Shri Hare-Krishna Sponge Iron Ltd. IPO: Key Details

Shri Hare-Krishna Sponge Iron

• Shri Hare-Krishna Sponge Iron is coming out with an initial public offering (IPO) of 50,70,000 equity shares in a price band Rs 56-59 per equity share.
• The issue will open on June 24, 2025 and will close on June 26, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 5.60 times of its face value on the lower side and 5.90 times on the higher side.
• Book running lead manager to the issue is HEM Securities.
• Compliance Officer for the issue is Rashmeet Kaur.

Profile of the company

Established in 2003, Shri Hare-Krishna Sponge Iron is primarily engaged in the business of manufacturing and selling of Sponge Iron. Sponge iron is mainly used as a raw material for steel production in electric arc furnaces and induction furnaces. Through its sponge iron business, it caters to the metallic requirements of steel producers in selected geographies.

The company’s manufacturing facility is located in Siltara - Raipur, Chhattisgarh and is spread across an area of around 13.45 acres of land with an annual production capacity of 30,000 metric tonnes. The strategic location of its sponge iron manufacturing facility provides it with access to high-quality iron ore, iron ore pellets, coal and dolomite which are essential raw materials for producing sponge iron. During production of sponge iron, a solid waste is produced as a by-product called dolochar. 

The company has been granted ISO 9001:2015 for quality management systems, ISO 14001:2015 for environmental management systems and ISO 45001:2018 for occupational health and safety management systems. The company’s manufacturing facility is equipped with requisite technology and infrastructure including machineries, testing laboratory other handling equipments to facilitate smooth manufacturing process. The key raw materials to produce sponge iron are iron ore/iron ore pellets, coal and dolomite. Sponge iron manufacturing is highly sensitive to raw material characteristics that would help obtain the rated capacity and the desired product quality.

Proceed is being used for:

• Funding of capital expenditure requirements of the company towards setup of captive power plant at Siltara - Raipur
• General Corporate Purpose

Industry Overview

India's iron ore production is estimated to stand at 257.85 MT in FY23, while it stood at 253.97 MT in FY22 - a sharp increase of 23% compared with 205.04 MT in FY21. In 2022-23, exports of iron ore stood at $1.75 billion as compared to $3.18 billion in 2021-22. In FY24 (until January 2024), the production of crude steel and finished steel stood at 118 MT and 114 MT respectively. In FY23, India produced about 193.16 MT of crude steel, while finished steel production stood at 89.55 MT. In April 2024, crude steel production in India stood at 11.9 MT. In April 2024, finished steel production stood at 11.2 MT. Steel Authority of India (SAIL), achieved the best-ever annual production during the financial year 2022-23. The company recorded 18.289 million tonnes (MT) of crude steel production with a growth of 5.3% over the previous best. In FY24, SAIL’s crude steel production stood at 19.23 MT and saleable steel production was 18.4 MT. Moreover, capacity increased to 142.2 million tonnes (MT) in FY20, and the figure is anticipated to rise to 300 MT by 2030-31.

In 2019, India ranked as the second-largest crude steel producer in the world. Between, April, 2021- March 2022, finished steel production stood at 120.007 MT. In April 2022, the production of crude steel in India stood at 10.144 MT. In January 2022, India’s finished steel consumption stood at 9.65 MT. The National Steel Policy aims to increase per capita steel consumption to 160 kgs by 2030-31. It is expected that consumption per capita would increase, supported by rapid growth in the industrial sector and rising infra expenditure projects in railways, roads and highways, etc.

The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg/per capita to 38 kg/per capita by 2030-31. Demand for steel from different sectors will drive this industry. Consumption of steel by India’s infrastructure segment is expected to increase to 11% by FY26. Steel demand from the automotive sector is expected to increase due to rise in the demand for automobiles. The new Vehicle Scrappage policy will help in reducing steel prices as the policy enables recycling of materials used in old vehicles. On the healthcare front, key steel producers are now exceeding their capacities to produce oxygen cylinders for COVID patients. The Smart Cities’ Affordable Housing and industrial corridors are a few government initiatives to boost the steel industry. About 158 lakh metric tonnes (MT) of steel are likely to be consumed in the construction of houses sanctioned under the Pradhan Mantri Awas Yojana (Urban).  

Pros and strengths

In-house manufacturing facility: The company presently carry all its manufacturing operations through manufacturing facility located at Siltara - Raipur, Chhattisgarh, which is situated on a vast area of over 13.45 acres of land with an annual production capacity of 30,000 metric tonnes. It is strategically located and is well connected with road for transportation of raw materials & finished goods. The iron ore/iron ore pellets, coal and dolomite are some of the key raw materials required for its manufacturing operations, and their continued and sustained availability at competitive prices is essential to the growth of its business. These raw materials i.e. coal, iron ore and dolomite are available in abundant in the local mines of Raipur which are located at nearby distance from its manufacturing facility. The close proximity with raw materials brings cost efficiencies in procurement of raw material and also reduce logistic cost which helps it to achieve economies of scale.

Stringent quality control mechanism ensuring standardized product quality: The quality of raw materials and their relative proportions determine the quality of the final product and the efficiency of its rotary kilns. Thus, the quality of raw materials is of paramount importance to it in its sponge iron production process. To verify the same, it has established in-house testing laboratory at its sponge iron manufacturing facility, which is equipped with precision equipment’s such as barometer, combustion furnace, desiccator, distillation plant, heating furnace, hot air oven, hot plate, measuring scale, measuring tape, muffle furnace, and other necessary tools, that is responsible for conducting tests and checks in respect of the quality of its key raw materials.

Long standing relationship with customers: The company’s sponge iron product generally caters to customers who primarily are manufacturers of steel in state of Maharashtra, Chhattisgarh and Madhya Pradesh. It generally does not enter into long term agreements with its customers, however, it has developed longstanding relationships with these customers. Maintaining strong relationships with its key customers is essential to its business strategy and to the growth of its business. Owing to its strong customer relationships and service, it has been able to retain a number of its customers for a long period of time ensuring uninterrupted supplies of its products to them. The company’s existing relationship with its customers represents a competitive advantage in gaining new customers and increasing its business.

Risks and concerns

Maximum revenue comes from few customers: The substantial portion of its revenues has been dependent upon few customers. For instance, its top five customers for the financial year ended March 31, 2025, March 31, 2024 and March 31, 2023 accounted for 70.22%, 76.25% and 61.51% of its revenue from operations for the respective years. Its reliance on a limited number of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, a failure to negotiate favorable terms with its key customers or the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of the company.

Business operations are majorly concentrated in certain geographical regions: The company generates major domestic sales through its customers situated at Maharashtra, Madhya Pradesh and Chhattisgarh. The company has garnered 60.70%, 84.61% and 66.00% of its total revenue from Chhattisgarh in FY25, FY24 and FY23 respectively. Moreover, the company has garnered 18.24% and 21.06% of its total revenue in FY25 from Madhya Pradesh and Maharashtra respectively. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region, which may adversely affect its business prospects, financial conditions and results of operations.

Majority of revenue is dependent on single business segment i.e. Sponge Iron: Majority of its revenue is dependent on single business segment i.e. Sponge Iron, which accounted for 95.67%, 96.53%, & 96.51% of its total revenue from operations, respectively for the financial year ending March 31, 2025, March 31, 2024 & March 31, 2023. Its continued reliance on single business segment for substantial portion of its revenue exposes it to risks, including but not limited to, reduction in the demand of the products in the particular segment in the future; increased competition from regional and national players; the invention of superior and cost- effective technology; fluctuations in the price and availability of the raw materials; changes in regulations and import duties and the general economic conditions. Any occurrences of such event could significantly reduce its revenues, thereby materially adversely affecting its results of operations and financial condition.

Outlook

Shri Hare-Krishna Sponge Iron manufactures and sells Sponge Iron. The manufacturing unit is in Siltara - Raipur, Chhattisgarh, covering 13.45 acres with an annual capacity of 30,000 metric tonnes. The company has in-house manufacturing facility. Its stringent quality control mechanisms ensure standardized product quality. On the concern side, substantial portion of its revenues has been dependent upon few customers, with which it does not have any firm commitments. The loss of any one or more of its major customer would have a material adverse effect on its business, cash flows, results of operations and financial condition. Moreover, the company’s business operations are majorly concentrated in certain geographical regions and any adverse developments affecting its operations in these regions could have a significant impact on its revenue and results of operations.

The company is coming out with a maiden IPO of 50,70,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 56-59 per equity share. The aggregate size of the offer is around Rs 28.39 crore to Rs 29.91 crore based on lower and upper price band respectively. On performance front, during the financial year 2024-25, the revenue from operations of the company decreased to Rs 8047.00 lakh as against Rs 8226.63 lakh in financial year 2023-24, representing a decrease of 2.18%. Such decrease was due to decrease in sale of Sponge iron during the FY 2024-25. Moreover, profit after tax for the financial year 2024-25 was Rs 919.80 lakh as compared to profit after tax of Rs 1017.44 lakh during the financial year 2023-24.

The company intends to focus on adhering to the quality standards of the service as it understands that curtailing cost without compromise on quality is an important factor to be considered for operation of business. This is necessary so as to make sure that it gets repeat orders from its customers. This will also aid it in enhancing its brand value. It intends to continue to build its brand image by providing quality services to the satisfaction of its clients. This can be achieved through detailed analysis of its processes and continuous process improvement along with keeping pace with technology development.