Company Overview

Newmalayalam Steel Limited, doing business as Demac Steel, is a Public Limited Indian Non-Government Company incorporated on 31 March 2017. Its registered office is in Thrissur, Kerala, India. The company manufactures construction materials, offering galvanized and mild steel circular, rectangular, and square tubes and pipes that find extensive application in various engineering-related industries. The products' reputation and quality have helped Newmalayalam Steel Limited establish brand equity under the brand name "Demac Steel".

Incorporated in 2017, NewMalayalam Steel manufactures galvanized pipes, tubes, and sheets, primarily serving households and the construction industry in Kerala. In 2018, the company began production with a 3,500 MT electric resistance welding (ERW) tube mill, later expanding its capacity by 4,000 MT in 2019 to meet growing demand. This strategic expansion demonstrates the company's commitment to meeting market demands and scaling operations efficiently.

The company operates from its manufacturing facility strategically located in Kerala, which provides significant locational advantages for serving the South Indian market. Newmalayalam Steel's products are used across households in Kerala, particularly for roofing solutions to reduce heat and prevent leakage. In addition to household applications, Newmalayalam Steel's products cater to various industries, including building construction, architecture, automobiles, solar panel frames, interior design, furniture, and decor.

Business Model and Operations

The company operates on a B2B2C model, focusing on manufacturing high-quality galvanized steel products that address specific regional needs. Galvanized products are popular for their rust-free durability, heat resistance, and leakage prevention, addressing Kerala's weather challenges. This positioning makes the company particularly relevant in markets with challenging weather conditions where traditional steel products may not perform optimally.

The company's product portfolio consists of GP pipes, GI pipes, coils, sheets, slits, and additional items such as scrap and rejected pipes. This diversified product range allows the company to serve multiple market segments and reduce dependency on any single product category.

The company manufactures multiple products under one roof at its production unit. This approach allows for cost savings by sharing overhead costs and resources across different product categories. The integrated manufacturing approach provides operational efficiency and better margins.

Financial Performance

As of 30 September 2024 (H1 FY25), the company recorded revenue from operations of Rs 154.21 crore and a net profit of Rs 5.19 crore. However, the company has shown some volatility in its financial performance. Newmalayalam Steel Limited's revenue decreased by -15.78% and profit after tax (PAT) dropped by -28.91% between the financial year ending March 31, 2024, and March 31, 2023.

Key Financial Metrics (as of latest available data):

• H1 FY2024-25 Performance: Revenue from operations of Rs 154.21 crore, Net profit of Rs 5.19 crore

• Authorized Share Capital: Rs 20.00 crore

• Paid-up Capital: Rs 12.65 crore

Recent IPO and Market Listing

Newmalayalam Steel IPO opened on December 19, 2024, and closed on December 23, 2024. The company's shares got listed on NSE SME on December 27, 2024. The IPO was a bookbuilding issue of ₹41.76 crores, comprising entirely a fresh issue of 46.40 lakh shares. The IPO price band was set at ₹90 per share. The IPO was subscribed 48.18 times, indicating strong investor interest.

Competitive Advantages

The company has established several competitive strengths that position it well in the market:

• Widespread Distribution Network: Presence across various retail channels.

• Diversified Product Basket: Offering a range of galvanized products.

• Brand Recall and Track Record: Established brand equity under "Demac Steel".

• Client and Supplier Relationships: Existing strong relationships in the market.

• Quality Assurance: Robust quality control processes for products.

• Strategic Location: Manufacturing facilities in Kerala offering locational advantages and modern infrastructure.

• Integrated Manufacturing: Core focus on quality and cost-efficient sourcing.

The company claims a strong brand presence and a significant customer base across Kerala. This regional dominance provides a stable customer base and reduces marketing costs for customer acquisition.

Management and Leadership

The company promoters include Vazhappily Davis Varghese, Divyakumar Jain, Ankur Jain, Mahendra Kumar Jain, Molly Varghese, and Cyriac Varghese. The Key Managerial Personnel (KMP) at Newmalayalam Steel Limited India are Shravan Dev (Company Secretary) and Rahul Jain (CFO). The experienced management team brings industry expertise and proven project management capabilities.

Market Position and Client Base

The company's clients include Jaihind Steel Private Limited, Aashico Ventures LLP, George Infra Private Limited, and others. Additionally, products are sold to a Promoter Group entity, Jaihind Steel Private Limited, for further distribution. This relationship with the promoter group provides additional distribution channels and revenue stability.

Recent Developments

On 3 February 2025, Newmalayalam Steel Limited informed about a press release dated February 03, 2025, titled "NewMalayalam Steel Continues Growth with Rs 9 Cr in New Orders". This recent order win demonstrates the company's continued growth trajectory and market demand for its products.

Promoter holding in Newmalayalam Steel Ltd has gone down to 73.02 per cent as of Dec 2024. The promoter dilution following the IPO is within healthy limits, providing sufficient public float.

Investment Considerations

The company operates in a cyclical industry with inherent challenges. The cyclical nature of the steel industry impacts profitability. Investors should consider the potential for failure to implement expansion and diversification strategies, financial risks from defaults in loan repayments, and the risk of disruption from hazardous manufacturing processes.

As of 30 September 2024, the company had 140 employees, suggesting efficient operations for its current scale.

The company represents an interesting investment opportunity in the regional steel manufacturing space, with strong brand recognition in Kerala and a diversified product portfolio. However, investors should carefully consider the cyclical nature of the steel industry and the company's financial performance volatility when making investment decisions.