Nashik-headquartered Rishabh Instruments IPO subscribed 73% on its debut

The offer comprises a fresh issuance of shares worth Rs 75 crore and an offer-for-sale (OFS) of Rs 415.78 crore by promoters and investor.

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SACEF Holdings II, the only investor in the company, will be exiting Rishabh Instruments by selling entire shareholding of 70.10 lakh shares or 19.33 percent stake via OFS. SACEF is the subsidiary of South Asia Clean Energy Fund, an India-focused clean energy private equity fund.

The company has already mopped up Rs 147.2 crore via anchor book on August 29, a day before the issue opening. Sundaram Mutual Fund, HDFC Mutual Fund, Bandhan Mutual Fund, Nippon Life, Quant Mutual Fund, Aditya Birla Sun Life Insurance, and Tata Multicap Fund were some of investors in the company via anchor book.

With five manufacturing facilities, Rishabh Instruments involved in designing, developing, manufacturing and supplying electrical automation devices; metering, control and protection devices; portable test and measuring instruments; and solar string inverters. It caters to power, automotive and industrial sectors.

Also read Moneycontrol's Exclusive Note on Rishabh Instruments IPO

In Nashik, Maharashtra, it has two manufacturing facilities. The expansion of the Nashik manufacturing facility I will be done through fresh issue proceeds.

Most analysts recommended subscribing the public issue for medium-to-long term given the unique business, though valuations are high and return ratios are weak.

At upper price band, the company is valued at 33.7x FY23 PE multiple and 3.5x FY23 P/BV on post-issue capital. The company doesn’t have any listed peers in India. "Taking into consideration weak cash flows and low return ratios, the valuations are slightly stretched," SBI Securities said.

However, "being a unique business, the business may command a scarcity premium and long-term investors are recommended to subscribe to the issue. Listing gains are likely to remain tepid," the brokerage said.

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The company is technologically advanced and comes up with nearly 6-12 new products every year with widespread operations across 100 countries. At the same time risks like manufacturing dependencies, overseas operations, etc. has to be kept in mind, said Sushil Finance.

Keeping in mind the favourable and unfavourable factors and also a higher valuation, high risk investors investors may look at medium to long term
investment in the company, the brokerage advised.

On the financial front, the revenue from operations grew at a CAGR of 20.85 percent during FY21-FY23, while the EBITDA margin dropped 216 bps on-year to 13.35 percent in FY23 and net profit margin fell 178 bps to 8.57 percent during the same period.

Even the return on capital employed (ROCE) declined to 13.77 percent in FY23 from 15.20 percent in FY22 and return on equity (ROE) fell to 12.39 percent from 14.58 percent, but debt-to-equity ratio improved to 0.26 from 0.28 in the same period.