Vraj Iron

Integrated and well-established manufacturing setup.

Manufacturing plants are strategically located, supported by robust architecture, leading to cost efficiencies and a stable supply chain.

Quantity and Average price of Coal procured by the company.

Diversified product mix with strong focus on value added products.

Experienced Promoter, Board, and management team.

Consistent track record of growth and financial performance.

Both of its existing manufacturing facilities are concentrated in a single region i.e. Raipur and Bilaspur, Chhattisgarh. Further its Expansion Project is also being implemented at Bilaspur, Chhattisgarh and hence the company faces geographical concentration related risks.

100% of its revenue is from sale of the company steel products such as TMT Bars, MS Billets, Sponge Iron & others related items. Volatility in the demand and pricing in the iron and steel industry is common and is cyclical in nature. A decrease in steel prices may have a material adverse effect on its business, results of operations, prospects and financial condition.

The company has had experienced negative cash flows from operating, investing and financing in the recent past, and its may have negative cash flows in the future. The company net cash flow for the period / years are set forth in the table below.

Capital expenditure to the tune of Rs. 1,295 million required towards the "Expansion Project" at Bilaspur would be funded out of the Net Proceeds of the Issue. Hence, the company has not made any alternate arrangements for the same. Any shortfall in raising / meeting the same could adversely affect its growth plans, operations and financial performance.

Total capital expenditure for the Expansion Project is Rs.1,645 million and we have incurred Rs. 1,020 million till June 03, 2024. The company has not yet placed orders / made payment in relation to Rs. 625 million to be incurred for the Expansion Project. Any delay in placing the orders or inability of the vendors to provide the plant and machineries or complete the civil and related works etc. in a timely manner, or at all, the same may result in time and cost over-runs.

If the company is unable to successfully implement its Expansion Project, including Captive Power Plant, the company`s results of operations and financial condition could be adversely affected.

A majority of its Directors of the Company do not have prior experience of being a director of a public listed company.

The company does not have long-term agreements with its customers and the company derives a significant portion of its revenues from its top 10 (ten) customers. The loss of, or a significant reduction in the revenues the company receive from, one or more of these customers which would have a material adverse effect on its business, results of operations and financial condition.

Its Directors and the company Promoter, namely, Gopal Sponge and Power Private Limited have provided personal and corporate guarantees to certain loan facilities availed by it, which if revoked may requires alternative arrangements guarantees, repayments of amounts due or termination of the facilities. Total sanctioned and outstanding amount of such loans are Rs.1,651.33 million and Rs. 492.99 million.

Its lenders have charge over the company movable and immovable properties in respect of finance availed by it. Its inability to meet the company obligations under our debt financing arrangements could adversely affect its business, results of operations and cash flows.

Its Promoters Gopal Sponge and Power Private Limited, Kirti Ispat Private Limited and Utkal Ispat Private Limited and its Group Company Vraj Metaliks Private Limited are engaged in activities which is similar to its business. This may be a potential source of conflict of interest for it and which may have an adverse effect on its business, financial condition and results of operations.

Its Promoters will continue to retain a majority shareholding in it after the Issue, which will allow them to exercise significant influence over the company.

There have been past instances of procedural delays by the Company in filing of certain GST returns and making payments under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and Employee State Insurance Act, 1948 during Fiscals 2023, 2022, 2021 and for the nine-months period ended December 31, 2023 is approximately 237.45 million. Any future instances of such delays may result in levy of penalties on the Company from the respective government authorities and in turn may have a material adverse impact on its financial condition and cash flows.

The company may be unable to follow the new industry trends such as Steel scrap recycling policy, Decarbonising the Steel Industry, Green Steel and Carbon Capture Utilisation and Storage (CCUS) and Enhancing Sustainability and ESG Focus.

The company faces substantial competition from domestic steel producers, which may affect its prospects. Developments in the competitive environment in the steel industry, such as consolidation among its competitors, could have a material adverse effect on the company competitive position and hence its business, financial condition, results of operations or prospects.

Inadequate or interrupted supply and price fluctuation of its raw materials could adversely affect the company`s business, results of operations, cash flows, profitability and financial condition.

The company is predominantly dependent on the sale of its steel products. An inability to anticipate and adapt to evolving customer preferences and demand for particular product, or ensure product quality or reduction in the demand of its steel products may adversely impact demand for its products, brand loyalty and consequently the company business prospects and financial performance.

Its existing manufacturing plants are critical to the company`s business operations. The unexpected loss, shutdown or slowdown of operations or under- utilisation of production capacities at any of its manufacturing plants could have a material adverse effect on its business, results of operations and financial condition.

Its loan agreements with lender bank have several restrictive covenants and certain unconditional rights in favour of the lenders, which could influence the company ability to expand, in turn affecting its business and results of operations.

The company is subject to strict quality requirements and any product defect issues or failures by it or its raw material suppliers to comply with quality standards may lead to the cancellation of existing and future orders, recalls and exposure to potential product liability claims.

Information relating to the installed manufacturing capacity of its existing manufacturing plants included in this Red Herring Prospectus is based on various assumptions and estimates and future production and capacity may vary.

Certain of its Directors hold 991,665 Equity Shares in the Company comprising approximately 4.01% of the total issued, subscribed and paid-up equity share capital of the Company and are therefore, interested in the Company`s performance in addition to their remuneration and reimbursement of expenses. There can be no assurance that its Directors will exercise their rights as Shareholders to the benefit and best interest of the Company.

The company is required to pay penalty to suppliers of coal in the event the company lift below specified percentage of the annual contracted capacity.

Failures to manage its inventory could have an adverse effect on the company`s net sales, profitability, cash flow and liquidity.

The company depends on third parties for its suppliers, logistics and transportation needs. Any disruptions in the same may adversely affect the company`s operations, business, cash flows and financial condition.

Its Promoters/Director, viz. Vijay Anand Jhanwar and Gopal Sponge and Power Private Limited, has interest in the Company other than reimbursement of expenses incurred, dividend payable and normal remuneration or benefits.

The company is dependent on its key management team and its success depends in large part upon the company`s Promoters. The loss of or its inability to attract or retain such persons could materially adversely affect its business performance.

There may have been certain instances of delays by one of its Promoters viz. Bhinaswar Commercial Private Limited in obtaining Credit Information Companies memberships, providing the details of the membership of the Credit Information Companies to RBI, as well as delay in submitting certificate of registration and filing returns, which could expose one of its Promoters viz. Bhinaswar Commercial Private Limited to certain penalties and restrictions.

Certain sections of this Red Herring Prospectus contain information from an industry report obtained from Care Edge Advisory, which the company has commissioned and paid for purposes of confirming its understanding of the industry exclusively in connection with the Issue. There can be no assurance that such third-party statistical, financial and other industry information is either complete or accurate.

The company has acquired the Raipur Plant through a slump sale and have not obtained an independent valuation report prior to such acquisition.

The Company, its Promoters, its Directors and its Group Companies are parties to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on its business, results of operations and financial condition.

Key challenges in the global steel industry such as global slowdown, availability of raw materials and price volatility, Trade barriers and environmental concerns and regulations that are beyond its control may have an adverse effect on the company`s business and results of operations.

Its ability to pay dividends in the future will depends upon the company future earnings, financial condition, cash flows, working capital requirements, capital expenditure and restrictive covenants in its financing arrangements.

The company has certain contingent liabilities that have not been provided for in the Company`s financials which if materialised, could adversely affect its financial condition.

The Company has in the past entered into related party transactions and may continue to do so in the future.

Its funding requirements and the proposed deployment of Net Proceeds have not been appraised by a public financial institution or a scheduled commercial bank and its management will have broad discretion over utilization of the Net Proceeds. The company cannot assure you that use of the Net Proceeds to meet its future capital requirements, fund its growth and for other purposes identified by the company management would result in actual growth of its business, increased profitability or an increase in the value of its business and your investment.

The company is heavily dependent on machinery for its operations and any disruption to the same may cause interruption in business.

If the company is not able to obtain, renew or maintain its statutory and regulatory licenses, registrations and approvals required to operate its business, it may have a material adverse effect on the company`s business, results of operations and financial condition.

The company may not continue to grow at same rate as compared to its recent past years in terms of Revenue, Profit and Net Worth which may have an adverse effect on its business, results of operations and financial condition.

If the company does not continue to invest in new technologies and equipment, its technologies and equipment may become obsolete and the company cost of processing may increase relative to its competitors, which may have an adverse impact on the company`s business, results of operations and financial condition.

Its efforts to ensure high capacity utilization in the company plants may result in oversupply of its products which may adversely affect the company profitability.

Its operations could be adversely affected by strikes, work stoppages or increased wage demands by the company employees or any other kind of disputes with its employees.

The company appoint contract labour for carrying out certain of its operations and its may be held responsible for paying the wages of such workers, if the independent contractors through whom such workers are hired default on their obligations, and such obligations could have an adverse effect on its results of operations, cash flows and financial condition.

Competition from other materials or changes in the products or manufacturing processes of customers that use its steel products, could reduce market prices and demand for steel products and thereby reduce its cash flow and profitability.

Failures to comply with environmental laws and regulations by it could lead to unforeseen environmental litigation which could impact the company`s business and its future net earnings.

A shortage or non-availability of essential utilities such as electricity and water could affect its manufacturing operations and have an adverse effect on its business, results of operations and financial condition.

Any failures to protect or enforce its rights to own or use trademarks and brand names and identities could have an adverse effect on its business and competitive position.

The company has incurred indebtedness and an inability to comply with repayment and other covenants in its financing agreements could adversely affect the company`s business, results of operations, financial condition and cash flows.

Its may be unable to comply with changes in environmental, health and safety, labour laws and other applicable regulations.

Its business prospects and continued growth depends on the company ability to access financing at competitive rates and competitive terms, which amongst other factors is dependent on its credit rating.

Failures to procure and/ or maintain adequate insurance cover in connection with its business may adversely affect the company operations and profitability.

Orders placed by customers may be delayed, modified or cancelled, which may have an adverse effect on its business, financial condition and results of operations. Further any defaults or delays in payment by a significant portion of its customers, may have an adverse effect on cash flows, results of operations and financial condition.

Certain of its existing shareholders together may be able to exert substantial voting control over the Company after completion of the Issue, which may limit your ability to influence the outcome of matters submitted for approval of its shareholders.

The company could be harmed by employee misconduct or errors that are difficult to detect and any such incidences could adversely affect its financial condition, results of operations and reputation.

Significant differences exist between Ind AS and other accounting principles, such as Indian GAAP, IFRS and U.S. GAAP, which may be material to investors` assessments of its financial condition, result of operations and cash flows.

The Issue Price, market capitalization to total income multiple, market capitalization to earnings multiple, price to earnings ratio and enterprise value to EBITDA ratio based on the Issue Price of the Company, may not be indicative of the market price of the Equity Shares on listing.

Pursuant to listing of the Equity shares, its may be subject to pre-emptive surveillance measures like Additional Surveillance Measures ("ASM") and Graded Surveillance Measures ("GSM") by the Stock Exchanges in the order to enhance market integrity and safeguard the interest of the investors.