The VMS TMT IPO is set to open on September 17, 2025, aiming to raise ₹148.50 crores entirely through fresh issue of shares. While the company has published its detailed prospectus, many investors simply want clarity on three aspects – what are the key strengths, what are the risks, and what could be the long-term prospects. Here’s a focused view.
Earlier we did complete review of VMS TMT IPO and this article covers majorly the strenghts, risks and what investors need to do.
Key Strengths of VMS TMT IPO
- Strategic Location Advantage – The company’s plant in Gujarat is close to scrap sources and transport links, reducing freight and raw material costs.
- Brand Tie-Up with Kamdhenu – Retail license agreement to sell TMT bars under “Kamdhenu NXT” brand in Gujarat adds credibility and recall.
- Strong Dealer Network – As of July 2025, the company had 227 dealers, strengthening its distribution reach in Gujarat.
- Debt Repayment from IPO Proceeds – Around ₹115 crores from the issue will go towards reducing debt, easing interest costs and improving profitability.
- Reasonable Valuation Post IPO – At ~14× P/E post issue, the valuation looks closer to industry average, making it more attractive than the pre-IPO level.
Risks Investors Should Watch
- High Leverage – Current debt/equity ratio is ~6.06×. Even after repayment, the company will continue with significant borrowings.
- Revenue Decline – FY24 to FY25 saw a 12% drop in revenues, pointing to demand pressures or input cost volatility.
- Thin Margins – PAT margin of ~1.91% is quite low, leaving little buffer during downturns.
- Regional Concentration – Nearly 98% of sales come from Gujarat, posing concentration risk.
- Commodity Dependency – Profitability depends heavily on steel, scrap, and energy price cycles.
Long-Term Prospects
- Scalability: With debt repayment and brand partnerships, the company has scope to expand beyond Gujarat if execution is strong.
- Profitability Levers: Margin expansion is possible if raw material prices stabilize and operational efficiency improves.
- Growth Challenges: Sustained growth will depend on geographical diversification and reducing reliance on commodity cycles.
- Valuation Comfort: Post-IPO valuation appears reasonable, but long-term returns will hinge on how effectively debt is managed and revenues revived.
Conclusion
The VMS TMT IPO offers strengths such as brand tie-ups, cost advantage, and debt reduction, but also carries high risks due to leverage, thin margins, and regional dependence. For investors, this IPO looks suitable for those seeking short-term listing gains or cautiously optimistic on steel demand in Gujarat. However, for long-term investors, execution on debt control and expansion will be critical before this becomes a strong portfolio bet.
Subscribe with Caution – Good for potential listing gains, but watch for risks if holding long term.
Disclaimer: This article is for informational purposes only and is not a recommendation to buy, sell or hold any shares or apply for any IPO. The securities market is subject to risks, and readers should consult their financial advisor before making any investment decisions.
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