decrease power costs, improve sustainability, and achieve backward integration. Solar power will allow the company to become more energy-efficient, cutting down on its reliance on conventional energy sources.
- Working Capital (Rs. 3000.00 lakhs): To support ongoing business requirements and ensure the smooth operation of daily activities, VMS TMT has earmarked Rs. 3000 lakhs for long-term working capital needs.
- Debt Repayment (Rs. 1100.00 lakhs): With total borrowings of Rs. 25,251.83 lakhs as of August 2024, the company intends to use a part of the IPO proceeds to repay or prepay specific loans, reducing its debt burden.
- General Corporate Purposes: The remaining funds from the IPO will be used for miscellaneous corporate expenses. These could cover operational improvements, employee training, and any additional strategic initiatives that arise.
Current Shareholding Structure
As of now, the promoters of VMS TMT Limited hold a significant share in the company, with a stake of 96.28%. The remaining shares, about 3.72%, are held by members of the promoter group and public shareholders, which include Chanakya Opportunities Fund I and Kamdhenu Limited. This strong promoter holding reflects a high level of confidence in the company’s potential for growth.
Strategic Moves for Cost Reduction and Diversification
The company’s expansion plans also include a backward integration project designed to help control production costs. In addition to TMT bars, VMS TMT Limited aims to enter the market for MS (mild steel) pipes, a diversification effort that can tap into other sectors within the construction and industrial markets. The new solar plant is expected to provide long-term savings on energy costs, directly impacting profitability.
TMT Bar Industry in India: Current Trends and Market Potential
The TMT Bars industry in India is experiencing rapid growth, largely due to a surge in demand from construction, infrastructure, and real estate sectors. Government initiatives like ‘Make in India’ and infrastructure projects such as highways, airports, and metro systems are fuelling the demand for high-quality construction materials like TMT bars.
Increasing urbanization and the push for sustainable, high-quality infrastructure are also driving factors in this sector. With crude steel production on the rise and the Indian government focusing on self-reliance, VMS TMT Limited finds itself well-positioned to leverage these developments.
Arihant Capital Markets Limited: Lead Manager for the Issue
To handle the technicalities and manage the public issue, VMS TMT Limited has appointed Arihant Capital Markets Limited as the book-running lead manager. With years of experience in IPO management and capital markets, Arihant Capital is expected to play a vital role in ensuring a smooth process from filing to public listing.
What This IPO Could Mean for VMS TMT Limited
This IPO represents an essential milestone for VMS TMT Limited as it seeks to expand its operations, improve financial stability, and tap into new growth avenues. With the planned solar power project and diversification into MS pipes, the company’s strategy seems focused on sustainable growth. The capital raised will not only help reduce reliance on debt but will also enable it to meet the increasing demand within the TMT bar industry.
By tapping into public markets, VMS TMT Limited is sending a clear message about its growth ambitions and commitment to innovation in a sector that continues to experience rising demand.
