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Super Iron Foundry

• Super Iron Foundry is coming out with an initial public offering (IPO) of 63,01,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share.
• The issue opens on March 11, 2025 and will close on March 13, 2025.
• The shares will be listed on BSE SME Platform.
• The share is priced at 10.80 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Horizon Management.
• Compliance Officer for the issue is Sanchita Rameka.

Profile of the company

Super Iron Foundry manufactures municipal castings, ductile iron pipe fittings, ductile iron automotive castings, ductile iron agricultural castings (rollers and crosskills), railway castings and cast-iron counterweights. The municipal castings are used primarily in roadway construction and these products are used in major construction projects to provide access covers to cover the storm water, sewerage, telecom and other utility networks. The company is engaged in the business of iron and steel foundry; more particularly in the business of casting and manufacturing of access covers and gully grates used in roadway construction. The company’s products are used in major construction projects to provide access covers to cover the storm water, sewerage, telecom and other utility networks. The company manufactures and exports these covers globally, as its products are compliant with international standards like EN124. Applications of other product groups manufactured by the company are in automotive, agriculture equipment and applications where weight balancing and stability are crucial. Its production facility is equipped with modern robotic equipment, ensuring quality standards and control, and follows sustainable practices, making it the preferred choice for its customers from across the globe giving them a one stop shop solution for all their casting needs.

It mainly exports its products to European and Middle Eastern markets. In Europe, it sells through distributors, wherein the company does subcontract manufacturing for the distributors under their brand. The orders for the European business are fairly stable year on year basis, with exception during the period prior to snowfall in European countries, which generally lasts from July till September. Its Middle East business is driven through agents who work in mega projects on behalf of the company and it typically carries minimal stocks and supply to the projects directly. The company has successfully given design solutions and castings to various prestigious projects in Middle East like New Hamad Port Project (Qatar), New Turkish Air Base (Qatar), Airport expansion project in Oman, Dubai South developmental project, Lusail FIFA Stadium project, Al Barwah project in Doha to name a few. There is no seasonality in Middle East business except for the month of Ramadan, where construction activities take a dip.

Its manufacturing facility is ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certified for quality management system, occupational health and safety management system and environmental management system to manufacture and supply ductile, grey iron casting, SGCI inserts applicable to municipal, sanitary, automotive, agriculture, waterworks, railways and electrical transmission and distribution. It also has Kitemark certificate issued by BSI, United Kingdom for gully tops and manhole tops for vehicular and pedestrian areas. It combines modern manufacturing technology and engineering expertise with cost efficient processes, to deliver quality products at competitive prices. Its manufacturing operations are strengthened by its technical capabilities, infrastructure, and process knowledge.

Proceed is being used for:

• Funding of the working capital requirements of the company
• Repayment/pre-payment, in full or in part, of certain borrowings availed by the company
• General corporate purposes

Industry Overview

Traditionally, the backbone of any manufacturing industry is foundry and casting and acts as the focus input area for major sectors in any economy’s major support sectors which facilitate economic growth of the nation such as automobile, industrial machinery, power, construction & mining equipment, railways, road networks, bridges and general engineering. Historically, the Indian foundry and casting industry has been prominent and can be evidenced from the intricate castings which has been obtained from historical sites linked to the Indus Valley Civilization. Mass production of industrial castings was started in India only a hundred and fifty years back. The second half of the last century saw the emergence of the industrial mass production of castings, a direct result of the growth of the engineering industry, centred at Calcutta. As a result, many foundry units were established in the eastern part of the country, particularly during the late nineteenth century, to produce industrial castings required by Indian railways, and the growing textile, jute, and allied industries as well as for manufacture of simple products like manhole covers, sanitary fittings and others.

The foundry industry made rapid progress in the post-independence years. This could be directly related to the industrialization programme launched through India's five-year plans. Successive plans were aimed at expanding and diversifying India's manufacturing base. There were massive outlays made to develop infrastructural facilities and rapidly expand engineering industries. This, naturally triggered the growth of Indian foundry industry which graduated into the manufacture of complex and sophisticated castings required by power, iron and steel, fertilizer, chemical and a host of other industries. With its traditional skills, reinforced by modern technology, the industry has developed as a blend of the old and the new. In the modern world, the Indian forging and casting industry has carved out a niche for itself and is well recognised for its technical prowess. The Indian foundry and casting industry has the capability to cast a variety of raw materials like carbon steel, alloy steel, stainless steel, super alloy, titanium, aluminium, grey iron, non-ferrous, ductile iron casting, malleable casting and so forth, as per the requirements of user industry.

Traditionally, the foundry industry in India can be found to be geographically located around clusters are located in Batala, Jalandhar, Ludhiana, Agra, Pune, Kolhapur, Sholapur, Rajkot, Mumbai, Ahmedabad, Belgaum, Coimbatore, Chennai, Hyderabad, Howrah, Kolkata, Indore, Chennai, Ahmedabad, Faridabad, Gurgaon etc. Each cluster is known for its product and typically, each foundry cluster is known for catering to some specific end-use markets. To illustrate, the Coimbatore cluster is famous for pump-sets castings, the Kolhapur and the Belgaum clusters are known for automotive castings and the Rajkot cluster for diesel engine castings. The clusters centered in West Bengal are specifically renowned for manhole and sanitary castings. It is estimated that the share of manufacturing in the GDP will increase from the current 15% to 25% and create 100 million additional jobs in next 10 years. Since all engineering & other sectors use metal castings in their manufacturing, the role of foundry industry to support manufacturing is very vital. It is not possible to achieve the above goal without the sustainable corresponding growth of the foundry sector.

Pros and strengths

Diversified product mix with strong focus on customised products: The company has a diverse product portfolio of over 500 products supported by its ability to make customised products, which demonstrates its capability as an emerging supplier of a diverse range of products and positions it as a strategic and preferred supplier to its customers. The company’s versatile product portfolio covers all grades of mild steel, and spheroidal graphite cast iron. It derives its revenue by supplying products for usage in multiple industries such as construction, infrastructure, railways, agriculture, telecom and power industry amongst others. It also constantly endeavours to develop its product portfolio as per evolving requirements of its customers.

Design, quality assurance and quality control of its products: At the core of its operations is an unwavering commitment to specified design, quality assurance and control. Design, quality assurance and quality control are critical aspects of its manufacturing process as more than 95% of its products are exported to European and Middle-Eastern countries which are known for their quality consciousness. Its customers demand rigorous quality checks at various stages before dispatch, and it has established dedicated design, quality assurance and control teams to meet these demands. Led by experienced technicians, production teams ensure that its products are designed as per customers’ specifications, undergo meticulous inspections to prevent rejections and maintain specified quality standards. Its quality control measures extend from thorough checks of raw materials to the final inspection of finished goods. An in-house laboratory equipped with automatic/mechanical machines, operated by skilled personnel, supplements these efforts.

Cost effective production and timely fulfilment of orders: Timely fulfilment of the work orders is a prerequisite in its industry. It has taken various steps to ensure adherence to timely fulfilment of orders and to achieve greater cost efficiency at its existing manufacturing unit. These steps include sourcing of quality raw materials, quality control, smooth labour relations, use of an efficient production system and strong relationship with raw material suppliers. These steps enable it to meet large and varied orders in a timely manner.

Risks and concerns

Maximum revenue comes from limited customers: The company has garnered 96.70%, 89.63% and 96.43% of its revenue from top ten customers in FY24, FY23 and FY22 respectively. The composition of revenue generated from these customers might change as it continues to add new customers in the normal course of business. Its revenues may be adversely affected if there is any adverse development with such customers, including as a result of a dispute with or its disqualification by such major customers, which may result in significant reduction in its orders from such customers, and thereby decline in its revenue, cash flows and liquidity. Further, if its customers are able to fulfil their requirements through captive or in house manufacturing or any of its existing or new competitors providing products with better quality, or cheaper cost, it may lose significant portion of its business and revenue.

Geographical constrain: The company operates its foundry, that is, its cast and ductile iron foundry, at its manufacturing facility located at Durgapur, District Burdwan, West Bengal. It is dependent on its manufacturing facility for the production of its products. Any events impacting state of West Bengal, particularly Burdwan district, may disrupt its production and operations. Further, its manufacturing facility is subject to operating risks, such as the breakdown or failure of equipment, disruption in power supply or processes, severe weather conditions, performance below expected levels of efficiency, obsolescence, labour disputes, natural disasters, industrial accidents, infectious diseases (such as Covid-19 pandemic), political instability, the need to comply with the directives of relevant Government authorities and the requirement to obtain certain material approvals to operate its manufacturing facility. While the company seeks to ensure a continuous supply of its products to its customers, its customer relationships, business and financial results may be adversely affected by any disruption to the operations of its foundries and its major equipment.

Business is capital intensive: The company’s business requires significant amount of working capital primarily since a considerable amount of time passes between purchase of raw materials and collection of receivables post sales to customers. This requires it to obtain financing through various means. As on December 31, 2024, its total secured borrowings stood at Rs 9,973.08 lakh. It may incur additional indebtedness in the future. Additional debt financing could increase its interest costs and require it to comply with additional restrictive covenants in its financing agreements. Additional equity financing could dilute its earnings per Equity Share and investors interest in the company, and could adversely impact its Equity Share price.

Outlook

Super Iron Foundry manufactures municipal castings, ductile iron pipe fittings, automotive castings, agricultural castings (rollers and crosskills), railway castings, and cast-iron counterweights. The modern robotic production facility ensures quality and sustainability, making it the preferred choice for customers seeking a one-stop shop for all casting needs. The company is exporting to 38 countries, including the USA, Canada, UK, Germany, and some Middle Eastern Nations. On the concern side, a significant majority of its revenues from operations is derived from a limited number of customers. Moreover, its manufacturing facility is located in Durgapur, District Burdwan, West Bengal. Any disruption, breakdown or shutdown of its manufacturing facility may have a material adverse effect on its business, financial condition, results of operations and cash flow.

The company is coming out with an IPO of 63,01,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share to mobilize Rs 68.05 crore. On performance front, the company has reported a rise of 24.06% in its total revenue to Rs 15,482.99 lakh in FY24 as compared to Rs 12,480.27 lakh in the fiscal year ended March 31, 2023. The increase in revenue was on account of increase in export of its products with the revival of economies in Europe and Middle-East post COVID-19 and de-escalation of tension between Russia and Ukraine. Moreover, net profit has increased 207.07% from Rs 128.33 lakh in the fiscal year ended March 31, 2023 to Rs 394.07 lakh in the fiscal year ended March 31, 2024.

The company is engaged in designing and manufacturing of products for sale to its predominantly global customers. It is focused on enhancing its presence in the geographies where it already operates by strengthening relationships with existing customers and expanding in the countries and projects in the Middle East. Further, the company is also in the process of participating in the bid to supply its products for several mega projects in Saudi Arabia such as SIDRA and WAFRA package of ROSHN project in Riyadh and Murcia Housing Project, to name a few. This will also increase its market share in its existing market. Further, it currently has negligible domestic presence in India; however, the Indian market offers various opportunities in infrastructure and railways, and product/market diversification which it intends to seize and increase its market reach domestically and explore untapped markets and segments as part of its strategy to mitigate market risks and widen growth prospects.