Whalesbook
CMR Green Technologies is proceeding with its ₹630 crore initial public offering (IPO), structured entirely as an offer-for-sale (OFS). This move comes at a challenging time, with market conditions causing many companies to postpone their public debuts. Furthermore, recent IPOs with a heavy OFS component have faced investor skepticism.
Management Optimism Amidst Uncertainty
Despite these headwinds, CMR Green Technologies' CMD, Mohan Agarwal, expressed confidence. "We're confident in our business; we've seen a lot of storms and we have weathered those in the past," he stated. Roadshows indicated positive reception from institutional investors, bolstering the company's decision to launch.
Debt Funding for Expansion
The company is notably eschewing a fresh issue component for its ₹630 crore IPO, despite plans for significant capacity expansion. Management cited debt as a more efficient funding mechanism when leverage is manageable, pointing to CMR's current debt-equity ratio of 0.76. "Our business generates cash, and with that generation of cash, we are usually able to fund our expansion plans," they added.
Market Position and Financials
CMR Green Technologies is a dominant player in India's aluminium recycling sector, claiming approximately 45% market share. Its operations are reportedly four times larger than its closest domestic competitor. However, compared to listed peers, the firm exhibits lower EBITDA and profit margins. Management attributes this to the volume-driven nature of aluminium recycling, emphasizing that return on capital employed and operational efficiency are more critical metrics in this industry. "In aluminium recycling, scale matters. We focus heavily on process control, sourcing efficiency and technology adoption to improve yields and margins," the company stated.
The company primarily serves automobile manufacturers and tier-1 auto ancillaries, with ongoing expansion into beverage can recycling and applications related to solar and electric vehicles.
Shareholding and Subscription Details
Initially, promoters intended to sell 4.29 crore equity shares. This has been revised down to 3.28 crore shares. Promoters Mohan Agarwal, Gauri Shankar Agarwala HUF, and Mohan Agarwal HUF will collectively offload 64.59 lakh shares. Investor Global Scrap Processors is divesting a significant portion, offering 2.6 crore shares.
The IPO window opens for public subscription on June 2 for the anchor book and closes on June 5 for the general issue.