B.S. Sponge IPO

Strengths · 8

• 01All manufacturing sits in one integrated set-up across 47.19 hectares in Raigarh, Chhattisgarh, running from iron ore conversion into sponge iron through to finished pipes and bars.
• 02A 67 MW captive power plant met 96.01% of the facility's total operational power requirement in FY2026, against 98.14% in FY2025.
• 03Revenue from operations grew from Rs 1,494.39 crore in FY2024 to Rs 2,187.82 crore in FY2025 and Rs 2,592.52 crore in FY2026.
• 04Profit after tax rose from Rs 143.95 crore in FY2024 to Rs 158.43 crore in FY2025 and Rs 171.11 crore in FY2026.
• 05No single product dominates: sponge iron gave 41.52% of FY2026 revenue, HR coils 17.21%, TMT bars 12.42%, ferro alloys 9.09% and billets and slabs 9.00%.
• 06Customer spread is wide for a steel maker, with the top 10 customers at 17.32% of FY2026 revenue from operations and the largest customer at 4.12%.
• 07Net working capital was 37 days in FY2026 and the interest coverage ratio was 4.75 times.
• 08New value-added lines scaled up in FY2026, with ERW pipe and tube sales at 41,589 TPA against 14,296 TPA in FY2025 and wire rod sales of 11,579 TPA in the first year of that product.

Risks · 10

• 01Every manufacturing operation is carried out at the one facility in Raigarh, Chhattisgarh, so any disruption at that site stops the whole business.
• 02Raw material cost was 73.67% of revenue from operations in FY2026, 74.03% in FY2025 and 68.41% in FY2024, which leaves profit exposed to coal, iron ore, pellet and manganese ore prices.
• 03The top 10 suppliers accounted for 68.91% of raw materials purchased in FY2026, 75.91% in FY2025 and 78.92% in FY2024.
• 04The central region gave 74.87% of FY2026 revenue from operations and all revenue comes from domestic sales, with no export cushion.
• 05Sponge iron and HR coils together were 58.73% of FY2026 revenue from operations, so a fall in demand for these two products would hit a majority of sales.
• 06Margins have narrowed as the business grew: operating EBITDA margin was 14.39% in FY2026 against 19.08% in FY2024, and PAT margin was 6.60% against 9.63%.
• 07Return on equity fell from 37.88% in FY2024 to 29.61% in FY2025 and 24.18% in FY2026, and return on capital employed from 29.68% to 22.90% over the same years.
• 08Total borrowing was Rs 770.99 crore at 31 March 2026 against net worth of Rs 714.82 crore, a debt-equity ratio of 0.97 times.
• 09Net cash generated from operating activities fell to Rs 144.07 crore in FY2026 from Rs 300.91 crore in FY2025, while investing outflow was Rs 239.24 crore in FY2026.
• 10The entire stated use of the fresh issue is repayment of borrowings of Rs 650.00 crore, not new capacity, and the Rs 200.00 crore offer for sale goes to selling shareholders whose cost of acquisition is Rs 0.15 to Rs 0.17 per share or nil.

B.S. Sponge Limited is a Kolkata-registered steel maker that runs all its manufacturing from a single integrated site at Taraimal, post office Gerwani, Tamnar, in Raigarh district of Chhattisgarh. The facility is spread across 47.19 hectares and holds sponge iron kilns, induction furnaces in the steel melting shop, hot rolling mills for TMT bars, wire rods and hot strips, a tube mill, submerged arc furnaces for ferro alloys and captive power plants in one set-up. The company was incorporated in 2000 and has a corporate office at Lodhipara Chowk, Raipur.

The product range covers the steel value chain. Semi-finished products are sponge iron and billets and slabs. Finished products are thermo-mechanically treated bars, hot rolled coils, wire rods, electric resistance welded pipes and tubes, and ferro alloys that are mainly silico manganese. Sponge iron gave 41.52% of revenue from operations in FY2026, HR coils 17.21%, TMT bars 12.42%, ferro alloys 9.09%, billets and slabs 9.00%, ERW pipes and tubes 7.02% and wire rods 1.99%. Part of the output is consumed inside the company for its own downstream products and the rest is sold in the market.

FY2026 production was 7,29,918 TPA of sponge iron, 3,10,057 TPA of billets and slabs, 1,48,419 TPA of hot rolled coils, 74,523 TPA of TMT bars, 42,129 TPA of ERW pipes and tubes, 33,564 TPA of ferro alloys and 12,080 TPA of wire rods. Wire rods and ERW pipes are new lines: wire rod production started in FY2026 and ERW pipe production rose from 16,059 TPA in FY2025 to 42,129 TPA in FY2026.

Sales are made to third-party steel makers, re-rollers, pipe manufacturers, fabricators and other industrial customers, through direct institutional sales and a network of traders, distributors and dealers. End-use industries include steel manufacturing, construction and infrastructure, residential and commercial development, agriculture, and the making of wires, cables, fasteners, nails, fencing products, springs and welding electrodes. All revenue is domestic. In FY2026 the products reached 20 states and three union territories, with the central region of Chhattisgarh, Madhya Pradesh and Uttar Pradesh accounting for 74.87% of revenue from operations.

The plant is supported by a 67 MW captive power plant as on the date of the draft red herring prospectus, which met 96.01% of the facility's total operational power requirement in FY2026. The company reports a single business segment, manufacturing of iron and steel products, and operates only in India. It has no subsidiary and no group company as on the date of the draft red herring prospectus. The company plans a brownfield expansion at the existing facility and a new greenfield integrated steel plant called the Nawapara Facility.

The industry

India is the world's second-largest steel-consuming nation, with finished steel demand estimated at 159.8 million tonnes in 2025, about 9.3% of global steel demand of 1,718.2 million tonnes, according to the CRISIL report in the draft red herring prospectus. Global crude steel production stayed broadly stable at around 1.8 to 1.9 billion tonnes between CY20 and CY25, while India's crude steel production rose from 100.3 million tonnes in CY20 to 164.9 million tonnes in CY25, a CAGR of 10.5%. The report attributes this to rising infrastructure investment, manufacturing expansion, urbanisation and higher domestic steel consumption. B.S. Sponge operates in Chhattisgarh, which the report calls the steel capital of India.

Customer concentration: The top five customers gave 10.88% of FY2026 revenue from operations against 15.08% in FY2025, and the top 10 customers 17.32% against 24.39%.