Liotech Industries IPO DHRP Analysis

SME IPO Analysis  |  BSE SME Platform  |  Fixed Price Issue

Based on Draft Prospectus dated May 21, 2025

STATUS: DRAFT PROSPECTUS FILED  |  Issue Type: Fixed Price (Fresh Issue + OFS)  |  Exchange: BSE SME Platform  |  Issue Price: To Be Announced  |  Incorporated: June 2020

Liotech Industries Limited is a Rajkot, Gujarat-based manufacturer and trader of steel hardware structures and accessories. Incorporated in June 2020 as a private limited company and converted to public limited in April 2024, the company specialises in the production of door hardware kits and components   including a wide range of hinges (cut & butt, parliament, W, Z, duck hinges), gate hooks, aldrops, locks, handles, tower bolts, shelf bottoms, and related accessories. The product portfolio spans over 150 distinct specifications.

Beyond core manufacturing, Liotech also trades supplementary products such as door stoppers, magnets, table brackets, bed lifters, and bell magnets. The company serves a B2B customer base and markets its products across approximately 9 states and Union Territories in India, with the majority of revenue generated in Gujarat. It does not sell directly to retail consumers.

The manufacturing facility is located at Kotdasanagani, Shapar, Rajkot, Gujarat, spanning 12,632 square feet. The facility holds ISO 9001:2015 certification for its Quality Management System and has received a certificate of compliance from UK Certificate and Inspection, with products certified under EU Construction Products Regulation (CPD/CPR) standards   a meaningful quality credential for export aspirations.

The company's promoters, Hitesh M. Bhuva and Hetal Hitesh Bhuva, have experience in the iron and steel industry. The business has scaled rapidly from ₹849.58 lakhs in revenue in FY2023 to ₹4,067.78 lakhs in FY2025   a near five-fold increase in just two years   driven primarily by a shift from trading toward manufacturing activity.

Revenue mix has shifted dramatically from trading to manufacturing:

• Manufacturing revenue grew from 68.30% of total revenue (FY2023) to 93.68% (FY2025), indicating a fundamental transition from a trading business to a production-oriented business.

• Trading revenue has declined as a share from 31.70% (FY2023) to just 6.32% (FY2025). This mix shift carries positive margin implications.

Key Basics

This is a Fixed Price SME IPO under Regulation 229(1) of SEBI ICDR Regulations, being made on the BSE SME Platform. It comprises both a Fresh Issue (growth capital to the company) and an Offer for Sale (promoter exit). The issue price has not been determined at the Draft Prospectus stage.

Issue Type	Fixed Price Issue   Fresh Issue of 9,00,000 shares + Offer for Sale of 2,23,000 shares. Total: 11,23,000 Equity Shares.
Total Issue Size	Up to 11,23,000 Equity Shares of face value ₹10 each
Fresh Issue	Up to 9,00,000 Equity Shares where proceeds go to the company for capex, debt repayment, and working capital
Offer for Sale	Up to 2,23,000 Equity Shares (1,11,500 by Mrs. Pushpaben Mansukhbhai Bhuva + 1,11,500 by Mr. Mansukhbhai Kadvabhai Bhuva)   proceeds go to selling shareholders
Face Value	₹10 per Equity Share
Issue Price	To be determined by the Company in consultation with Lead Manager (Fixed Price   not book built)
Pre-Issue Share Capital	30,00,000 Equity Shares of ₹10 each (paid-up capital ₹300 lakhs)
Post-Issue Share Capital	Up to 39,00,000 Equity Shares of ₹10 each   public will hold at least 25% per SCRR Rule 19(2)(b)(i)
Promoter Shareholding (Pre-IPO)	Hitesh Bhuva (25.00%), Vipul Bhuva (25.00%), Hetal Bhuva (12.50%), Pushpaben Bhuva (12.50%), Femina Bhuva (12.50%), Mansukhbhai Bhuva (12.49%)   total 99.99%
Selling Shareholders & Cost	Mrs. Pushpaben Mansukhbhai Bhuva (1,11,500 shares, WAC ₹20/share) | Mr. Mansukhbhai Kadvabhai Bhuva (1,11,500 shares, WAC ₹0.00/share   gifted shares)
Listing Exchange	BSE SME Platform   not BSE Main Board or NSE
Lead Manager	Wealth Mine Networks Private Limited, Jamnagar (SEBI Reg: INM000013077)
Registrar	KFin Technologies Limited, Hyderabad
Offer Opens / Closes	Dates to be announced
Monitoring Agency	None required as issue size is below ₹50 crore (monitoring by Company's Audit Committee only)

SME IPO note: BSE SME listings have significantly thinner liquidity than main board stocks. A mandatory market maker provides two-way quotes but trading volumes can be very low. Investors should carefully consider exit liquidity risk before applying. The fixed price process means no price discovery; the company sets the price in consultation with the Lead Manager.

The Fresh Issue proceeds (from the 9,00,000 new shares) will flow to the company. The OFS proceeds (from the 2,23,000 shares) will go to the two selling promoters. Note that Mansukhbhai Kadvabhai Bhuva's shares were acquired as a gift (₹0 cost)   the exit premium on those shares at any listing price is effectively infinite.

Object	Amount (₹ lakhs)	% of Net Proceeds	Details
Capital Expenditure   Machinery	750.00	~43%	34 machines/dies at Rajkot unit incl. CNC Fiber Laser Cutters, Injection Moulding Machine, Power Press Machines, Die Sets
Repayment of Borrowings	265.00	~15%	ICICI Bank Cash Credit (₹90L) + ICICI Bank Term Loan 1 (₹80L) + ICICI Bank Term Loan 2 (₹95L)   total outstanding ₹329.16L as on May 14, 2025
Working Capital Requirement	700.00	~40%	Fund projected FY2026 net working capital gap of ₹1,549.90 lakhs   nearly double the FY2025 level of ₹810.15 lakhs
General Corporate Purpose		Up to 15%	Strategic initiatives, brand promotion, working capital exigencies   capped at 15% of gross fresh issue proceeds or ₹10 crore
Issue Expenses (Fresh Issue Share)		TBD	Lead manager fees, registrar, legal, printing, advertising, SEBI/BSE fees   apportioned between fresh issue and OFS

Key observations: The largest deployment (₹700 lakhs, ~40%) is working capital. The projected FY2026 net working capital requirement of ₹1,549.90 lakhs is nearly double the FY2025 level, driven by the expectation of a further revenue doubling in FY2026   an ambitious projection.

If revenue growth is slower than projected, working capital from IPO proceeds may be over-provisioned. Debt repayment of ₹265 lakhs will largely clear the ICICI Bank loans, improving the debt profile. The capex allocation of ₹750 lakhs for 34 pieces of machinery is well-specified with actual vendor quotations   a positive signal of planning quality.

Financial Performance

Note: All figures are in ₹ lakhs unless stated otherwise. The company's financial year runs April to March. Financial years shown are FY2023, FY2024, and FY2025 (the three most recent complete years).

Revenue from operations has grown from ₹849.58 lakhs in FY2023 to ₹2,786.30 lakhs in FY2024 and ₹4,067.78 lakhs in FY2025   a two-year CAGR of approximately 118.6%. This growth rate is exceptional but must be viewed in the context of a very small base and a very young company (incorporated June 2020). The shift from trading-dominated to manufacturing-dominated revenue is the structural driver.

Profitability

Metric	FY2023 (₹L)	FY2024 (₹L)	FY2025 (₹L)
Revenue from Operations	849.58	2,786.30	4,067.78
Total Income	849.58	2,787.03	4,068.62
Cost of Materials Consumed	735.40	2,534.74	3,508.93
Employee Benefits Expense	40.08	94.89	120.69
Finance Costs	6.66	13.60	32.02
Depreciation	35.84	53.36	64.84
Other Expenses	15.52	18.30	26.31
Profit Before Tax	44.28	378.89	560.18
Profit After Tax (PAT)	34.51	292.61	416.39
Net Profit Margin %	4.06%	10.50%	10.23%
EPS   Basic & Diluted (₹)	2.72	10.42	13.88

Profitability has scaled dramatically: PAT went from ₹34.51 lakhs (FY2023) to ₹292.61 lakhs (FY2024)   a 747% jump   and further to ₹416.39 lakhs in FY2025. Net margins have stabilised at approximately 10% after an initial low-margin FY2023. EPS has grown from ₹2.72 to ₹13.88 over two years   a compelling trajectory. Weighted average EPS over three years (weighted 3:2:1) is ₹10.87, which will be a key metric for valuation at the time of price determination.

Return Ratios

Metric	FY2023	FY2024	FY2025
Return on Net Worth (RONW) %	14.64%	46.58%	39.86%
Weighted Average RONW %	37.90%
Return on Capital Employed (ROCE) %	14%	39%	40%
Net Asset Value (NAV) per Share (₹)	18.58	22.37	34.82
Current Ratio	3.28	1.73	1.65
Debt-to-Equity Ratio	0.59	0.56	0.40
Net Profit Ratio	0.04	0.11	0.10

RONW of nearly 40% and ROCE of 40% in FY2025 are high-quality return metrics for a small manufacturing company. Debt-to-equity of 0.40x is improving and relatively conservative for a capital goods manufacturer. The current ratio of 1.65x is adequate. NAV per share has grown from ₹18.58 to ₹34.82 in two years, reflecting profit retention and equity value creation.

Cash Flow

Cash Flow	FY2023 (₹L)	FY2024 (₹L)	FY2025 (₹L)
Net Cash from Operating Activities	(71.25)	(51.51)	262.04
Net Cash from Investing Activities	(45.81)	(228.08)	(320.43)
Net Cash from Financing Activities	57.53	302.93	34.96
Net Change in Cash	(59.53)	23.34	(23.43)
Cash & Cash Equivalents (Year End)	1.57	24.91	1.48

Operating cash flow has turned positive in FY2025 (₹262.04 lakhs), recovering from two years of negative operating flows. This is an important improvement   the business now converts its reported profits into cash at the operating level. However, investing outflows remain heavy (₹320.43 lakhs in FY2025) reflecting ongoing capex for the manufacturing ramp-up.

Cash and cash equivalents are extremely thin (₹1.48 lakhs as of March 31, 2025)   the company is running on minimal cash buffer, which is a liquidity risk. Financing inflows from borrowings and share issuances have funded working capital. The IPO proceeds will materially change this cash position.

Balance Sheet Snapshot (March 31, 2025)

Balance Sheet Item	FY2023 (₹L)	FY2024 (₹L)	FY2025 (₹L)
Total Assets	401.58	1,408.80	1,977.47
Tangible Fixed Assets (PPE)	228.43	403.88	660.31
Inventories	85.62	436.15	715.23
Trade Receivables	62.66	486.29	590.71
Cash & Cash Equivalents	1.57	24.91	1.48
Share Capital	200.00	300.00	300.00
Reserves & Surplus	35.64	328.25	744.64
Net Worth (Equity)	235.64	628.25	1,044.64
Long-Term Borrowings	113.47	197.44	129.57
Short-Term Borrowings	24.91	157.47	292.32
Trade Payables (MSME)	10.62	293.59	365.14

The balance sheet has expanded dramatically   total assets grew from ₹401.58 lakhs to ₹1,977.47 lakhs in two years. Net worth has also grown substantially, from ₹235.64 lakhs to ₹1,044.64 lakhs, reflecting cumulative profit retention. An important flag: trade payables owed to MSME suppliers stand at ₹365.14 lakhs as on March 31, 2025   the company discloses this but shows nil interest paid beyond appointed date, suggesting timely payment so far. Total borrowings of ₹421.89 lakhs (₹329.57 lakhs bank + ₹132.15 lakhs unsecured from promoter Hitesh M. Bhuva) are manageable relative to net worth.

Revenue Composition and Business Mix

Revenue Type	FY2023 (₹L)	FY2023 %	FY2024 (₹L)	FY2024 %	FY2025 (₹L)	FY2025 %
Manufacturing	580.26	68.30%	2,043.75	73.35%	3,810.84	93.68%
Trading	269.32	31.70%	742.55	26.65%	256.94	6.32%
Total Revenue	849.58	100%	2,786.30	100%	4,067.78	100%

The most significant strategic fact in Liotech's financials is this mix shift: manufacturing has grown from 68.30% to 93.68% of revenue in two years. This is not incidental   it reflects a deliberate strategic transformation from a trading overlay business to a genuine manufacturing enterprise.

Manufacturing operations typically carry better gross margins than pure trading (where the company earns only a distribution margin). This mix shift, alongside revenue growth, is the likely explanation for why PAT margins expanded from ~4% to ~10%.

Customer concentration is high: the top 10 customers accounted for 91.43% of FY2025 revenue (₹3,719.18 lakhs). The top 5 customers alone accounted for 61.25% (₹2,491.43 lakhs). The top 1 customer accounted for 14.38% (₹585.10 lakhs). This concentration creates meaningful revenue risk if any major customer relationship deteriorates.

How Does It Compare to Peers?

The Draft Prospectus explicitly states: 'There are no listed companies in India and abroad that is engaged in developing a similar line of product solution to that of our company. Accordingly, it is not possible to provide a comparison of accounting ratios of industry with our Company.' For context on the broader steel sector P/E, the prospectus cites the 'Steel   Medium & Small' industry P/E range on BSE: highest 94.36x, lowest 1.32x, average 47.84x.

KPI	FY2023	FY2024	FY2025
Revenue from Operations (₹L)	849.58	2,786.30	4,067.78
PAT (₹L)	34.51	292.61	416.39
EPS   Basic & Diluted (₹)	2.72	10.42	13.88
Weighted Average EPS (₹)	10.87
RONW %	14.64%	46.58%	39.86%
Weighted Average RONW %	37.90%
NAV per share (₹)	18.58	22.37	34.82
Industry P/E Range (Steel SME, BSE)	1.32x to 94.36x	Average: 47.84x

At the FY2025 EPS of ₹13.88 and weighted average EPS of ₹10.87, a P/E in line with the industry average of 47.84x would imply an issue price of approximately ₹663 (on FY2025 EPS) or ₹520 (on weighted average EPS). However, actual pricing for a new SME IPO from a young company will factor in company size, listing premium expectations, and lead manager guidance. Investors should wait for the Prospectus with the actual price band to complete a proper valuation assessment.

Key Risks

•  Company is only 5 years old   very limited operating history: Incorporated in June 2020, Liotech is barely 5 years old. The explosive revenue growth is real but untested across a full economic or industry cycle. The company has no track record of sustaining performance through a sector downturn, demand shock, or raw material spike. All financial data covers a period of consistently rising steel demand and infrastructure investment in India.

• Extremely high customer concentration   top 10 customers = 91.43% of FY2025 revenue: The top 5 customers account for 61.25% of revenue, and the single largest customer accounts for 14.38%. Loss of even 2-3 major customers could reduce revenue by a third or more. The Draft Prospectus flags this as a key risk under Risk Factor 1.

• Critically thin cash position   only ₹1.48 lakhs in cash as of March 31, 2025: The company had just ₹1.48 lakhs in cash at year-end FY2025. For a business doing ₹4,067 lakhs in revenue (over ₹11 lakhs per day), this is an extremely thin liquidity buffer. Any payment delay from customers, or any short-term demand for loan repayment, could create a cash crisis. The company is entirely dependent on credit facilities and IPO proceeds for liquidity.

• Unsecured promoter loan of ₹132.15 lakhs from Hitesh M. Bhuva   repayable on demand: Mr. Hitesh Bhuva (Managing Director) has lent ₹132.15 lakhs to the company (as of March 31, 2025 balance sheet), with this amount listed as short-term unsecured borrowings. Unsecured loans from promoters/directors are typically repayable on demand. If this loan is called, the company would need to urgently arrange funds or use IPO proceeds for repayment. Risk Factor 10 explicitly flags this.

• Selling shareholder (Mansukhbhai Kadvabhai Bhuva) selling gifted shares at ₹0 cost: Mr. Mansukhbhai Kadvabhai Bhuva received his 3,74,900 shares as a gift from Mrs. Pushpaben Mansukhbhai Bhuva at ₹0 cost. He is selling 1,11,500 of these shares in the OFS. At any issue price above ₹10 (face value), the gain is effectively 100% on zero investment. Investors should be aware of this asymmetry.

• Negative operating cash flows in FY2023 and FY2024   only recently positive: The company had negative operating cash flows in both FY2023 (₹71.25 lakhs negative) and FY2024 (₹51.51 lakhs negative). FY2025 turned positive, but only one year of positive operating cash flow is not a long enough track record. If growth continues at the projected pace, working capital demands could again strain operating cash flows.

• Revenue growth projections for FY2026 imply near-doubling   extremely ambitious: The working capital projections assume revenue in FY2026 will grow to approximately ₹8,100 lakhs (implied by receivable growth from ₹590 lakhs to ₹1,240 lakhs at similar receivable days). This would mean near-doubling of revenue in one year after already growing 46% in FY2025. Such growth assumptions are material inputs into the working capital deployment of ₹700 lakhs.

• Intellectual Property Rights are 'objected' and not registered: Risk Factor 5 discloses that the IP rights used by the company (presumably brand name/logos) have been objected to by the IP authority and are not registered in the company's name. If IP claims are settled adversely, rebranding costs and loss of brand equity could arise.

• No industry report commissioned   industry data is general steel sector data: The Draft Prospectus does not contain a commissioned independent industry report. Risk Factor 13 flags that the company has relied on publicly available data for its industry overview. Investors lack a customised analysis of the door hardware fitting segment specifically.

• Heavy dependence on Gujarat   geographic concentration risk: Majority of revenue comes from Gujarat. Any economic slowdown, construction sector decline, or regulatory change specific to Gujarat could disproportionately affect the company.

• No supply agreements with raw material vendors: Risk Factor 2 states the company has not entered into long-term supply agreements with raw material suppliers. Steel price volatility and potential supply disruptions (particularly for specialty sheet metal) could affect margins and production continuity.

• Multiple auditor changes in 3 years: The company has changed statutory auditors twice in the three years preceding this Draft Prospectus   K.P. Parekh & Co. served until January 2024, B.B. Gusani & Associates from February to March 2025, and DGMS & Co. from April 2025. Frequent auditor changes at a pre-IPO stage warrant scrutiny.

• Related party transactions   significant remuneration and loans within Bhuva family: All KMPs (Managing Director Hitesh Bhuva, Director Hetal Bhuva, CFO Femina Bhuva, CS Pooja Jain) are family members or closely related. The ₹132.15 lakhs outstanding unsecured loan from Hitesh Bhuva, plus significant salary payments to the entire Bhuva family, means a large proportion of net earnings flow back to the promoter family in some form.

Positives

• Exceptional revenue growth: 5x in 2 years (₹849.58L → ₹4,067.78L): The revenue trajectory is striking. Growing from ₹849 lakhs to ₹4,067 lakhs in two years demonstrates genuine demand for the company's products and successful execution of the manufacturing ramp-up.

• PAT growth of 12x in 2 years and stable double-digit margins: Profit after tax grew from ₹34.51 lakhs (FY2023) to ₹416.39 lakhs (FY2025)   a 12x increase. Net margins have stabilised at approximately 10%, which is a respectable level for a small steel products manufacturer.

• Manufacturing mix now 93.68%   genuine manufacturer, not just trader: The shift from 68% manufacturing to 94% manufacturing over two years is a fundamental business quality improvement. Manufacturing businesses command better P/E multiples than pure trading businesses due to higher margins and differentiated products.

• Strong return ratios   RONW 39.86%, ROCE 40%, D/E 0.40x: The return metrics are strong for a company of this size and age. RONW of nearly 40% means the business generates ₹40 of profit per ₹100 of shareholder equity invested. The improving debt-to-equity ratio (from 0.59x to 0.40x) signals financial discipline.

• EU CPR compliance and ISO 9001:2015   export-ready quality credentials: UK Certificate and Inspection certification and EU CPR compliance are meaningful quality signals, particularly for companies with export aspirations. Most small SME manufacturers at this scale do not hold international quality certifications.

• No pending litigation   clean legal record: The Draft Prospectus discloses zero pending criminal, tax, statutory, regulatory, or civil litigation against the company, promoters, directors, or any associated entity. For a 5-year-old SME, this is a clean bill of health.

• No contingent liabilities   balance sheet is clean: As of March 31, 2025, the company has zero contingent liabilities. Combined with the declining debt-to-equity ratio, the balance sheet does not carry hidden risks.

• Fresh issue proceeds will fund genuine business expansion: Unlike a pure OFS, the ₹9,00,000 fresh shares create real new capital for the business   specifically for manufacturing capex (₹750 lakhs in 34 new machines), debt reduction (₹265 lakhs), and working capital (₹700 lakhs). All three are operationally justified.