R.K. Steel Manufacturing Company Limited IPO

01At a glance

What the company does: makes welded steel tubes and pipes, pre-galvanised, hot-dip galvanised, hot-rolled and cold-rolled, and galvanised, cold-rolled and pickled coils from hot-rolled coil, at one plant in Perundurai, Tamil Nadu, over 19 years (DRHP p.29, DRHP p.31). The D&B report it cites says it is one of the few southern companies with tandem cold-rolling mills (DRHP p.29).

Who pays it: mainly traders who distribute its products; the top ten customers were 34.78% of FY25 revenue (DRHP p.42). Karnataka, Kerala, Tamil Nadu and Telangana provided 98.86% of FY25 revenue, Kerala alone 44.13% (DRHP p.41).

Why it is raising money: ₹760.00 million for working capital, ₹432.30 million to repay borrowings, and the rest for general purposes (DRHP p.30). Converted from ₹ lakh.

How fast it has grown: revenue of ₹8,474 million in FY23, ₹10,222 million in FY24 and ₹11,478 million in FY25 (DRHP p.31).

The one thing to understand: a high-volume, very-low-margin business with rising leverage. The document itself says EBITDA and profit fell in FY25 despite higher revenue and that its margins trail listed peers; interest cover fell from 3.01 to 1.60 (DRHP p.31, DRHP p.33).

02The business, in plain words

A steel-pipe maker buys hot-rolled coil from steel mills, cold-rolls, galvanises and welds it into pipes and tubes, and sells them largely through traders; its margin is the small spread between coil cost and finished-pipe price.

A hardware trader in Kerala orders a truckload of galvanised pipes → R.K. Steel makes them at Perundurai from hot-rolled coil and zinc → it delivers to the trader → the trader supplies its own customers.

The main raw materials are hot-rolled coil and zinc, bought on purchase orders without long-term contracts (DRHP p.41).

Earnings equation: Profit ≈ tonnes sold × (pipe price − coil and zinc cost − conversion) − interest. EBITDA margin was 4.21% in FY25 (DRHP p.31).

03Where the money comes from

Source: DRHP p.41, DRHP p.42.

04The growth record

Source: DRHP p.31. Converted from ₹ lakh.

Revenue grew at a compound 16.4% a year from FY23 to FY25, while profit after tax fell at a compound 25.9% a year (our arithmetic, DRHP p.31). Trade receivable days were 36 in FY23, 31 in FY24 and 40 in FY25 (DRHP p.128).

05What the growth is made of

Volume at thinner margins. Revenue grew 12.29% in FY25, while EBITDA fell 19% and profit 52% (DRHP p.31, our arithmetic). Working-capital days rose from 86 to 104 (DRHP p.32).

06Earnings quality

Operating cash flow was negative in FY23 and FY25, a combined ₹402.92 million outflow over the three years against ₹534.92 million of profit (our arithmetic, DRHP p.31). Return on equity fell from 27.32% in FY23 to 9.46% in FY25 (DRHP p.31). The statutory auditor made no qualifications not given effect in the restated accounts (DRHP p.32). Other income was ₹59.37 million in FY25 against profit before tax of ₹146.79 million, or 40.4% of it, converted from ₹ lakh (our arithmetic, DRHP p.88).

07The balance sheet

Source: DRHP p.31. Converted from ₹ lakh.

Directors and their relatives lent the company ₹134.69 million in FY24 and ₹50.88 million in FY25, including from Abhishek Bhalotia and Pramod Kumar Bhalotia (DRHP p.34, our arithmetic). Converted from ₹ lakh.

08What the money is for

Source: DRHP p.30. Converted from ₹ lakh.

09Who is selling

Nobody. The issue is a fresh issue only, of up to 20,000,000 shares, under Regulation 6(1) (DRHP p.29).

10Promoters

The promoters are Pramod Kumar Bhalotia, Abhishek Bhalotia, Beena Bhalotia and Mayank Marketing Private Limited (DRHP p.29). One civil proceeding, amount not ascertainable, and seven small tax matters are pending against the promoters (DRHP p.33).

11Who already owns it

Source: DRHP p.30. Promoters and promoter group hold 97.84% (DRHP p.30).

12What changed just before the IPO

• Margins: EBITDA margin down to 4.21% in FY25 (DRHP p.31).
• Cash: operating cash outflow of ₹446 million in FY25 (DRHP p.31).
• Leverage: debt to equity up to 2.91 (DRHP p.31).

The company issued bonus shares at 6 for every 1 held in September 2024 and at 2 for every 1 held in December 2024 (DRHP p.105, DRHP p.106). The last allotment of shares for cash was a rights issue at ₹289 a share in March 2023 (DRHP p.104). The company does not propose a pre-IPO placement (DRHP p.37). R R More & Co ended its term as statutory auditor on September 30, 2024 and Mahesh C Solanki & Co was appointed the same day (DRHP p.94). The company converted into a public limited company, with a fresh certificate of incorporation dated January 9, 2024 (DRHP p.2).

13Capacity and expansion

One manufacturing facility at Perundurai, Tamil Nadu (DRHP p.33). The document lists under-utilisation of capacity among its top risks; installed capacity figures rest on a chartered engineer's report (DRHP p.33, DRHP p.74). The proceeds fund working capital and debt repayment, not capacity (DRHP p.30).

14Market size and industry structure

The D&B report cited in the offer document describes the Indian steel industry and its long and flat products (DRHP p.29). The summary read gives no market figures for pipes.

15Competitive position

What the document claims, and what it rests on:

• Tandem cold-rolling mills, which few southern producers have, citing D&B (DRHP p.29).
• A range of pipes and coils from one integrated plant (DRHP p.29).

Against that: margins below listed peers, dependence on four states and on traders, reliance on ten suppliers, and one plant (DRHP p.33).

16Peers the company named

The document gives the listed peers' P/E range as 18.33 (Surya Roshni) to 30.50 (Hi-Tech Pipes), average 25.48 (DRHP p.134). The full peer table was not read for this study.

No P/E is possible for the company until a price band is set.

17Risks, in plain words

• Southern states. 99% of revenue from four states (DRHP p.41).
• Suppliers. Ten suppliers for most raw materials (DRHP p.33).
• One plant. All production at Perundurai (DRHP p.33).
• Thin margins. A high-volume, low-margin business (DRHP p.33).
• Working capital. High needs and rising debt (DRHP p.33).

18Litigation and regulatory matters

Source: DRHP p.32, DRHP p.33. Converted from ₹ lakh.

19Related-party transactions

Loans from directors and relatives are shown in section 06. KPR Tubes LLP is a promoter-group entity (DRHP p.34). The rest was not read in detail for this study.

20What the offer document does not say

In the sections read for this study, the document does not give:

• Total borrowings in rupees, in the summary pages read, only the ratio to equity.
• Why margins fell in FY25, in the pages read.
• What KPR Tubes LLP does, and whether it competes, in the pages read.
• Plant capacity and utilisation figures, in the pages read.
• The price band, lot size or issue dates, which is normal at DRHP stage.

21Five questions for management

1. What caused EBITDA to fall 19% in FY25 on higher revenue?
2. How many days of credit do traders get, and how much is overdue?
3. What does KPR Tubes LLP make, and does it trade with the company?
4. How much capacity is used at Perundurai?
5. What interest rate do directors charge on their loans to the company?

1Sources and cited facts

This study was read from 1 document the company filed. The 56 figures it cites are listed under the document each came from, with the page and the sentence as printed.