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We are dependent on a retail licence agreement with Kamdhenu Limited for sale of TMT bars and the agreement is non-exclusive in nature. Pursuant to this Agreement, we have paid a royalty of Rs. 208.57 lakhs, Rs. 654.83 lakhs, Rs. 610.66 lakhs and Rs. 535.45 lakhs, respectively, representing 0.98%, 0.85%, 0.70% and 0.61% of our 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. We have derived 95.99%, 91.63%, 94.06% and 96.85% of our 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 Limited is terminated, we may face difficulties in retaining our network of distributors and dealers that distribute our products, which could materially and adversely impact our business, results of operations and financial condition.
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Our business and profitability are substantially dependent on the availability and cost of our raw materials and we are dependent on third party suppliers for meeting our raw material requirements which are on purchase order basis. Our raw material`s consumption accounted for 82.58%, 70.25% 87.86% and 96.63% of our total expenses for the three months period ended June 30, 2025 and the Fiscals 2025, 2024 and 2023, respectively. Any disruption to the timely and adequate supply of raw materials, or volatility in the prices of raw materials may adversely impact our business, results of operations and financial condition.
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Royalty payments under our agreement dated November 7, 2022, with Kamdhenu Limited may impact our profitability. We have paid royalty of Rs. 208.57 lakhs, Rs. 654.83 lakhs, Rs. 610.66 lakhs and Rs. 535.45 lakhs, representing 0.98%, 0.85% 0.70% and 0.61%, of our total revenue from operations for the three month period ended June 30, 2025, and Fiscal 2025, Fiscal 2024, and Fiscal 2023, respectively. Any increase in such royalty payments may adversely impact our business, results of operations, and financial condition.
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We derive a significant portion of our revenue from operations from our top ten customers, with our single largest customer contributing 30.19%, 30.11%, 29.09% and 28.55% of our 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 our business, results of operations, cash flows and financial condition.
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We do not have long-term arrangements with any of our customers, distributors or dealers. Any termination of our current arrangements with our customers, distributors or dealers could materially and adversely affect our business, results of operations and financial condition.
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We rely on our distributors for the distribution of our TMT Bars with whom we do not have any exclusive formal arrangement. Any significant loss of our distribution network or failure by our distributors to effectively sell or market our products could have an adverse impact on our business, results of operations, and financial condition.
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Our Company primarily manufactures TMT bars contributing 95.99%, 91.63% 94.06% and 96.85% of our revenue from operations in the three months period ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. The demand and pricing of TMT Bars is volatile and sensitive to the cyclical nature of the industries it serves including raw material prices. A decrease in TMT Bar prices or sales may have a material adverse effect on our business, results of operations, prospects and financial condition.
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Our 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 our significant outstanding debt and financial obligations and our inability to meet our financial obligations may limit our ability to pursue our business and could adversely affect our business, financial condition, results of operations and cash flows.
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We have entered into related party transaction with our Group Companies and a few our promoter group companies and will continue to enter into related party transactions. We cannot assure you that such transactions, individuals or in the aggregate, will not have an adverse effect on our business, financial condition, cash flows and results of operations.
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We have experienced negative operating cash flows of Rs. (2,241.88) lakhs, Rs. (1,793.82) lakhs and Rs. (1,134.76) lakhs during three months period ended June 30, 2025, Fiscal 2025 and Fiscal 2023, respectively .
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One of our Group Company `VMS Industries Limited` was subjected to the penalties imposed by the BSE Limited amounting to Rs. 2,65,500. During the period ended September 30, 2021 and the financial year ended March 31, 2022, our Group Company, VMS Industries Limited ("VMS Industries") was found to be in non-compliance under Regulation 33 and Regulation 23(9) of the SEBI LODR Regulations respectively. Further, in the past, there have been disciplinary action imposed by SEBI or stock exchanges against one of our Promoters. We cannot assure you in the future there will no such action or regulatory proceeding initiated against us.
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The names of Eternal Motors Private Limited and Subodhkumar Ajitkumar Jain, members of our Promoter Group of our Company were published in the list of Wilful Defaulters. Any future adverse regulatory actions or penalties against the aforesaid entity and the individual or entities associated with the Promoter Group may negatively impact the Company`s reputation and business operations.
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Our manufacturing facility and our sales are concentrated in Gujarat in India, where we derived 98.93%, 96.71%, 98.75% and 97.42% of our revenues from operations in the three months period ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. Any significant social, political, economic or seasonal disruption, natural calamities or civil disruptions in Gujarat could have an adverse effect on our business, results of operations and financial condition.
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Our Company has ceased operation of its MS Pipes facility located at Bhavnagar, Gujarat which may impact the financial conditions.
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We have in the past entered into related party transactions and may continue to do so in the future.
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We face competition from national and local players and our inability to compete effectively may have a material adverse impact on our business, results of operations and financial condition.
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We are subject to strict quality requirement and regular quality inspections by Kamdhenu Limited, our brand licensor, and any failure to comply with quality standards may lead to cancellation of our retail license agreement with Kamdhenu Limited. In addition, our business may expose us to potential product recalls and returns, which could adversely affect our results of operation, goodwill and the marketability of our products. Further, we may be exposed to potential product liability claims which could adversely affect our results of operation, goodwill and the marketability of our products.
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Our success largely depends upon the knowledge and experience of our Promoters, Directors, Key Managerial Personnels and Senior Management Personnels as well as our ability to attract and retain personnel with technical expertise. Our inability to retain our Promoters, Directors, Key Managerial Personnels and Senior Management Personnels or our inability to attract and retain other personnel with technical expertise could adversely affect our business, results of operations and financial condition.
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Our annual actual production for the three months period ended June 30, 2025 and the Fiscal Years 2025, 2024 and 2023 was 35,741 MT, 1,26,065 MT, 1,60,321MT and 1,61,807MT respectively, resulting in capacity utilisation of 71.48%, 63.03%, 80.16% and 80.90% for the three-month period ended June 30, 2025, and for the Fiscals 2025, 2024, and 2023, respectively. Under-utilization of our manufacturing capacities and an inability to effectively utilize our expanded manufacturing capacities could have an adverse effect on our business, future prospects and future financial performance. Our inability to accurately forecast demand for our products may have an adverse effect on our business, results of operations and financial condition.
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Our business is dependent and will continue to depend on our manufacturing facility, and we are subject to certain risks inherent in steel manufacturing process. The manufacturing process may require our employees and labourers to work under potentially dangerous circumstances. Any slowdown or shutdown in our manufacturing operations that could interfere with our operations could have an adverse effect on our business, results of operations and financial condition.
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Exchange rate fluctuations may adversely affect our results of operations as a portion of our expenditures are denominated in foreign currencies.
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Certain of our immovable properties are leased. If we are unable to renew existing leases or relocate our operations on commercially reasonable terms, there may be an adverse effect on our business, financial condition and operations.
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We may not be able to optimally utilise our backward integration to enhance and support our business which may affect our business, results of operations and financial condition.
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We may be subject to industrial unrest and increased employee costs, which may adversely affect our business and results of operations.
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We do not have an information security and disaster recovery system in place. Further any failure or disruption of our IT systems may adversely affect our business, results of operations and financial condition.
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Certain legal proceedings involving one of our Independent Directors could adversely affect our reputation, business, financial condition and results of operations.
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We use fleet of trucks provided by third party transportation and logistics service providers for delivery of our products to our customers as well as raw materials to our manufacturing facility. Any delay in delivery of our products or raw materials or increase in the charges of these entities could adversely affect our business, results of operations and financial condition. We also may be exposed to the risk of theft, accidents and/or loss of our products in transit.
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We are dependent on third parties for the supply of utilities, such as water, gas and electricity and any disruption in the supply of such utilities could adversely affect our manufacturing operations.
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Pricing pressure from our customers may adversely affect our gross margin, profitability and ability to increase our prices, which may in turn have a material adverse effect on our results of operations and financial condition.
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Our EBITDA and PAT margins are lower in comparison to our peers.
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Our financial performance may be adversely affected if we are not successful in forecasting customer demands, managing our inventory levels. Our inventory turnover ratio has decreased significantly. The inventory turnover ratio for the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 was 5.45, 6.45, 8.60 and 12.60 respectively.
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We have substantial capital expenditure and working capital requirements and may require additional financing to meet those requirements, which could have an adverse effect on our results of operations and financial condition.
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Certain of our loan facilities include prepayment clauses under which prepayment or early repayment (in full or part) may trigger payment of a penalties.
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We could incur losses under our purchase orders with our customers or be subjected to disputes or contractual penalties as a result of delays in delivery or failures to meet contract specifications or delivery schedules which may have a material adverse effect on our business, results of operations and financial condition.
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We have incurred indebtedness, and an inability to comply with repayment and other covenants or including variation in the interest rates under our financing agreements could adversely affect our business and financial condition.
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Our contingent liabilities could materially and adversely affect our business, results of operations and financial condition.
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We may not have sufficient insurance coverage to cover our economic losses as well as certain other risks, not covered in our insurance policies, which could adversely affect business, results of operations and financial condition. The insured assets as a percentage of fixed assets for the three months period ended June 30, 2025 and Fiscal 2025, Fiscal 2024 and Fiscal 2023 was 96.25%, 98.64%, 79.54% and 80.72% respectively.
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There are outstanding legal proceedings against our Company, Promoters, Directors, Key Managerial Personnels, Senior Management Personnels and our Group Companies. Any adverse decision in such proceedings may render us/them liable to liabilities/penalties and may adversely affect our business, results of operations and financial condition.
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We are unable to trace some of the historical records of our Company pertaining to RoC compliance for past periods. We cannot assure you that legal proceedings or regulatory actions will not be initiated against our Company in future in relation to such untraceable records.
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There have been instances of discrepancies/errors/non-filings and statutory non compliances in the past under Companies Act. We have been imposed fines/penalties amount to Rs.27.39 lakhs on our Company and other applicants for the suo-moto applications filed by our Company to rectify the non-compliances in the past. We may be subject to legal proceedings or regulatory actions by statutory authorities and our business, financial condition and reputation may be adversely affected.
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Delay/ default in payment of statutory dues may attract penalties and in turn have an adverse impact on our financial condition.
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We do not have documentary evidence for the educational qualification of certain Promoters of our Company.
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Our Promoters and Promoter Group have extended personal guarantees as well as corporate guarantee with respect to loan facilities availed by our Company and have provided their property as collateral security for loan facilities availed by our Company. Revocation of any or all of these personal guarantees or withdrawal of such property may adversely affect our business operations and financial condition.
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Non-compliance with and changes in, safety, health, environmental laws and other applicable regulations in India, may adversely affect our business, results of operations and financial condition.
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We have filed a trademark application for our corporate logo. We also rely on a combination of trade secret and contractual restrictions to protect our intellectual property. If we are unable to protect our intellectual property rights, our business, results of operations and financial condition may be adversely affected.
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We require various licenses and approvals for undertaking our businesses and the failure to obtain or retain such licenses or approvals in a timely manner, or at all, may adversely affect our business, results of operations and financial condition.
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After the completion of the Issue, our Promoters will continue to collectively hold substantial shareholding in our Company.
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Certain unsecured loans have been availed by us which may be recalled by lenders.
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Conflicts of interest may arise out of common pursuits between our Company and our Promoter Group/ Group Companies.
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Our Group Companies have incurred losses and may continue to do so in the future.
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Our manufacturing process involve processes that can cause personal injury and loss of life, severe damage to and destruction of property and equipment, which could result in incurring material liabilities, loss of revenues and increased expenses.
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Changing laws, rules and regulations and legal uncertainties, including reduction in import duties on steel, adverse application of corporate and tax laws, may adversely affect our business, results of operations and prospects.
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Any variation in the utilisation of the Net Proceeds would be subject to certain compliance requirements, including prior shareholders` approval.
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Our funding requirements and the proposed deployment of Net Proceeds have not been appraised by any bank or financial institution or any other independent agency. There is no assurance that the objects of the Issue will be achieved within the time frame expected or at all, or that the deployment of the Net Proceeds in the manner intended by us will result in any increase in the value of your investment.
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The requirements of being a publicly listed company may strain our resources.
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Our inability to successfully implement some or all our business strategies in a timely manner or at all could have an adverse effect on our business.
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If we do not continue to invest in new technologies and equipment, our machines and equipment may become obsolete and our production costs may increase relative to our competitors, which may have an adverse impact on our business, results of operations and financial condition.
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Any downgrade of our credit ratings could adversely affect our business and the non-availability of credit ratings or a poor rating may restrict our access to capital and thereby adversely affect our business, financial conditions, cash flows and results of operations.
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We might infringe upon the intellectual property rights of others and any misappropriation of our intellectual property could harm our competitive position.
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Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
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If we are unable to establish and maintain an effective internal controls and compliance system, our business and reputation could be adversely affected.
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Information relating to the installed manufacturing capacity, actual production and capacity utilisation of our manufacturing facility in India included in this Red Herring Prospectus are based on various assumptions and estimates and future production and capacity may vary.
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Certain sections of this Red Herring Prospectus contain information from the Dun & Bradstreet Report which we commissioned and purchased and any reliance on such information for making an investment decision in the Issue is subject to inherent risks.
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We have in this Red Herring Prospectus included certain Non-GAAP Measures that may vary from any standard methodology that is applicable across the TMT Bar industry and may not be comparable with financial information of similar nomenclature computed and presented by other companies.
