Adhunik Metals is part of the Adhunik Group and was incorporated in 2001 with production starting from 2003. The company was started up with the aim of manufacturing value added steel products having application in automotive industry, engineering sector and household sector. The company currently produces Sponge Iron, Pig Iron and Alloy Billets. And has a manufacturing facility of 250,000 tons per annum of carbon and alloy steel billets.
The existing facilities are located in Chadrihariharpur, Sundergarh in Orissa. This consists of five DRI units of 100 tpd capacity each in the Sponge Iron Division (Unit I) and a Steel Division (Unit II), which consists of a Blast Furnace Complex, one Electric Arc Furnace (EAF), one Ladle Refining Furnace and one Billet Caster has also been set up. Unit I was commissioned in 2003 and Unit II was commissioned in the year 2005. A captive power plant has also been set up in Unit II which will commence operations in April 2006.

Financials

Since the company does not enjoy a long history one can’t make a judgement of the historical performance. For the nine months ended December 2005 Adhunik had a turnover of Rs.240.45 crores and a net profit of Rs.16.81 crores.
The company is offering its shares in the price band of Rs. 37 – Rs.42. The annualized EPS for 2005 comes out to be 3.91 and at Rs.42 the P/E comes to be 10.7, the Industry average is just 4.4.

Objects of the Issue

The IPO is being carried out to raise money for expansion and setting up units which are collectively known as Unit III. This project is aimed to integrate the company fully and cover the entire value chain starting from raw material i.e. iron ore and coal and ending up in value added products for automotive, engineering and household sector.

Conclusion

While the company is in a growing industry and has good plans for integration with promotes who have got over two decades of experience in the steel business, the asking price seems to be very high for a company that has just started production some three years ago.