Vibhor Steel Tubes opened its IPO subscription for retail investors on February 13 and got over 29 million shares bid within two hours of opening the issue. This is over eight times the offered shares. The company has set the price band at Rs 141 – 151 to raise Rs 72.17 crore. The bidding will close on February 15.
The minimum lot size for a retail investor is 99 shares summing to Rs 14,949 at the upper band of the IPO. The shares of the company will be listed on both the bourses, NSE and BSE.
The company has raised Rs 21.52 crore from the anchor investors by offering 1.4 million shares out of 4.7 million shares.
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The company manufactures, exports, and supplies steel pipes and tubes to a lot of heavy engineering companies. The company manufactures ERW pipes for application in water transport, oil, gas, and other non-toxic supplies; hot-dipped, galvanised pipes for application in agriculture and infrastructure; hollow section pipes in square and rectangular forms; primer painted pipes; and crash barriers for application in railways, highways, and roads.
According to the company, the net proceeds will be used for funding working capital requirements and general corporate purposes.
The company’s focus will remain on improving operating efficiencies through technology enhancements, which will strengthen the company’s competitive position. Investors can invest in this IPO with a medium- to long-term perspective, said Vishnu Kant Upadhyay, Assistant Vice President of Research and Advisory at Master Capital Services.
On the risk front, fluctuations in steel prices may have a material adverse impact on business. The company is largely concentrated in two states and is affected by various factors associated with these states. The company’s business is working capital intensive. Insufficient cash flows to meet required payments on working capital requirements may harm business. Derives a substantial portion of revenue from, a single customer, Jindal Pipes Limited and over 90% of revenue is derived from a single customer, said Master Capital Services in an IPO note.
“However, the rising debt cost in the last two years need to be monitored going forward. While the value-added steel products business entails front-loaded costs, the trajectory suggests higher risks in the initial phases, gradually transitioning to lower risks as operations mature. In terms of valuation, the upper band pricing translates to a P/E of 10.2x based on FY23 EPS. This valuation appears attractive, especially considering the company’s outperformance compared to its listed peers by a considerable margin in terms of both valuation and returns. We, therefore, give a “SUBSCRIBE” rating to the IPO,” said StoxBox in an IPO note.
Khambatta Securities is the book-running lead manager for the issue and Kfin Technologies is the registrar.
