Megatherm Induction SME IPO: Check price band, GMP, financials, risks and listing date

The price band for the offer has been fixed at Rs 100-Rs 108 a share.

The Rs 53.9-crore initial public offering (IPO) of Megatherm Induction Limited opened for subscription on January 29. The IPO, a fresh issue, will close on January 31.

Incorporated in 2010, the company manufactures induction heating and melting products using electrical induction such as induction melting furnaces and induction heating equipment. It is a subsidiary of Megatherm Electronics Private Limited.

Here are the key details of the issue

Issue Size

The issue is entirely a fresh issue of 49.92 lakh shares.

Price Band

The price band for the offer has been fixed at Rs 100-Rs 108 a share.

Lot size

Investors can bid for a minimum of 1,200 equity shares and in multiples thereof.

Financial Performance

For the year ended March 2021, the company reported a revenue of Rs 266 crore, marking an increase of 41.4 percent from the same period the previous year, where it clocked a revenue of Rs 188 crore.

On the profitability side, the company's net profit stood at Rs 14 crore, a massive jump from Rs 1.1 crore during the same period the previous year.

Objectives of the Issue

The company intends to utilise the proceeds of the issue to meet funding capital expenditure towards the construction of a factory shed, and installation of an additional plant and machinery. The rest would be used to meet working capital requirements and for general corporate purposes.

Lead Managers

Hem Securities Limited is the book-running lead manager of the Megatherm Induction IPO, while Bigshare Services Pvt Ltd is the registrar for the issue. The market maker for Megatherm Induction IPO is Hem Finlease.

Key Risks

i.)  The company significantly depends on a few of the raw material suppliers for manufacturing induction heating and melting products
and transformers. Volatility in the supply and pricing of raw materials may hurt business, financial condition, and results of operations.

ii.) A substantial portion of its revenues has been dependent on a few customers. The loss of any major customer would have a material adverse effect on the business, cash flows, results of operations, and financial condition.

iii.) The company has not yet placed orders for machinery and equipment required for the expansion of the manufacturing facility. Any delay in placing the orders or supply of plant and machinery may result in time and cost overruns and may affect profitability.

Grey Market Premium

The grey market premium (GMP) surged to Rs 135, or 125 percent, over the issue price of Rs 108 on January 10. The GMP implies a listing price of Rs 243.

The grey market is an unofficial ecosystem where shares start trading much before the allotment and until the listing day. Investors typically track the grey market premium (GMP), which can fluctuate wildly, to get an indication of the listing price.

Listing Date

Megatherm Induction IPO will likely list on NSE SME with a tentative listing date fixed as Monday, February 5, 2024.