Auto Recycling Systems Limited IPO

01At a glance

What the company does: melts aluminium scrap in two furnaces at Palwal, Haryana and casts it into alloy ingots of grades such as ADC 12, ALDC-3 and ALSI12 Fe for die casters and other makers in the automotive, electrical and engineering trades; it also trades aluminium, copper and other metal scrap (DRHP p.150, DRHP p.151).

Who pays it: business customers, whose names the document withholds (DRHP p.155). The largest customer was 24.62% of FY26 revenue, the top five 75.02% and the top ten 88.81% (DRHP p.20). Haryana was 70.76% of FY26 revenue and Rajasthan 24.86% (DRHP p.22). A bank facility names Samvardhana Motherson Auto Component (P) Ltd, CMR Green Technologies Ltd and Sandhar Technologies Ltd as approved buyers whose invoices it finances (DRHP p.252).

Why it is raising money: ₹63.5 crore of the fresh issue is for working capital, ₹7.7 crore for plant and machinery and ₹1.0 crore for a new factory shed; the general corporate purposes amount is blank (DRHP p.79). There is no offer for sale (DRHP p.1).

How fast it has grown: revenue from operations from ₹52.7 crore in FY24 to ₹256.7 crore in FY26, about 120.7% a year, and profit after tax from ₹0.29 crore to ₹11.2 crore, about 525.4% a year (our arithmetic, DRHP p.49). FY24 was the year manufacturing began (DRHP p.89).

The one thing to understand: the business has grown on borrowed working capital. Cash from operations was −₹9.6 crore, −₹6.1 crore and −₹14.8 crore in FY24 to FY26 as stock and money owed by customers rose (DRHP p.50). Borrowings were ₹44.2 crore at March 31, 2026, 94.14% of it repayable on demand (DRHP p.48, DRHP p.253). A GST order of ₹9.3 crore, which the company disputes, sits as a contingent liability (DRHP p.51).

02The business, in plain words

What Auto Recycling Systems does

The company was incorporated on December 24, 2020 as Auto Recycling Systems Private Limited and became a public company with a fresh certificate dated June 16, 2026 (DRHP p.2, DRHP p.183). Its registered office is in Karol Bagh, New Delhi, and its only factory is at Baghola, Palwal, Haryana (DRHP p.166). The company says it installed its first furnace and began manufacturing in FY24 and added a second furnace in December 2024; before that it traded materials, with FY23 revenue of ₹5.94 crore (DRHP p.89, DRHP p.262).

The steps, as the document describes them (DRHP p.157 to DRHP p.161):

• Scrap in: aluminium scrap, bike and car rim scrap, brake shoe scrap, zorba and alloying metals such as silicon and copper are inspected and sorted by grade (DRHP p.158).
• Batching and melting: a charge mix is worked out for the grade the customer wants and melted at about 600°C to 800°C in Skelner furnaces of 6 and 8 tonnes a batch (DRHP p.158, DRHP p.164).
• Cleaning the metal: fluxing, drossing, degassing with nitrogen or argon, and filtering through a 400 mesh screen (DRHP p.158, DRHP p.159).
• Casting and checks: the metal is poured into moulds, skimmed, rejected ingots go back to the furnace, good ingots are coded by batch and colour and tested on a spectrometer (DRHP p.159, DRHP p.160).
• Dispatch: by hired trucks; the company has no transport of its own (DRHP p.161, DRHP p.34).

A die caster or engineering firm places an order for a grade of ingot → the company buys and sorts scrap and alloying metals → it melts, refines and casts them into ingots of that composition → it is paid the ingot price; separately it resells scrap it buys and the dross its furnaces throw off (DRHP p.151, DRHP p.172).

The factory land of 50,366.25 sq ft is owned, bought for ₹4.01 crore; the registered office of 750 sq ft is rented from Sarthak International Limited, a promoter group company, for ₹7,000 a month (DRHP p.174). The company had 42 permanent employees at March 31, 2026 and hires contract labour for production (DRHP p.171, DRHP p.33). It holds ISO 14001:2015 and ISO 45001:2018 certificates; an IATF 16949 automotive certificate has been applied for (DRHP p.278, DRHP p.279).

Earnings equation: Revenue = tonnes of ingots sold × price per tonne + scrap traded. The document gives tonnes of capacity used, 13,322 tonnes in FY26, but not tonnes sold or prices (DRHP p.165), so the equation can only be approached through capacity used (see section 04).

03Where the money comes from

By activity and product (₹ crore):

Source: DRHP p.152, DRHP p.153, converted from ₹ lakh. Manufacturing was 43.00% of revenue in FY24, 78.91% in FY25 and 87.26% in FY26 (DRHP p.152). The other grades in FY26 were JED029 M1 ₹11.5 crore, ALSI12 Fe ₹7.5 crore, A380 ₹1.3 crore and JED029 M3 ₹0.34 crore (DRHP p.152, DRHP p.153). In trading, aluminium scrap was ₹19.2 crore and copper scrap ₹9.9 crore in FY26 (DRHP p.153).

By state, FY26 share of revenue: Haryana 70.76%, Rajasthan 24.86%, Karnataka 1.49%, Uttar Pradesh 1.29%, Delhi 1.02% (DRHP p.153). Rajasthan was 0.89% in FY24 and Uttar Pradesh 22.03% (DRHP p.153). All sales are in India; there are no exports (DRHP p.237).

By end use, the document says demand comes from the automotive, electrical and engineering industries and that a significant portion comes from automotive customers making engine parts, transmission housings and wheels (DRHP p.165, DRHP p.25). It gives no split of revenue by end use.

Auto Recycling Systems customers: how concentrated the revenue is

Source: DRHP p.20, DRHP p.155. Revenue does depend on a few customers: in FY26 the four largest were 24.62%, 22.62%, 11.86% and 10.86% of revenue, together about 70.0% (our arithmetic, DRHP p.155). Names are withheld "to preserve confidentiality" (DRHP p.155). The company describes its rising receivable days as a deliberate choice to give longer credit to these high volume customers (DRHP p.90).

On the supply side, the largest supplier was 24.36% of FY26 purchases and the top ten 70.45%, against 30.75% and 83.94% in FY24 (DRHP p.20). Imported raw material was 3.95% of purchases in FY26 against 37.10% in FY24 (DRHP p.27). Punjab, Delhi and Haryana supplied 35.76%, 33.30% and 24.11% of FY26 raw material (DRHP p.170).

04The growth record

Auto Recycling Systems financials: revenue, profit and margins

Source: DRHP p.48, DRHP p.49, DRHP p.50, DRHP p.99, converted from ₹ lakh. Revenue from operations went from ₹52.7 crore in FY24 to ₹256.7 crore in FY26 and profit after tax from ₹0.29 crore to ₹11.2 crore (DRHP p.49). The company's EBITDA adds finance cost and depreciation to profit before tax and takes out other income (DRHP p.99).

Our arithmetic over FY24 to FY26: revenue grew about 120.7% a year and profit after tax about 525.4% a year (our arithmetic, DRHP p.49); EBITDA grew about 239.1% a year (our arithmetic, DRHP p.99). EBITDA margin moved from 2.65% to 6.25%, up 360 basis points, so from 2.7% to 6.3% rounded (DRHP p.99). Revenue rose 173.72% in FY25 and 77.98% in FY26 (DRHP p.262, DRHP p.260).

The year ends on March 31 throughout. Restatement moved profit: FY24 profit after tax was ₹0.78 crore audited and ₹0.29 crore restated, mainly because ₹0.76 crore of grant income was reversed; FY25 was ₹6.0 crore audited and ₹6.4 crore restated (DRHP p.222). The auditors gave unmodified opinions on all three years (DRHP p.212). The abridged prospectus prints RoCE of 22.30% and debt to equity of 1.68 for FY26, the DRHP 22.17% and 1.70 (AP p.7, DRHP p.99).

What sits around the record:

• Cash: operating cash flow was −₹14.8 crore in FY26, −₹6.1 crore in FY25 and −₹9.6 crore in FY24 (DRHP p.50). In FY26 inventories absorbed ₹17.6 crore and trade receivables ₹15.2 crore (DRHP p.50).
• Other income was ₹0.88 crore in FY26, about 6.4% of profit before tax, and included ₹0.80 crore of rent from a promoter group company (our arithmetic, DRHP p.49, DRHP p.233).
• Debt: borrowings were ₹44.2 crore at March 31, 2026 (DRHP p.48); debt to equity 1.70, so 1.7× (DRHP p.99); net of ₹1.9 crore of cash and bank balances, about 2.6× FY26 EBITDA (our arithmetic, DRHP p.48, DRHP p.49). Return on capital employed was 22.17%, so 22.2% rounded (DRHP p.99). 94.14% of borrowings, so 94.1%, were repayable on demand (DRHP p.253). Finance cost was ₹2.7 crore in FY26 (DRHP p.49).
• Promoter loans: unsecured loans from the promoters and relatives were ₹5.2 crore at March 31, 2026, at nil interest (DRHP p.253).
• Customers and states: the largest customer was 24.62% of FY26 revenue, so 24.6% rounded; the top five 75.02%, so 75.0%; the top ten 88.81%, so 88.8% (DRHP p.20). Haryana was 70.76% of FY26 revenue, so 70.8% (DRHP p.22). The largest supplier was 24.36% of FY26 purchases, so 24.4% (DRHP p.20).
• Capacity: capacity utilisation was 87.64% in FY26, so 87.6% rounded (DRHP p.165).
• Related party purchases: purchases from Indo Australian Enterprise Pty Ltd, a promoter group company, were ₹5.0 crore in FY26 (DRHP p.53).
• Cases: no cases of any kind against the promoters (DRHP p.273).
• Use of the issue: the objects named in rupees add to ₹72.3 crore, of which ₹63.5 crore is working capital (our arithmetic, DRHP p.79).

05What the growth is made of

Revenue from operations rose ₹204.0 crore from FY24 to FY26 (our arithmetic, DRHP p.49). By source (our arithmetic, DRHP p.152, DRHP p.153):

• ADC 12 ingots: up ₹117.9 crore, from ₹5.9 crore to ₹123.8 crore.
• ALDC-3 ingots: up ₹63.0 crore, from ₹16.5 crore to ₹79.5 crore.
• Other ingot grades: up ₹20.4 crore, from ₹0.3 crore to ₹20.7 crore.
• Scrap trading: up ₹2.7 crore, from ₹30.0 crore to ₹32.7 crore.

Volume: capacity used was 4,520 tonnes in FY24, 6,037 tonnes in FY25 and 13,322 tonnes in FY26, against installed capacity of 7,200, 9,900 and 15,200 tonnes (DRHP p.165). The management discussion says the first furnace ran at about 63% in FY24 and 73% in FY25, and the second, installed in December 2024, at about 29% in the part of FY25 it ran (DRHP p.263).

Realisation, read from capacity used: manufacturing revenue per tonne of capacity used was about ₹50,100 in FY24, ₹1.89 lakh in FY25 and ₹1.68 lakh in FY26 (our arithmetic, DRHP p.152, DRHP p.165). This is metal processed, not tonnes sold, and finished stock rose from ₹2.8 crore to ₹15.3 crore over the period (DRHP p.230), so the arithmetic does not separate price, mix and timing. The FY24 figure is far below the later years, and the document gives nothing that explains it.

The document gives no tonnes sold and no prices, so the increase cannot be split into volume and price. That is the finding. The management discussion puts FY26 growth down to higher volumes from existing and new customers, higher capacity utilisation and more business from top customers (DRHP p.260, DRHP p.261), and FY25 growth to the start of manufacturing, the second furnace and a larger bank credit line, an ICICI Bank cash credit of ₹21.1 crore raised to ₹35.0 crore (DRHP p.262, DRHP p.263). The cost of goods consumed was 92.66% of revenue in FY26 and 94.19% in FY25 (DRHP p.261).

06Earnings quality

The item that needs explaining is cash. Inventories went from ₹6.7 crore at March 2024 to ₹33.8 crore at March 2026 and trade receivables from ₹4.4 crore to ₹28.9 crore, while trade payables reached only ₹8.6 crore (DRHP p.48). The gap was filled by borrowing: short term borrowings rose from ₹12.4 crore to ₹36.4 crore (DRHP p.48). The company's own working capital gap was ₹53.9 crore at March 2026 against ₹11.6 crore at March 2024 (DRHP p.88).

The second item is restatement. FY24 profit fell from ₹0.78 crore audited to ₹0.29 crore restated after grant income of ₹0.76 crore was found to have been booked as income (DRHP p.222). Other corrections covered gratuity, depreciation, insurance, CSR, foreign exchange and tax (DRHP p.222). The company's FY24 profit before tax of ₹0.37 crore was more than half other income, including ₹0.12 crore of rent from a promoter group company (DRHP p.49, DRHP p.233).

The third is GST. An order disallows input tax credit the company took in FY24-25 on purchases from M/s Ashoka Trading Company, which the department says was a non-existent entity; the demand is tax ₹4.37 crore, interest ₹0.52 crore and penalty ₹4.37 crore, ₹9.27 crore in all (DRHP p.272, DRHP p.273). The company has appealed and made no provision (DRHP p.51). Read from the filing: the disputed tax alone is about 69% of FY25 profit after tax of ₹6.4 crore (our arithmetic, DRHP p.272, DRHP p.49).

07The balance sheet

At March 31, 2026 total assets were ₹83.1 crore: property, plant and equipment ₹14.2 crore, inventories ₹33.8 crore, trade receivables ₹28.9 crore, short term loans and advances ₹4.1 crore, cash and bank ₹1.9 crore and security deposits ₹0.30 crore (DRHP p.48). Against them: long term borrowings ₹7.4 crore, short term borrowings ₹36.4 crore, trade payables ₹8.6 crore, other liabilities and provisions ₹4.6 crore and net worth ₹26.0 crore (DRHP p.48).

Borrowings of ₹44.2 crore at March 31, 2026 were (DRHP p.250 to DRHP p.253):

The bank facilities are secured on all movable fixed assets and current assets, a mortgage on the factory and a mortgage on a residence at Greater Kailash owned by Ranjana Malhotra, with personal guarantees of ₹39.50 crore each from Sanjeev Malhotra and Sarthak Malhotra and ₹4.26 crore from Ranjana Malhotra (DRHP p.225). The Kotak cash credit is valid or reviewable up to October 15, 2026 (DRHP p.225). The largest vehicle loan, ₹0.96 crore, is for a BMW X7 taken in January 2026 (DRHP p.251).

Source: DRHP p.268, DRHP p.79. The capitalisation statement leaves the post-issue column blank (DRHP p.268). Contingent liabilities were ₹9.3 crore at March 31, 2026, all the disputed GST demand; there are no capital commitments (DRHP p.51). The company owed ₹3.3 crore to micro and small suppliers, with ₹0.08 crore of interest due on it (DRHP p.228).

08What the money is for

Auto Recycling Systems IPO objects: what the money is for

Source: DRHP p.79, DRHP p.91. The rupee size of the fresh issue depends on a price not yet set, so the share of each object cannot be worked out (DRHP p.79).

Plant and machinery, ₹7.7 crore: two 8 tonne and one 6 tonne furnaces with moulding conveyors and pollution control, ₹2.4 crore with GST; ten other items including four electric forklifts, two 15 tonne cranes, four Ashok Leyland trucks, a JCB telehandler and a spectrometer, ₹4.9 crore; and a 150 kWp rooftop solar plant, ₹0.43 crore (DRHP p.82 to DRHP p.85). The order for the 6 tonne furnace has been placed with an advance of ₹0.34 crore paid from internal accruals, to be recouped from the issue; other orders are to be placed in December 2026, with commercial operation planned for February 2027 (DRHP p.82, DRHP p.86).

Shed, ₹1.0 crore: a pre-engineered building from Vipul Infra Systems Private Limited, construction November 2026 to January 2027 (DRHP p.86, DRHP p.87).

Working capital, ₹63.5 crore: ₹23.8 crore in FY27 and ₹39.7 crore in FY28 (DRHP p.81). The company's own estimate puts the working capital gap at ₹106.8 crore in FY27 and ₹148.5 crore in FY28, against ₹53.9 crore at March 2026, with ₹65.1 crore a year from borrowings and the rest from internal accruals (DRHP p.88, DRHP p.89). It assumes inventory of 56 and 58 days and receivables of 46 and 47 days (DRHP p.89).

The objects have not been appraised by any bank or agency (DRHP p.94). A monitoring agency will be appointed, the document says, because the issue exceeds ₹50 crore (DRHP p.59). The company has spent ₹0.59 crore from internal accruals on machinery and issue expenses so far (DRHP p.92).

Into the business the fresh issue of up to 69,00,000 shares, at a price not yet set (DRHP p.65). To selling shareholders nothing: there is no offer for sale (DRHP p.1).

09Who is selling

Auto Recycling Systems IPO offer for sale: who is selling

Nobody. The whole issue is a fresh issue of up to 69,00,000 shares of ₹10, amount not set (DRHP p.65), and the document marks the offer for sale “NOT APPLICABLE AS THE ENTIRE ISSUE CONSTITUTES FRESH ISSUE OF EQUITY SHARES” (DRHP p.1, AP p.1). If all the new shares are issued they would be about 30.1% of the 2,29,00,000 shares then in issue (our arithmetic, DRHP p.65). The promoters and promoter group will not take part in the issue (DRHP p.77).

10Promoters

The promoters are Sanjeev Malhotra and Sarthak Malhotra (DRHP p.204). The document states that Sanjeev Malhotra is the father of Sarthak Malhotra and the husband of Ranjana Malhotra, a non-executive director (DRHP p.191). Holdings: Sanjeev Malhotra 1,52,46,200 shares (95.29%) and Sarthak Malhotra 7,52,100 shares (4.70%), 99.99% in all (DRHP p.71).

• Sanjeev Malhotra, 69, Chairman and Managing Director, a director since incorporation; more than 9 years in metal trading, manufacturing and recycling and more than 20 years in building materials and real estate; in charge of administration, human resources and maintenance (DRHP p.187, DRHP p.204).
• Sarthak Malhotra, 35, Whole-Time Director since incorporation; a Bachelor of Science from the University of Bradford and a Master of Banking and Finance from Monash University; more than 9 years in metal trading, manufacturing and recycling; in charge of accounts, dispatch, marketing, production, quality, sales and storage (DRHP p.188, DRHP p.205).

Pay: Sarthak Malhotra's remuneration was ₹0.12 crore in FY24, ₹0.17 crore in FY25 and ₹0.18 crore in FY26 (DRHP p.52). Sanjeev Malhotra was paid nothing in FY26 (DRHP p.192). From June 18, 2026 the approved salaries are ₹0.12 crore a year for Sanjeev Malhotra and ₹0.36 crore a year for Sarthak Malhotra (DRHP p.192).

Loans: unsecured loans at March 31, 2026 were ₹0.69 crore from Sanjeev Malhotra, ₹1.90 crore from Sarthak Malhotra, ₹2.49 crore from Ranjana Malhotra and ₹0.15 crore from Prerna Malhotra, ₹5.2 crore in all, at nil interest (DRHP p.253).

Other businesses: Sanjeev Malhotra is a director of Sripa & RD Ventures Private Limited, Sarthak International Limited and Indo Australian Enterprise Pty Ltd; Sarthak Malhotra of Sripa & RD Ventures, Sarthak International and Auto Recycling Services LLP (DRHP p.204, DRHP p.205).

Sripa & RD Ventures trades metals and scrap, Sarthak International leases commercial property, and Indo Australian Enterprise, registered in Victoria, Australia, trades metal scrap internationally; its latest annual report on file is for the year to June 30, 2022 (DRHP p.281, DRHP p.282). Auto Recycling Services LLP may trade non-ferrous scrap under its deed (DRHP p.34). The company signed non-compete agreements with these entities on August 14, 2026 (DRHP p.34, DRHP p.282).

Sanjeev Malhotra was associated with two struck-off companies, Gullu Exports Private Limited and Prerna Overseas Private Limited (DRHP p.194).

Guarantees and pledges: the promoters and Ranjana Malhotra guarantee the bank loans and Ranjana Malhotra's residence is mortgaged for them (DRHP p.225). No promoter shares are pledged (DRHP p.74).

Cases: no criminal, regulatory, civil or tax cases against the promoters (DRHP p.273).

Promoter group gaps: SEBI rejected the company's request to leave out three relatives of Sanjeev Malhotra, Anil Kapoor, Rakesh Kapoor and Anita Khanna, with whom the company says Sanjeev Malhotra keeps no contact; disclosures on them come from public sources only (DRHP p.26, DRHP p.208).

Promoter economics: every share the promoters subscribed was issued at ₹10: the 2020 subscription, rights issues from January 2021 to June 2023 and a conversion of Sanjeev Malhotra's loan into 6,11,462 shares on July 7, 2023, followed by a 1:1 bonus on August 25, 2026 (DRHP p.67, DRHP p.69, DRHP p.73). The capital structure puts their average cost after the bonus at ₹5.00 for Sanjeev Malhotra and ₹4.99 for Sarthak Malhotra (DRHP p.74). Sanjeev Malhotra paid ₹7.62 crore in all and Sarthak Malhotra ₹0.38 crore (DRHP p.73, DRHP p.74). On April 1, 2026 Sarthak Malhotra transferred 100 shares each to four people at ₹25 a share (DRHP p.74).

11Who already owns it

Auto Recycling Systems promoter holding before and after the IPO

Source: DRHP p.71; the after-issue column is our arithmetic. There are 1,60,00,000 shares of ₹10 before the issue and 7 shareholders (DRHP p.65, DRHP p.74). If all 69,00,000 new shares are issued the total becomes 2,29,00,000 shares (our arithmetic, DRHP p.65), and the promoters' 99.99% becomes about 69.9%, so 99.99% → 69.9% (our arithmetic, DRHP p.71, DRHP p.65). The document leaves the after-issue percentages blank (DRHP p.71).

The promoter group holders are Ranjana Malhotra 900 shares and Prerna Malhotra, Kanwer Surrinder Malhotra and Tanya Dhir 200 each (DRHP p.71). The promoter group table names Ranjana Malhotra as Sanjeev Malhotra's spouse, Kanwer Surrinder Malhotra as Sanjeev Malhotra's brother, Prerna Malhotra as Sanjeev Malhotra's daughter and Tanya Dhir as Sarthak Malhotra's spouse (DRHP p.207). No fund or company holds shares. Promoter shares equal to 20% of the post-issue capital are to be locked in for three years (DRHP p.74).

12What changed just before the IPO

• Revenue and profit: revenue from operations went from ₹52.7 crore in FY24 to ₹256.7 crore in FY26 and profit after tax from ₹0.29 crore to ₹11.2 crore (DRHP p.49).
• Receivables: 30 days in FY24 and 41 days in FY26 as computed by the company (DRHP p.89).
• Promoter pay: Sarthak Malhotra's remuneration was ₹0.12 crore in FY24 and ₹0.18 crore in FY26 (DRHP p.52).
• Sales mix: manufacturing went from 43.00% of revenue in FY24 to 87.26% in FY26 (DRHP p.152).
• Bonus issue: 1:1, 80,00,000 shares allotted on August 25, 2026, taking the count to 1,60,00,000 (DRHP p.67).
• Last allotment before the IPO: other than the bonus, the conversion of a promoter loan into shares at ₹10 a share on July 7, 2023 (DRHP p.67).
• Share transfer: 400 shares moved from Sarthak Malhotra to four people at ₹25 a share on April 1, 2026 (DRHP p.74).
• Auditor: Ashok Jha & Co. resigned on March 25, 2026 for “professional and administration reasons”, and M Parashar & Co. was appointed on April 20, 2026 to fill the vacancy (DRHP p.58).
• Converted to a public company: shareholders approved on May 12, 2026; fresh certificate June 16, 2026 (DRHP p.2).
• Board and officers: Ranjana Malhotra joined the board on January 30, 2026; CFO Meenakshi Gupta and Company Secretary Jyoti Bala Soni from April 10, 2026; independent directors Sunaina Prashant Ahuja and Ram Kumar Sharma from June 18, 2026; audit committee formed July 4, 2026 (DRHP p.195, DRHP p.202, DRHP p.189, DRHP p.195).
• Debt: Kotak Mahindra Bank facilities sanctioned on November 14, 2025 and a Standard Chartered invoice financing line on February 4, 2026; ICICI Bank loans no longer appear at March 2026 (DRHP p.250, DRHP p.252, DRHP p.224).
• Supplier mix: imports fell from 37.10% of raw material purchases in FY24 to 3.95% in FY26, and purchases from Indo Australian Enterprise Pty Ltd from ₹15.3 crore to ₹5.0 crore (DRHP p.27, DRHP p.53).
• Non-compete agreements with promoter group entities on August 14, 2026 (DRHP p.34).
• Dividend: none in the last three years (DRHP p.209).

13Capacity and expansion

Source: DRHP p.165, DRHP p.82. The figures are certified by a chartered engineer (DRHP p.165). The existing furnaces are a 6 tonne and an 8 tonne batch furnace (DRHP p.164). The planned addition is 22,000 tonnes a year, from two 8 tonne and one 6 tonne furnaces, with orders in December 2026 and commercial operation in February 2027 (DRHP p.82, DRHP p.86). A consent to establish for the expansion was applied for with the Haryana State Pollution Control Board on July 21, 2026 (DRHP p.87).

The step from capacity to revenue cannot be made from the filing: it gives capacity used but not tonnes sold, and the risk factors say the historical capacity figures rest on assumptions and estimates (DRHP p.39, DRHP p.40). The capacity certificate is attributed to Akhilesh Pandit in the objects chapter and to Sanjeev Raghvendra Betdur in the business chapter (DRHP p.82, DRHP p.165).

14Market size and industry structure

Auto Recycling Systems industry: market size and growth

As claimed: the Industry Overview chapter does not name an industry report, give a report date, or say whether the company commissioned or paid for one (DRHP p.109 to DRHP p.149). Several charts and tables cite “Infomerics Analytics & Research” as a source alongside government and industry data (DRHP p.115, DRHP p.123, DRHP p.124, DRHP p.137). The list of material documents does not include an industry report (DRHP p.374). The chapter gives no rupee or tonnage size for the Indian secondary aluminium or aluminium ingot market.

The part that is addressable: the company sells recycled aluminium alloy ingots to die casters and engineering firms in north India, mainly Haryana and Rajasthan (DRHP p.150, DRHP p.153). The chapter states that secondary aluminium was 36% of India's aluminium consumption in FY20 and 38% in FY24, citing the Ministry of Mines Vision Document on the aluminium sector (DRHP p.133). It says the automotive industry takes 44% of secondary aluminium, building and construction 21%, other industry 20%, packaging 8%, consumer durables 6% and power 1% (DRHP p.134). It does not convert any of this into a market size.

What the company is today: the company used 13,322 tonnes of capacity in FY26 and earned ₹224.0 crore from ingots (DRHP p.165, DRHP p.152). With no size given for its segment, its share cannot be worked out from the filing.

Size over time: India's automobile production rose from 2.27 crore units in FY21 to 3.47 crore units in FY26, and the chapter projects 4.88 crore units by FY30, citing CMIE and Infomerics Analytics and Research (DRHP p.124). Our arithmetic: that is about 8.9% a year from FY21 to FY26 (our arithmetic, DRHP p.124).

Global vehicle production, passenger and commercial only, went from 8.00 crore units in 2021 to 9.64 crore units in 2025, and the chapter projects 11.61 crore units by 2030 (DRHP p.123). India's primary aluminium production rose from 4,026 thousand tonnes in FY22 to 4,257 thousand tonnes in FY26 (DRHP p.132), about 1.4% a year (our arithmetic, DRHP p.132).

Global primary aluminium production went from 67,092 thousand tonnes in 2021 to 73,794 thousand tonnes in 2025 (DRHP p.131). The wholesale price index for aluminium ingots stood at 183.4 in FY26 against 100 in FY12 (DRHP p.132, DRHP p.133).

Segments: the chapter divides metal recycling by metal (ferrous, non-ferrous, precious), by source of scrap (industrial, end-of-life vehicles, e-waste, post-consumer) and by end use (automotive, electrical, construction, engineering) (DRHP p.127, DRHP p.128). The company sits in non-ferrous scrap processed into aluminium alloy ingots for automotive and engineering die casting (DRHP p.150).

What drives demand: the chapter rates as high, over one to seven years, rising vehicle demand, personal mobility and demand for cheaper secondary metal inputs, and rates scrap generation and preference for recycled material as moderate in the near term and high later (DRHP p.136, DRHP p.137).

Policy support it names includes the automobile production linked incentive scheme of ₹25,938 crore over FY23 to FY27, the FAME scheme, the National Vehicle Scrappage Policy, the National Non-Ferrous Metal Scrap Recycling Framework and the End-of-Life Vehicles Rules of January 2025 (DRHP p.139). It reports 134 registered vehicle scrapping facilities operating across 22 states and union territories as of March 2026, having scrapped 4,65,393 vehicles (DRHP p.127).

Structure: the chapter describes a fragmented industry of large integrated makers, regional organised processors and a large unorganised sector (DRHP p.141). It says the Indian Bureau of Mines puts India's overall metal recycling rate at around 25%, with aluminium scrap recovery historically dominated by the unorganised sector (DRHP p.127). Barriers to entry it names are scrap sourcing, capital cost, scale, working capital and customer approval processes (DRHP p.143). It names Nupur Recyclers Limited, Arfin India Limited, Baheti Recycling Industries Limited and CMR Green Technologies Limited as key players (DRHP p.144).

Inputs and trade: the chapter says secondary aluminium makers depend on imported scrap for 85% to 90% of raw material (DRHP p.134). India's aluminium scrap imports rose from US$2,007.68 million in FY21 to US$4,551.38 million in FY26, and exports from US$8.12 million to US$53.80 million, a deficit of US$4,497.58 million in FY26 (DRHP p.135). The United States supplied 19% of imports, the UAE 11%, Saudi Arabia 9%, the UK 8% and Australia 5% (DRHP p.135).

Steel scrap consumption rose from 25.58 million tonnes in FY19 to 33.36 million tonnes in FY24, according to the Ministry of Steel (DRHP p.127). The company itself now buys 96.05% of its raw material in India (DRHP p.170).

Rules: the business needs pollution consents from the Haryana State Pollution Control Board, a factory licence, a fire NOC, legal metrology verification, authorisation under the Hazardous and other Wastes Rules and approval to store liquid oxygen; the hazardous waste authorisation and contract labour registration are pending (DRHP p.277, DRHP p.278, DRHP p.279). Scrap imports fall under the Foreign Trade Policy 2023 (DRHP p.178).

What the chapter says can go wrong: it rates as high dependence on imported scrap, a fragmented scrap supply and volatile scrap prices and realisations, and on the automotive side volatile input costs, competition and cyclical demand (DRHP p.137, DRHP p.138). The risk factors add that demand depends heavily on the automotive industry and its shift to electric vehicles (DRHP p.25). The chapter does not discuss ingot price spreads over scrap, customer approval cycles or the scale of the unorganised sector in rupees.

15Competitive position

Auto Recycling Systems competitors

Source: DRHP p.101, converted from ₹ lakh; Nupur Recyclers' debt to equity is shown as not applicable (DRHP p.101). Product overlaps are as the chapter describes them (DRHP p.144). CMR Green's revenue is about 20 times the company's and Baheti's and Arfin's about 2.8 and 2.4 times (our arithmetic, DRHP p.101). CMR Green Technologies Ltd is also one of three buyers named as approved counterparties under the company's Standard Chartered invoice financing line (DRHP p.252).

What the company puts forward: an in-house laboratory with a spectrometer, tensile and hardness testing, supplier audits, repeat orders after customer vendor approvals, and a shift to domestic scrap sourcing (DRHP p.161, DRHP p.162). Against that: one factory, two furnaces, unregistered trademarks, customer names withheld, high staff turnover and no IATF automotive certificate yet (DRHP p.164, DRHP p.23, DRHP p.155, DRHP p.32, DRHP p.279).

16Peers the company named

Peers named in the offer document: Arfin India Limited, CMR Green Technologies Limited, Nupur Recyclers Limited and Baheti Recyling Industries Limited (DRHP p.98).

All four are larger by revenue except Nupur Recyclers, which is about half the company's size on the DRHP's figures (DRHP p.101). The document gives their P/E as 94.89, 21.20, 66.90 and 29.60 at September 23, 2026 prices (DRHP p.98). None of these equals the printed price divided by the printed EPS; Baheti Recycling's comes closest (our arithmetic, DRHP p.98).

The company's FY26 EPS is printed as ₹14.03 on 80,00,000 shares, before the 1:1 bonus that doubled the share count (DRHP p.96, DRHP p.237). On the 1,60,00,000 shares now in issue it would be about ₹7.01 (our arithmetic, DRHP p.49, DRHP p.65). With no price band, no P/E for the company can be stated.

17Risks, in plain words

Auto Recycling Systems IPO risks

Customers: the top five customers were 75.02% of FY26 revenue (DRHP p.20) → there are no long term contracts and customers order as their production needs (DRHP p.172) → the largest single customer moved from 11.50% in FY24 to 32.77% in FY25 and 24.62% in FY26 (DRHP p.20).

Customers: geography: Haryana and Rajasthan together were 95.62% of FY26 revenue (our arithmetic, DRHP p.22) → a slowdown among die casters there would hit most of revenue → Rajasthan alone went from 0.89% to 24.86% in two years (DRHP p.22).

Business: automotive demand: a significant portion of demand comes from automotive customers (DRHP p.25) → vehicle cycles and the shift to electric vehicles change demand for specific ingot grades → ADC 12 and ALDC-3 were 79.21% of FY26 revenue (our arithmetic, DRHP p.152).

Suppliers and prices: scrap is bought mostly on the spot market without long term agreements (DRHP p.24) → price increases may not be passed on → cost of goods consumed was 92.66% of FY26 revenue (DRHP p.261).

Financial: working capital: operating cash flow was negative in all three years (DRHP p.50) → growth needs ever more stock and customer credit → the company estimates its working capital gap rising to ₹148.5 crore by FY28, with ₹65.1 crore still from borrowings (DRHP p.89).

Financial: debt on demand: 94.14% of borrowings were repayable on demand at March 31, 2026 (DRHP p.253) → a bank or the promoters could call them → the Kotak cash credit of ₹34.9 crore is reviewable by October 15, 2026 (DRHP p.225).

Regulation: GST: an order disallows input tax credit claimed on purchases from a supplier the department calls non-existent (DRHP p.272) → the company has appealed and made no provision (DRHP p.51) → tax, interest and penalty total ₹9.27 crore (DRHP p.273).

Regulation: filings and approvals: delayed company law filings, wrong share data in past annual returns, unfiled foreign investment forms for eight allotments, late TDS, PF and ESI payments, a lapsed BIS licence and pending hazardous waste authorisation (DRHP p.27, DRHP p.28, DRHP p.29, DRHP p.30, DRHP p.31, DRHP p.278, DRHP p.279) → penalties may follow → late TDS payments were ₹0.06 crore in FY26 (DRHP p.30).

People: employee attrition was 140.00% in FY26 and 189.74% in FY25 (DRHP p.32) → skills in melting and alloying need continuity → only 2 employees were registered for provident fund at March 31, 2026 out of 42 (DRHP p.172, DRHP p.171).

Promoters: promoter group companies trade metal scrap and one was the largest supplier in FY24 (DRHP p.34, DRHP p.53) → conflicts may arise despite non-compete agreements → after the issue the promoters would still hold about 69.9% (our arithmetic, DRHP p.71, DRHP p.65).

Issue-specific: most machinery orders are not yet placed and quotations expire (DRHP p.23) → cost and timing may change → the plan has commercial operation in February 2027 (DRHP p.86).

18Litigation and regulatory matters

Cases against Auto Recycling Systems and its promoters

Criminal: none against the company, promoters, directors or key managers; the three cases above are filed by the company under the Negotiable Instruments Act, ₹0.96 crore in all (DRHP p.269, AP p.8). Regulatory: no actions by statutory or regulatory authorities against the company, promoters or directors (DRHP p.269, DRHP p.273). Tax: the GST order is also listed as a Section 74 demand of the same amount

and the document's table says a May 14, 2026 order directed payment of outstanding dues by August 12, 2026, failing which recovery may begin (DRHP p.271, DRHP p.273). Creditors: three material creditors were owed ₹4.2 crore at March 31, 2026 (DRHP p.275). Group companies: no litigation with a material impact (DRHP p.282).

19Related-party transactions

Source: DRHP p.52, DRHP p.53, converted from ₹ lakh. Other items: Sarthak Malhotra repaid ₹2.08 crore of loans in FY26 and Ranjana Malhotra ₹1.34 crore; Auto Recycling Services LLP returned ₹1.37 crore of advances in FY26; sales to Sripa & RD Ventures were ₹1.28 crore in FY24; reimbursements to Sanjeev Malhotra were ₹0.28 crore in FY26 (DRHP p.52, DRHP p.53).

At March 31, 2026 Sripa & RD Ventures owed the company ₹3.17 crore as trade receivable and the company owed Indo Australian Enterprise ₹0.68 crore (DRHP p.53). Read from the filing: the receivable from Sripa & RD Ventures is larger than the FY26 transactions disclosed with it, rent of ₹0.80 crore (DRHP p.53).

What appeared or changed in the two years before filing: purchases from Indo Australian Enterprise fell from ₹15.3 crore to ₹5.0 crore; purchases from Sripa & RD Ventures stopped after FY25 while a ₹3.17 crore receivable from it appeared; Ranjana Malhotra's loans rose from ₹0.59 crore at March 2024 to ₹2.49 crore at March 2026; and the office rent agreement with Sarthak International Limited continues at ₹7,000 a month (DRHP p.53, DRHP p.174). The company says all related party transactions are at arm's length and approved by the board (DRHP p.53).

20What the offer document does not say

The names of customers are not given, except three buyers named in a bank facility (DRHP p.155, DRHP p.252). Tonnes sold and prices are not given, so growth cannot be split into volume and price. Margins for manufacturing against trading are not given; the accounts report one segment, described as “Wholesale Trading Business” (DRHP p.237). There is no order book.

The industry report is not named or dated, and the chapter gives no size for the secondary aluminium market (DRHP p.109 to DRHP p.149). The issue size, price band, general corporate purposes and issue expenses are blank (DRHP p.79). The after-issue shareholding and capitalisation are blank (DRHP p.71, DRHP p.268).

Financial details of the group companies are left to the company website, and Indo Australian Enterprise's latest annual report is for June 2022 (DRHP p.281, DRHP p.282).

Some inconsistencies are recorded as document matters, not business ones:

• Per-share figures: EPS and net asset value labelled “post effect of bonus” are worked on 80,00,000 shares, though the bonus made it 1,60,00,000 (DRHP p.96, DRHP p.97, DRHP p.237).
• Abridged prospectus: it swaps the two promoters' share counts in its cost of acquisition table and shows their cost as nil, against ₹5.00 and ₹4.99 in the DRHP; it also cites ISO 9001, which the approvals list does not include (AP p.8, DRHP p.74, AP p.2, DRHP p.278).
• Ratios: RoCE is 22.30% in one KPI table and 22.17% in another; debt to equity 1.68 against 1.70 (AP p.7, DRHP p.99).
• Certificates: the capacity certificate is attributed to Akhilesh Pandit in one chapter, to Sanjeev Raghvendra Betdur in another and to Sanjiv Raghvendra Betdur in the documents list (DRHP p.82, DRHP p.165, DRHP p.374).
• Peers: the industry chapter gives peer revenues different from the basis for issue price, for example ₹215.9 crore for Nupur Recyclers against ₹135.8 crore (DRHP p.146, DRHP p.101).
• Industry chapter financials: it shows FY24 profit of ₹0.71 crore, the restated accounts ₹0.29 crore and the audited accounts ₹0.78 crore (DRHP p.145, DRHP p.49, DRHP p.222).
• Objects: one risk factor says the proceeds go to working capital and general corporate purposes only, while the objects include machinery and a shed (DRHP p.38, DRHP p.79). The objects include four trucks, while the risk factors say the company has no in-house transport (DRHP p.85, DRHP p.34).
• Loan conversion: the history chapter says no loans were converted into equity, while the capital structure shows a loan converted into 6,11,462 shares in July 2023 (DRHP p.185, DRHP p.67).
• Dates: SEBI's rejection letter is dated June 11, 2026 in the risk factors and June 16, 2026 in the promoters chapter (DRHP p.26, DRHP p.208). The income tax demand for AY 2025 is ₹0.05 crore in one table and slightly lower in the summary (DRHP p.271, DRHP p.274).
• Receivables: the note says nothing is outstanding beyond six months, while the ageing table's columns do not line up with its headings and the company has unpaid cheques from 2023 and 2024 in court (DRHP p.230, DRHP p.231, DRHP p.269, DRHP p.270).

21Five questions for management

1. How many tonnes of ingots were sold in FY24, FY25 and FY26, and at what average price per tonne, given manufacturing revenue per tonne of capacity used of about ₹50,100 in FY24 against ₹1.68 lakh in FY26?
2. Which customers made up the top five in FY26, and what share of FY26 revenue came from Samvardhana Motherson, CMR Green Technologies and Sandhar Technologies?
3. What part of the FY25 input tax credit under dispute relates to purchases from Ashoka Trading Company, and has any amount been paid or recovered since the August 12, 2026 deadline?
4. What made up the ₹3.17 crore receivable from Sripa & RD Ventures at March 31, 2026, and when is it due?
5. What gross margin did manufacturing earn against scrap trading in FY26, and what does it cost to process one tonne of scrap?

1Sources and cited facts

This study was read from 1 document the company filed. The 182 figures it cites are listed under the document each came from, with the page and the sentence as printed.