Business Profile of the SMPP Limited
SMPP Limited is an Indian defence equipment manufacturer, which offers a range of mission-critical products for armed forces, police, paramilitary, and other security forces. Their products include ammunition components, personal protection products, and protection kits for land, air, and sea platforms. The company has a history of supplying defence products to Indian armed forces and has a strong track record in handling military grade explosives. They manufacture their products at their Palwal manufacturing facility in India, with an annual installed manufacturing capacity of 408,000 protection products and 120,000 ammunition components. They are also establishing a manufacturing facility in Himachal Pradesh, India, to manufacture medium and large caliber ammunition for the armed forces.
SMPP Limited IPO Objective
As per the draft red hearing prospects, the IPO issue consists only of offer for sale.
- The OFS consists of up to XXXX Equity Shares aggregating up to Rs. 3, 420 crores. Nothing from those proceeds of OFS will be allotted to company.
- SMPP IPO offer has fresh issue of Rs. 580 crores. As per DRHP document, the company aims to utilize Rs. 437 crores in capex towards setting up the ammunition manufacturing facility and corporate general purposes.
| Particulars | Amount (in ₹ million) |
| Financing the capex towards setting up the
Planned Ammunition Manufacturing Facility |
4370.42 |
| General corporate purposes | XXXX |
| Net Proceeds | XXXX |
(₹ Million)
IPO Details of SMPP Limited:
| IPO Open Date | N.A. |
| IPO Close Date | N.A. |
| Basis of Allotment | N.A. |
| Listing Date | N.A. |
| Face Value | ₹2 per share |
| Price | N.A. |
| Lot Size | N.A. |
| Total Issue Size | XXXX Equity shares |
| Aggregating up to ₹4000.00 Cr | |
| Fresh Issue | XXXX Equity shares |
| aggregating up to ₹580.00 Cr | |
| Offer For Sale | XXXX Equity shares |
| Aggregating up to ₹3420 crores | |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE & NSE |
| QIB Shares Offered | Not less than 75% of the Net Issue |
| Retail Shares Offered | Not more than 10% of the Net Issue |
| NII (HNI) Shares Offered | Not more than 15% of the Net Issue |
Issue Price & Size: SMPP Limited IPO
The issue price of SMPP Limited hasn’t been released yet. Upon releasing the dates, the investors can bid between those price ranges. The company has both fresh issue of Rs. 580 crores as well as offer for sale of Rs. 3420 crores.
Launch Date of SMPP Limited IPO
The IPO opening date of SMPP hasn’t been officially announced yet, upon the declaration of dates investor can bid for IPO.
SMPP Limited Financial Statements
| Particulars | For the period ended
30th June 2024 |
For the period ended
30th June 2024 |
FY24 | FY23 | FY22 |
| Income | |||||
| Revenue from operations | 1457.67 | 525.42 | 5160.77 | 3508.28 | 3688.88 |
| Other income | 25.38 | 31.36 | 208.26 | 169.88 | 80.29 |
| Total Income | 0.641030093 | 556.75 | 5369.03 | 3678.16 | 3769.17 |
| Expenditure | |||||
| Cost of Materials consumed | 690.99 | 482.36 | 2946.99 | 1856.99 | 2088.53 |
| Changes in inventories of Finished goods | 49.69 | -220.29 | -249.49 | - | - |
| Employee Benefits Expense | 19.09 | 13.08 | 66.03 | 46.18 | 36.47 |
| Finance Cost | 5.96 | 1.89 | 8.09 | 5.21 | 12.71 |
| Depreciation and Amortization expense | 16.44 | 13.91 | 51.84 | 54.93 | 59.01 |
| Other Expenses | 130.55 | 142.04 | 568.61 | 460.72 | 396.32 |
| Total Expenses | 912.72 | 432.99 | 3392.08 | 2424.02 | 2593.04 |
| Restated Profit before Tax | 570.33 | 123.79 | 1976.95 | 1254.14 | 1176.16 |
| Restated Profit for the year | 425.93 | 92.12 | 1465.26 | 926.08 | 877.35 |
| KPI | SMPP | HAL | BEL | Bharat Dynamics | MTAR Tech | Astra Microwave Products | Solar Industries | Data Pattern (India) | Premier Explosives |
| Rev. from Ops. | 5160.77 | 303810.8 | 201693.9 | 23692.75 | 5807.52 | 9088.2 | 60695.2 | 5198 | 2717.17 |
| Rev Growth (%) | 47.10% | 12.83% | 13.73% | -4.83% | 1.22% | 11.44% | -12.63% | 14.63% | 34.49% |
| EBITDA | 1828.63 | 97675.6 | 50885.4 | 5365.5 | 614.6 | 2036.1 | 13695.6 | 2216.2 | 584.9 |
| EBITDA Margin (%) | 35.43% | 32.15% | 25.23% | 22.65% | 10.58% | 22.40% | 2.26% | 42.64% | 21.43% |
| PAT | 1465.26 | 76209.5 | 39852.4 | 6127.21 | 48.71 | 1210.66 | 8752.3 | 1816.9 | 284.18 |
| PAT Margin (%) | 28.39% | 25.08% | 19.76% | 25.86% | 0.84% | 13.32% | 1.44% | 34.95% | 10.46% |
| Net Debt | -2056.18 | -264316 | -110566 | - | 1400.81 | 106.73 | 8177.1 | -3926.9 | 322.5 |
| Net Debt to EBITDA | -1.12 | -0.37 | -0.46 | N.A. | 0.44 | 19.08 | 1.67 | -0.56 | 1.81 |
| RoE | 31.26% | 26.15% | 24.38% | 16.85% | 0.72% | 12.53% | 25.54% | 13.72% | 12.83% |
| RoCE | 37.72% | 24.56% | 30.13% | 11.33% | 11.92% | 18.30% | 30.00% | 18.75% | 19.83% |
| Cash Conversion Cycle (Days) | 131 | 430.77 | 370.96 | 657.61 | 531.92 | 305.16 | 130.97 | 523.94 | 388.43 |
| Net Fixed Assets Turnover Ratio (in times) | 13.15 | 5.26 | 7.23 | 3.52 | 1.71 | 5.43 | 31.63 | 4.31 | 1.41 |
SMPP Limited Promoters & Shareholding
As of date, there are three promoters of the company.
The promoter in aggregate holds 96.63% of the paid-up share capital of company.
| Name of the Shareholder | Number of Equity Shares held | % of pre-Offer Equity Share |
| Promoter | ||
| Dr. Shiv Chand Kansal^ | 29,99,99,991 | 50 |
| Dr. Madhu Kansal | 18,00,00,000 | 30 |
| Ashish Kansal | 9,97,50,000 | 16.63 |
| Total | 57,97,49,991 | 96.63 |
| Promoter Group | ||
| Ashima Goel | 2,02,50,000 | 3.37 |
| Kansal Auto Spares Private Limited | 3 | Negligible |
| Sopan Properties Private Limited | 3 | Negligible |
| Wiseman Systems Private Limited | 3 | Negligible |
| Total | 2,02,50,009 | 3.37 |
| Grand total | 60,00,00,000 | 100 |
Should You Subscribe to SMPP Limited IPO or Not
While investing or subscribing to any IPO, consider the investment rationales related to the company. Hence, here you can find out the strength of the company that will be its growth factors. And also check the risk factors that can affect the growth and operational efficiency of the company.
Competitive Strengths of SMPP Limited:
Designer and manufacturer of defence equipment
The company has an established track record of servicing the defence sector and supplying differentiated products for over past three decades. The company began operations in 1985 as a manufacturer of biodegradable packaging. Over the years, the company has become an indigenous designer and manufacturer of defence equipment. From biodegradable packager, they expanded their operations to manufacturing combustible cartridge cases in 1992 and began producing personal protection products in 2008. In 2018, they received an order from the Ministry of Defence, Government of India to manufacture bullet resistant jackets of Level III and III+ protection. Despite the high entry barriers in the defence manufacturing industry in India, the company's track record of innovation, quality standards position them to capitalize on the growth in the defence manufacturing industry.
In-house manufacturing capacities
The company is a leading armour manufacturing company in India that manufactures bullet resistant boron carbide plates. Boron carbide, also known as black diamond, is a hard material with low density, exceptional strength, high-temperature stability, making it ideal for high-performance applications. They have adopted a proprietary method to produce boron carbide ceramics, enabling them to manufacture single monolithic ceramic plates for bullet resistant jackets and other products.
The company ensures that their products meet international quality standards and utilizes customised furnaces for uniform production. They offer flexibility in product shapes and sizes, including multi-curved and circular multi-curved ceramics. Their in-house manufacturing capabilities enable them to meet indigenous content criteria and supply products for government orders, as boron carbide is a critical raw material in bullet resistant products.
Robust manufacturing and R&D capabilities
They have end-to-end control over key manufacturing processes and have been manufacturing combustible cartridge cases and military grade explosives for the Indian armed forces for over three decades. They have designed critical machinery themselves, addressing deficiencies in off-the-shelf equipment and optimizing production capacity at lower capital expenditure. As of June 30, 2024, the annual installed manufacturing capacity was 400,000 protection products and 120,000 ammunition components.
The company also focuses on R&D, developing personal protection products and armor kits based on customer requirements and factors affecting as per terrain.
Future strategies
- Focusing on manufacturing combustible cartridge cases for tank and artillery ammunition.
- Revising the war wastage reserve policy, aiming to stock enough ammunition for 40 days of intense warfare.
- Setting up a Planned Ammunition Manufacturing Facility to manufacture ammunition of 155 mm caliber artillery.
- The company plans to leverage its relationship with RDM for process development, product development, and market development and sales of artillery and mortar ammunition.
- Introduce advanced solutions, including lighter weight protection products, guided ammunition, and drone-delivered bombs.
- Increase the indigenous content in its products.
Risk Factors of SMPP Limited:
Dependence on government orders
The company derives a significant portion of its revenues from orders given by government entities. As can be seen from data in table below, the company generated more than 90% of its revenue from contract from government entities. As an Indian defense equipment manufacturer, SMPP manufacture combustible cartridge cases for tank and artillery ammunition, personal protection products for armed forces and protection kits for land, air, and sea platforms.
For winning government orders, the company has to first participate in bidding process and also meet basis requirement. Since there are open offer to bid for government contract, lowering the price of company offerings may adversely affect their margins and overall revenues.
| Particulars | For the three months ended June 30, 2024 | For the three months ended June 30, 2024 | FY24 | FY23 | FY22 |
| Revenues from the Government
Entities (₹ million) |
1343.77 | 285.67 | 4396.53 | 2384.26 | 2756.42 |
| Revenues from Government Entities as a percentage of total revenue from Ops | 92.19% | 54.37% | 85.19% | 67.96% | 74.72% |
Customer concentration
As can be understood from data below, the company has a significant portion of its revenue coming from its top 10 customers. The volume and timing of sales of company’s product to the customers may vary due to changes in their requirements, geopolitical issues, and inventory management. Any adverse developments in relationships with these customers could negatively impact the company's business and revenues.
| Particulars | For the three months ended June 30, 2024 | For the three months ended June 30, 2024 | FY24 | FY23 | FY22 |
| Revenues from top 10 customers (₹ million) | 1429.2 | 520.73 | 4788.29 | 4142.22 | 3543.68 |
| Revenues from top 10 customers as a percentage of total revenue from operations | 98.05% | 99.11% | 92.78% | 89.74% | 96.06% |
Limited suppliers
For manufacturing of its product company consumer various raw material like boron carbide powder, ballistic fabric, solvents, resins, and adhesives. The company relies on a limited number of third-party suppliers for sourcing raw material. Unanticipated increases in costs due to fluctuations in cost of raw material in the national and international markets may directly impact companies financial. If suppliers fail to fulfill their obligations in the provided time, the company may find it hard to find alternative suppliers within a requisite time
Strict Quality standards
The company manufactures defence equipment, including ammunition components, personal protection products along with many other products to cater to the safety and survivability equipment requirements of end users. The company operates in an industry that is highly regulated and subject to stringent government regulations. So adherence to quality standards is critical as supplies of defect products could lead to cancellation of supply orders or non-renewal of agreements. Such action could drastically change company’s fundamentals and financial picture of company.
Product concentration
As can be seen from table below, the company generates more than 90% of its revenue from the sale of protection products. Protection product includes bullet resistant jackets, armor plates, and shields customized for security forces. Significant segment concentration and not diversification of revenue among product portfolio can lead to drastic fall in revenue if any disruption occurs from demand side.
| Products | For 3-mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Percentage of revenue from operations | ||||
| Protection products | 94.23% | 88.95% | 82.32% | 90.30% |
| Ammunition components | 5.77% | 11.05% | 7.68% | 9.70% |
Revenue from exports
The company does not only supply its product to consumers in domestic market but also supplies its products to overseas market. The company began exporting protection products in 2008 and from FY22 to June 30, 2024 the company has served customers in 23 countries. Over the past three years, the company has generates significant revenue from export to overseas countries. As can be seen from data in table below, the company generated on an average generated more than 20% of revenue from operation from exports. Expanding into international markets is subject to political and economic factors risks.
| Products | For 3mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Percentage of revenue from operations | ||||
| Revenue from customers located outside India (₹ million) | 110.77 | 1085.64 | 1367.32 | 889.11 |
| Revenue from customers located outside India as a % of the total revenue from operations | 7.60% | 21.04% | 38.97% | 24.10% |
Dependence on R&D
Future growth of products depends on company’s dedication toward technological advancements cost-effectively and timely. Their R&D team works closely with business development teams to identify new products, enhancements. The company focuses on product innovation based on customer requirements and considers factors like terrain adaptability and user comfort. The company plans to diversify its product portfolio through R&D initiatives and invests in technology, equipment, and skilled workforce.
SMPP Limited Grey Market premium
Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.
Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable
However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share
According to various online sources, the Grey Market Premium or GMP of the SMPP Limited is trading around Rs XX in the grey market. It means shares are trading at the upper band issue price of Rs XX with a premium in the grey market and may list around the same price.
