From Gujarat’s Heartland to Markets – VMS TMT Limited IPO with Strong Brand Backing

About the Issue:  

VMS TMT Ltd. IPO is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.

Objects of the Issue  

The primary objective of the IPO is to utilize the net proceeds for the repayment or prepayment, either in full or in part, of certain borrowings availed by the company, amounting to Rs 115 crore. This step is aimed at strengthening the balance sheet by reducing debt obligations. Additionally, a portion of the proceeds will be allocated towards general corporate purposes, providing the company with financial flexibility to support its operational and strategic needs.

Promoter holding 

The promoters of the company include Varun Manojkumar Jain, Rishabh Sunil Singhi, Manojkumar Jain, and Sangeeta Jain. Prior to the IPO, the promoter group collectively held 96.28 per cent of the company’s shareholding. Following the issue, their stake will be reduced to 67.19 per cent, reflecting dilution of holdings due to the public offering while still maintaining majority control.

Company Profile  

Company is engaged in the manufacturing of Thermo-Mechanically Treated (TMT) Bars at its facility in Bhayla Village, Ahmedabad, Gujarat. Along with TMT Bars, the company also deals in allied steel products such as billets, scrap, and binding wires. Its products are marketed under the “Kamdhenu Brand” through a retail license agreement, giving it strong brand visibility in select regions of Gujarat.

The company’s operations are largely concentrated within Gujarat, supported by its retail distribution network. It also caters to buyers in other Indian states for certain allied products, while exports remain minimal. With its focus on TMT Bars and association with an established brand, VMS TMT Limited holds a strong position in its core market, though its growth is closely tied to regional demand dynamics.

Financials 

The company’s financial performance over the past three fiscal years reflects a mixed trend. Total income declined from Rs. 882.06 crore in FY23 to Rs. 873.17 crore in FY24, a marginal drop of 1 percent, and further to Rs. 771.41 crore in FY25, representing a decline of 11.7 percent, highlighting sustained pressure on topline growth. The decline in FY24 was primarily driven by a sharp fall in export sales, which were largely event-based and consisted of deemed exports to Special Economic Zones (SEZs), lacking recurring demand. In FY25, the revenue contraction was attributed to a combination of factors, including a reduction in TMT bar sales volume, a decline in average realisations, and the discontinuation of the company’s underperforming MS Pipes facility in Bhavnagar, Gujarat.

Despite the revenue pressure, the company reported strong profitability improvements. Profit after tax increased significantly from Rs. 4.2 crore in FY23 to Rs. 13.47 crore in FY24 and further to Rs. 15.42 crore in FY25. EBITDA also grew consistently over the period, reflecting improved operating efficiency. On the balance sheet front, total assets and net worth expanded substantially, supported by internal accruals. However, borrowings also increased materially, raising concerns around the company’s financial leverage and the importance of effective debt management moving forward.

Valuation & Returns 

Company demonstrates a balanced valuation profile with a Price-to-Earnings (P/E) ratio of 14.3, which is in line with industry peers, indicating that the stock is fairly valued by the market relative to its earnings. More importantly, the company has posted a strong Return on Net Worth (RoNW) of 20.14 per cent, reflecting efficient utilization of shareholder equity and robust profitability. This high RoNW sets VMS apart from several competitors, suggesting that the company is not only profitable but also generating healthy returns on its capital. The combination of a reasonable P/E and strong RoNW positions VMS TMT as a fundamentally sound candidate in the steel and TMT bars segment, supporting a positive outlook for its IPO.

Outlook

Company presents a growth-oriented outlook backed by strategic investments in backward integration, renewable energy, and capacity expansion. With a well-established manufacturing setup and a 200,000 MT annual capacity, the company is positioned to benefit from increasing domestic demand for TMT bars, particularly in Gujarat. Its integration of a Continuous Casting Machine and the upcoming 15 MW solar plant demonstrates a focus on operational efficiency and cost optimization. Additionally, the company’s strong CAGR in EBITDA and PAT from FY23 to FY25 underscores improving financial performance.

However, companies’ outlook is tempered by significant risks. The company remains heavily reliant on Gujarat for over 98 per cent of its revenue, exposing it to regional risks. Its exclusive dependence on the Kamdhenu brand under a terminable agreement.

Overall, companies’ strategic initiatives position it well for regional expansion and margin improvement, long-term success will depend on its ability to diversify geographically, strengthen its brand, and improve cash flow stability.

Considering the issue details and the valuation, we recommend subscribing to this IPO.