Ankit Metal

Ankit Metal &amp; Power has entered the capital market on 18th June 07 with a public issue of 1.19 crore equity shares of Rs.10 each in the band of Rs.30 to Rs.36 per share. It seems, the old days are returning back, where same promoter/group is repeatedly tapping the capital market to finance their small size projects, broadly in the similar line of business. Impex Ferro and Rohit Ferro are the two companies of the group having gone public in December 04 and March 06 with at par and Rs.30 issue, respectively for both the companies. Share of Impex Ferro is ruling at Rs.12 and Rohit Ferro at Rs.30. The company commenced operations at its 350 TPA sponge iron plant from October 2005 while Billets casting plant of 65,140 TPA started in January 2006. The company is now setting up 1 lakh TPA rolling mill and 12.5 MW captive power plants schedule to start by July 2007. The total cost of project is estimated at Rs.135 crores,which is being financed by Term loan of Rs.65.15 crores and remaining from equity issue. The company is trying to set up an integrated project with backward-forward complete value chain and may finally have to go for captive source of iron ore and coal. The existing production has mismatch in downstream products. 350 TPA of sponge iron can produce 2 lakh TPA of billets as 1 mt of billets need 540 kg of sponge iron and 540 kg of M.S. scrap or pig iron or cast iron. But billet plant of only 64,140 MT per annum is being installed. Here excess production of 70,000 TPA of sponge iron needs to be sold. Similarly, rolling mill of 1lakh TPA is being set up which will source its 60% requirement of billets in-house while 40% would be sourced from outside. Since this industry is highly working capital intensive, the company may have to sell its sponge iron on credit and buy billets on cash basis. A high working capital - low margin business. For FY 07, the company had total income of Rs.215 crores of which Rs.125 crore is trading income. Even in FY 06, which was its first year of commercial operations, had an income of Rs.67 crores with trading income contributing Rs.43 crore. Since major volume is from trading, EBITDA margin is low at about 11% to 12% in these years. The debt of the company at 31st March 07 is also quite high at Rs.109 crores with net worth of Rs.52 crores. The net current assets were at Rs.57 crores, which is in excess of three months topline as trading activity is lesser working capital intensive and manufacturing has longer cycle. Vikas Metal, MSP Steel &amp; Power and Shri Ramrupai Balaji Steels other similar companies have disappointed investors and this company is sure to be on the same line. Hence, investment is not advised at all.

Ankit Metal

Ankit Metal

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