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VMS TMT

• VMS TMT is coming out with a 100% book building; initial public offering (IPO) of 1,50,00,000 shares of Rs 10 each in a price band Rs 94-99 per equity share.
• Not more than 30% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 20% of the issue will be available for the non-institutional bidders and the remaining 50% for the retail investors.
• The issue will open for subscription on September 17, 2025 and will close on September 19, 2025.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 10 and is priced 9.40 times of its face value on the lower side and 9.90 times on the higher side.
• Book running lead manager to the issue is Arihant Capital Markets.
• Compliance Officer for the issue is Boliya Vijay Amrabhai.

Profile of the company

VMS TMT is engaged in manufacturing of Thermo Mechanically Treated Bars (TMT Bars) at its manufacturing facility situated at Bhayla Village, Ahmedabad, Gujarat. TMT Bars are high-strength reinforcement steel used widely in construction industry due to their exceptional strength, ductility, and corrosion resistance. It conducts its business predominantly in the State of Gujarat from where it derived 98.93%, 96.72%, 98.75% and 97.42% of its revenues from operations in the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 respectively. Its revenue from operations from sale of TMT Bars in the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 constituted around 95.99%, 91.63%, 94.06% and 96.85% of the revenue from operations. In the three months period ended June 31, 2024 and Fiscal 2025, retail sales constituted 86.93% and 78.66%, respectively and institutional sales constituted 12.60% and 20.33%, respectively of the total revenue from operations. Its revenue from operations also includes sale of scrap, binding wires and billets which constituted approximately 3.54%, 7.35%, 5.94%, 3.15% of the total revenue from operations in the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 respectively.

The company has a diverse customer base of retail and institutional customers primarily based in the State of Gujarat (except Saurashtra and Kutch district of Gujarat). It has a retail license agreement dated November 7, 2022, with Kamdhenu Limited which allows it to market its TMT Bars under the Kamdhenu Brand on mutually agreed terms within the State of Gujarat (except Saurashtra and Kutch district of Gujarat) on a non-exclusive basis. It sells its TMT Bars to customers through distribution network, on a non-exclusive basis, which comprise of 3 distributors and 227 dealers as of July 31, 2025. Accordingly, it relies on its distributors and dealers with whom it does not have any formal arrangements. Its ability to expand and grow its brands reach significantly depends on the reach and effective management of its distributor and dealer network. It continuously seeks to increase the penetration by appointing new distributors and dealers to ensure wide distribution network targeted at different consumers and areas.

Presently, the company is manufacturing TMT Bars from scrap and billets at its manufacturing facility. TMT Bars are manufactured through thirty - ton induction furnace from scrap in its continuous casting machine (CCM) and rolling mill and also from billets through its reheating furnace and rolling mill. Its total annual installed capacity of TMT Bars is 200,000 metric tonnes (MT) per annum and its production of TMT Bars in the three months period ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023 was 35,741 MT, 1,26,065 MT, 1,60,321 MT and 1,61,807 MT, respectively.

Proceed is being used for:

• Repayment/ prepayment, in full or part, of all or a portion of certain borrowings availed by the company
• General corporate purposes

Industry Overview

The production and consumption of steel bars and rods in India have maintained a close correlation, reflecting steady expansion with production growing at a CAGR of 9.2% and consumption at a slightly higher CAGR of 9.7%. In FY 2022, both indicators witnessed notable surges, with production rising sharply by 23.1% and consumption increasing by 12.3%, marking a pivotal year for the segment. This momentum carried through to FY 2025, with production reaching 63.0 million tons and consumption marginally exceeding it at 63.1 million tons, underscoring the sustained and balanced demand-supply dynamics. The robust growth over the last three years has been fueled by thriving end-use industries such as construction, infrastructure development, automotive, and machinery manufacturing. This consistent alignment between output and demand highlights efficient production planning, responsive market strategies, and favorable conditions, creating a solid foundation for stable growth opportunities in the steel bars and rods market.

India’s domestic consumption of TMT bars has been rising steadily, reflecting the strong momentum in the construction and infrastructure sectors. Consumption has expanded from about 41.6 million tons in FY 2021 to an estimated 62.5 million tons by FY 2025, registering a healthy CAGR of around 10.7% during this period. This sharp rise underscores the critical role of TMT bars in meeting the demand generated by large-scale infrastructure investments, rapid urbanization, and sustained growth in residential as well as commercial real estate projects. By FY 2025, the scale of consumption clearly reflects a market that is not only expanding in volume but also becoming more structured and responsive to quality standards, given the increasing preference for high-strength and earth quake resistant grades. Overall, this period signifies a phase of robust consolidation for TMT bar consumption in India, aligned with the country’s ambitious infrastructure and urban development agenda.

Domestic demand for TMT bars is anticipated to rise significantly, driven by the government's focused efforts on enhancing the nation's infrastructure. The construction industry's growth in India is on an upward trajectory, increasingly favoring TMT bars due to their superior qualities. These bars are known for their exceptional strength, durability, and ability to withstand seismic activities, making them indispensable in modern construction. As the government continues to prioritize the development of quality and sustainable infrastructure, TMT bars are set to play a crucial role. Their widespread adoption is not just a trend but a necessity, given the evolving structural requirements of contemporary construction projects. Engineers and builders across the country are increasingly turning to TMT bars to meet these demands, owing to their numerous advantages over traditional reinforcement materials.

Pros and strengths

Positioned to take advantage of the steady growth in the steel bar and rods industry: The company is engaged in manufacturing of TMT Bars from scrap through thirty - ton induction furnace in its CCM and rolling mill and also from billets through its reheating furnace and rolling mill at its manufacturing facility situated at Bhayla Village, Ahmedabad, Gujarat. The company’s business is predominantly conducted in the State of Gujarat, and it derives its revenue from retail as well as institutional customers. In the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023, it sold 42,023.16 MT, 1,44,409.52 MT, 1,61,902.00 MT and 1,51,795.00 MT of TMT Bars, respectively, and had revenue from operations of Rs 21,225.92 lakh, Rs 77,019.10 lakh, Rs 87,295.77 lakh and Rs 88,201.35 lakh in the same respective periods. The company is poised to take advantage of growth in TMT Bars demand. 

Established infrastructure with backward integration with strong logistics support: The company is engaged in manufacturing of TMT Bars through thirty - ton induction furnace from scrap in its CCM and rolling mill and also from billets through its reheating furnace and rolling mill at its manufacturing facility located at Bhayla Village near Ahmedabad, Gujarat. The capital cost of the backward integration project was around Rs 11,711.51 lakh which it had financed through borrowings from banks, internal accruals and raising funds through equity. The company has installed a thirty-ton electric induction furnace with installed capacity of 216,000 MT per annum and have installed power substation having 22,000 kVAh. The company requires 22MW of power for its uninterrupted operations, which it sources from Uttar Gujarat Vij Company Limited. To reduce its electricity expenses, it has initiated the process of setting up of a 15 MW solar power plant in Gujarat for its captive consumption.

Track record of growth in financial performance: The company’s integrated production facility focuses on maintaining high-capacity utilization, operational efficiency, productivity and low operating costs are the inherent strengths of the company, which helps it to effectively manage the cyclical trends of the TMT Bars sector. It has a consistent track record of delivering operating profitability. The company’s focus on operations have helped it to achieve a track record of healthy financial performance. The company’s demonstrated track record of growth financial performance is evidenced by the significant increase in sales volume and revenue from TMT bars. The volume of TMT bars sold increased from 1,51,795 MT in Fiscal 2023 to 1,61,902 MT in Fiscal 2024, representing a growth of around 6.66%. 

Long-term customer relationships augmented by large distribution network: The company’s business is predominantly conducted in the State of Gujarat (except Saurashtra and Kutch district of Gujarat), and it derives its revenue from retail as well as institutional customers. It has a history of high customer retention. As of June 30, 2025, 4 out of its top 10 customers have been its customers for more than three years. Its long-term relationships and ongoing active engagements with customers also allow it to enhance its ability to benefit from increasing economies of scale with stronger purchasing power for raw materials and a lower cost base. The company markets and sells its TMT Bars in the State of Gujarat under the brand “Kamdhenu”. The company also sells scrap and binding wires in the State of Gujarat and other states. The company focuses for sales has been on Tier II and Tier III cities.

Risks and concerns

Dependent on a retail licence agreement with Kamdhenu: The company is dependent on a retail licence agreement with Kamdhenu for sale of TMT bars and the agreement is non-exclusive in nature. Pursuant to this Agreement, it has paid a royalty of Rs 208.57 lakh, Rs 654.83 lakh, Rs 610.66 lakh and Rs 535.45 lakh, respectively, representing 0.98%, 0.85%, 0.70% and 0.61% of its total revenue from operations for the three month period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. The agreement has certain restrictions and obligations, such as minimum sales quotas, branding guidelines, packaging, and royalty payments. The company has derived 95.99%, 91.63%, 94.06% and 96.85% of its revenue from operations for the three month period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively from sale of TMT Bars and 100% of the revenue from such sale is only under Kamdhenu Brand. If the retail licence agreement with Kamdhenu is terminated, it may face difficulties in retaining its network of distributors and dealers that distribute its products, which could materially and adversely impact its business, results of operations and financial condition.

Maximum revenue comes from limited customers: The company’s business is predominantly conducted in the State of Gujarat and it derives its revenue from retail as well as institutional sales. It sells its TMT Bars to customers through distribution network on a non-exclusive basis which comprise of 3 distributors and 227 dealers as of July 31, 2025. In Fiscal 2025, it sold products to customers, which were predominately based in the State of Gujarat, and it derived 92.82% of its revenue from operations from its top 10 customers, with its single largest customer contributing 30.19%, 30.11%, 29.09% and 28.55% of its revenue from operations in the three months period ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. Loss of any of these customers or a reduction in purchases by any of them could adversely affect its business, results of operations, cash flows and financial condition.

High debt to equity ratio: The company has a high debt to equity ratio of 3.78 times, 3.77 times, 4.25 times and 5.28 times for the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 respectively, which denote its significant outstanding debt and financial obligations and its inability to meet its financial obligations may limit its ability to pursue its business and could adversely affect its business, financial condition, results of operations and cash flows.

Geographical constrain: The company’s manufacturing facility and its sales are concentrated in the State of Gujarat in India. It conducts its business predominantly in the State of Gujarat from where it derived 98.93%, 96.71%, 98.75% and 97.42% of its revenues from operations in the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 respectively. While the company has not faced any such disruptions in the past in its operations due to the concentration of its manufacturing operations in the State of Gujarat, it cannot assure that there will not be any significant developments in these regions in the future that may adversely affect its business, results of operations and financial condition.

Outlook

VMS TMT is primarily engaged in the manufacturing of Thermo Mechanically Treated Bars (TMT Bars). The company also deals in scrap and binding wires, which are sold within Gujarat and other states. The company is supported by an experienced and professional management team along with a workforce of 230 permanent employees as of July 31, 2025. On the concern side, the company derives a significant portion of its revenue from operations from its top ten customers and loss of any of these customers or a reduction in purchases by any of them could adversely affect its business, results of operations, cash flows and financial condition. Moreover, the company is dependent on a retail licence agreement with Kamdhenu for sale of TMT bars and the agreement is non-exclusive in nature. If the retail licence agreement with Kamdhenu is terminated, it may face difficulties in retaining its network of distributors and dealers that distribute its products, which could materially and adversely impact its business, results of operations and financial condition. 

The issue has been offering 1,50,00,000 shares in a price band of Rs 94-99 per equity share. The aggregate size of the offer is around Rs 141.00 crore to Rs 148.50 crore based on lower and upper price band respectively. Minimum application is to be made for 150 shares and in multiples thereon, thereafter. On performance front, during Fiscal 2025, the company’s revenue from operations declined by 11.77%, from Rs 87,295.77 lakh in Fiscal 2024 to Rs 77,019.10 lakh in Fiscal 2025. Moreover, profit after tax of the company improved from Rs 1,346.84 lakh in Fiscal 2024 to Rs 1,541.84 lakh in Fiscal 2025. 

With the installation of a thirty-ton electric induction furnace, its power requirement has increased significantly from 4 MW to 22 MW, making electricity a critical operational expense for its TMT Bars manufacturing. Currently, its power requirements are met through the state power grid, but the rising cost of electricity has necessitated a strategic shift towards renewable energy to manage costs and ensure long-term sustainability. Meanwhile, by integrating solar energy into its manufacturing process, the company aims to improve cost efficiency, energy security, and sustainability. This transition aligns with industry trends and regulatory frameworks that encourage renewable energy adoption, while also opening opportunities for green certifications, government incentives, and a stronger appeal to environmentally conscious clients. To maximize the benefits of solar power, it will implement efficient energy management systems that optimize power utilization and ensure seamless integration with its production processes.