NIFTY SME EMERGE

Happy Steels

• Happy Steels is coming out with an initial public offering (IPO) of 37,88,000 shares in a price band of Rs 62 -66 per equity share.
• The issue will open on July 09, 2026 and will close on July 13, 2026.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 6.20 times of its face value on the lower side and 6.60 times on the higher side.
• Book running lead managers to the issue are Share India Capital Services and Master Capital Services.
• Compliance officer for the issue is Isha Ghai.

Profile of the company

Happy Steels is an integrated manufacturer of Safety-Critical, Forged and Machined Transmission and Driveline components for On-highway vehicles, Off-highway vehicles, EV and Defence applications. The company’s product portfolio consists of wide range of Axles, Long Spline Shafts, Spindle and other related components that are critical of vehicle performance and safety. Over the years, the company has developed strong capabilities in manufacturing safety-critical, high strength and load-bearing components through a combination of forging, precision machining, and stringent quality control processes that are supplied to original equipment manufacturers (OEMs) and Tier-I suppliers in India and overseas.

Its manufacturing operations are supported by an integrated process covering raw material procurement, forging, heat treatment, machining, gear cutting, drilling, surface hardening, grinding, inspection and packing. These capabilities enable it to manufacture components with defined mechanical properties, dimensional accuracy and consistency, in line with customer specifications.

Its operations are engineering-driven and include capabilities such as reverse engineering of components, process design, validation and quality control. It works closely with its customers at various stages of the product lifecycle, including design finalisation, process development and serial production. Its in-house facilities for forging, machining, heat treatment and testing allow it to maintain control over quality parameters and production timelines.

Proceed is being used for:

• Capital expenditure towards purchase of additional plant and machinery for its existing manufacturing unit
• Repayment/ Prepayment of term loans to banks
• General corporate purpose

Industry overview

India has emerged as the fastest-growing economy in the world in recent years. Rising incomes, higher infrastructure spending, and supportive manufacturing incentives have together accelerated the automobile sector, making it a critical pillar of India’s growth story. This surge in demand has also encouraged the expansion of original equipment and auto component manufacturers, helping India build strong expertise in this space and enhancing global demand for Indian vehicles and components.

The Indian auto component industry recorded a turnover of Rs 6,73,000 crore ($78.74 billion) in FY25, registering a CAGR of 14% between FY20 and FY25. The sector is projected to achieve exports worth Rs 8,54,700 crore ($100 billion) by 2030, underscoring its global competitiveness. In FY25, exports stood at Rs 1,95,726 crore ($22.9 billion). North America remained the largest export destination with a 32% share, recording 8.4% growth, while Europe, with a 29.5% share, registered a 2.1% decline. Asia accounted for 26% of exports and witnessed robust growth of 15.1%. The key export items included drive transmission and steering, engine components, body and chassis parts, suspension systems, and braking components.

The Indian automobile sector recorded an inflow of huge investments from domestic and foreign manufacturers. Foreign Direct Investment (FDI) inflow in the sector stood at Rs 2,59,753.31 crore ($39.14 billion) between April 2000-June 2026 which is 5% of the total FDI inflows in India during the same period. The Government has reaffirmed its commitment towards EVs and its mission for 30% electric mobility by 2030. Budget announced customs duty exemption on the import of capital goods and machinery required for the manufacture of lithium-ion batteries that typically power EVs.

Pros and strengths

Integrated manufacturing enabling diversified product offerings with enhanced value addition: Its integrated manufacturing framework encompasses multiple stages of production, including raw material procurement, forging, heat treatment, precision machining, surface hardening, inspection and packing. This end-to-end integration enables it to exercise control over critical manufacturing parameters throughout the production cycle. By managing these processes in-house, it is able to manufacture a diversified range of transmission and driveline components across different sizes, specifications and applications. Integrated operations support the manufacture of both standardised and application-specific products, while enabling higher levels of value addition through controlled metallurgy, dimensional accuracy and surface characteristics.

Safety-Critical and Load-Bearing Products: The company manufactures components that are vital to vehicle performance and safety, serving automotive, defence, EV and off-highway applications. It manufactures safety-critical and load-bearing components that perform essential functions within vehicle driveline, axle and suspension systems. These components are directly involved in the transmission of torque, support of vehicle loads and maintenance of vehicle stability, and therefore play a vital role in overall vehicle performance and operational safety. Its products are designed to operate under high mechanical stresses, cyclic loading and demanding service conditions, including heavy payloads, variable terrains and continuous operation. Accordingly, its products require controlled forging, heat treatment and precision machining processes to achieve defined mechanical properties, dimensional accuracy and durability.

Quality assurance and standards: Its quality management systems are designed to ensure that products consistently meet customer specifications, applicable regulatory requirements and automotive industry standards. The company maintains a robust quality assurance system that encompasses multiple inspection and testing procedures throughout the manufacturing process to ensure compliance with stringent technical and quality standards.

Risks and concerns

Heavy reliance on top 10 customers: The company’s top ten customers contribute majority of its revenues from operations. Its top ten customers have contributed 67.47%, 72.17% and 81.14% of its revenue from operations for financial year ended March 31, 2026, March 31, 2025 and March 31, 2024 respectively based on Restated Financial Statements. Further, it does not have long-term firm commitment agreements or exclusive supply contracts with its customers. Its customers generally source components based on their current requirements and may reduce, defer or discontinue purchases at their discretion, without obligation to maintain historical order volumes. Any decline in demand from one or more customers or a shift in their sourcing strategy could have an adverse impact on its revenues, cash flows and operational performance.

High dependence on top 10 suppliers: A significant portion of its purchases is sourced from a limited number of suppliers, with its top ten suppliers. Its top ten suppliers accounted for around 91.73%, 96.04% and 92.08% of its total purchases for the financial years ended March 31, 2026, 2025 and 2024, respectively, based on its Restated Financial Statements. Also, it does not have long-term or firm commitment arrangements with any of its suppliers. Any disruption in supplies, deterioration in relationships, or inability of such suppliers to meet its requirements on commercially acceptable terms could adversely affect its production schedules, operating margins and business operations.

Volatility in raw material and energy costs may impact margins: Its manufacturing operations require continuous procurement of raw materials such as steel bars and other allied inputs, as well as significant consumption of power, fuel and oils for operating its forging, machining and heat treatment processes. Prices of these inputs are subject to volatility driven by factors including domestic and international demand-supply dynamics, availability of raw materials, fluctuations in commodity and energy markets, changes in government policies, duties and import regulations, transportation and logistics costs and macroeconomic conditions.

Outlook

Happy Steels is engaged in the manufacturing and sales of different types of Automative parts. The company’s product portfolio consists of wide range of axles, long spline shafts, spindle and other related components that are critical of vehicle performance and safety. The company has established long-term relationships with several customers, including OEMs and Tier-I suppliers, supported by its focus on consistent quality, timely delivery and ability to manufacture products across multiple specifications. On the concern side, as its business is concentrated among a limited number of suppliers, it may experience a reduction in purchases or disruption in operations if its losses one or more of these suppliers due to disputes, regulatory restrictions, financial difficulties or other reasons. Further, a portion of its revenue is derived from its growing export operations that are concentrated in select overseas markets, particularly Indonesia, and are subject to risks arising from changes in international trade policies, government regulations and geopolitical developments.

The company is coming out with a maiden IPO of 37,88,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 62-66 per equity share. The aggregate size of the offer is around Rs 23.49 crore to Rs 25.00 crore based on lower and upper price band respectively. On performance front, total income for the FY 2026 stood at Rs 9657.31 lakh whereas in FY 2025 the same stood at Rs 8252.43 lakh representing an increase of 17.02%. Its profit after tax for the year increased from net profit of Rs 234.19 lakh in FY 2025 to net profit of Rs 710.23 lakh in FY 2026.

Meanwhile, the company intends to selectively expand its export footprint for certain products, subject to customer qualification, regulatory compliance and logistics feasibility. Export markets provide opportunities for diversification of revenue streams and alignment with global supply chain sourcing trends, while maintaining a balanced mix between domestic and international customers. It intends to optimise its product mix by allocating manufacturing capacity based on value contribution, production complexity and volume visibility. Products that combine higher volumes with efficient cycle times and process stability are prioritised for continuous production, while higher-value components are scheduled to optimise machine utilisation and reduce changeover inefficiencies.