Rashi Peripherals IPO: Should you subscribe to the Rs 600-crore issue?

The net proceeds from the IPO worth Rs 326 crore will be used for prepayment or scheduled re-payment of certain outstanding borrowings and Rs 220 crore for funding working capital requirements. The remaining funds will be used for general corporate purposes

Rashi Peripherals IPO was fully subscribed on the first day of bidding. Veteran investor Madhu Kela-backed public offer has received favourable ratings from several domestic brokerages owing to reasonable valuation and the company’s objective of reducing its debt. However, falling profit and high debt-to-equity ratio are major concerns.

The company is a national distribution partner for global technology brands in India for information and communication technology (ICT) products. They primarily operate the following two business verticals — Personal Computing, Enterprise and Cloud Solutions (PES) and Lifestyle and IT Essentials (LIT).

Offer details

The Rs 600-crore IPO is entirely a fresh issue of 1.93 crore shares. In the pre-IPO placement, Volrado Venture Partners Fund-III-BETA and ace investor Madhusudan Kela's wife Madhuri Madhusudan Kela invested Rs 100 crore and Rs 50 crore, respectively. The price band for the issue has been fixed at Rs 295-311 per share.

Rashi Peripherals IPO: 10 things to know before subscribing to the Rs 600-crore issue

The net proceeds from the IPO worth Rs 326 crore will be used for prepayment or scheduled re-payment of certain outstanding borrowings and Rs 220 crore for funding working capital requirements. The remaining funds will be used for general corporate purposes.

The promoters of the company are Krishna Kumar Choudhary, Sureshkumar Pansari, Kapal Suresh Pansari, Keshav Krishna Kumar Choudhary, Chaman Pansari, Krishna Kumar Choudhary (HUF), and Suresh M Pansari HUF. Promoters have 89.65 percent shareholding in the company, while Volrado and Kela are the only public shareholders in the company with a 10.35 percent stake.

Anchor investors

A day before the IPO opening, the company mopped up Rs 180 crore from institutional investors. Several institutional investors participated in the anchor book launched by the company for a day, including Ashoka India Equity Investment Trust, Whiteoak Capital, ICICI Prudential Mutual Fund, Volrado Venture Partners Fund and Bandhan Mutual Fund.

Further, Bajaj Allianz Life Insurance, Aditya Birla Sun Life Insurance, SBI General Insurance Company, Singularity Growth Opportunities Fund, and Authum Investment and Infrastructure also invested in the company through an anchor book.

Rashi Peripherals IPO opens on Feb 7, institutional investors pick Rs 180 crore shares in anchor book

Financials

The company reported a 32 percent on-year fall in net profit at Rs 123 crore for the year ended March 2023. Revenue from operations during the same period grew by 1.5 percent to Rs 9,454 crore, while EBITDA (earnings before interest, tax, depreciation, and amortisation) slipped by 14.8 percent to Rs 253 crore.

However, the net profit for the six months ended September FY24 rose 6.9  percent on-year to Rs 72 crore. The revenue in H1FY24 came in at Rs 5,468.5 crore growing 8.8 percent over a year-ago period. As of November 30, 2023, the company had outstanding borrowings of Rs 1,569.36 crore on a consolidated basis. The debt-to-equity ratio stood at 1.82 times.

What brokerages have to say

Anand Rathi: Subscribe for long-term

“At the upper price band, the company is valued at a P/E of 16.6x with a market cap of Rs 2,049.48 crore post-issue of equity shares. We believe that valuations of the company are fairly priced and recommend a ‘Subscribe-Long Term’ rating to the IPO,” said analysts at Anand Rathi.

BP Wealth: Subscribe for listing gains

On the financial performance front, the company’s Revenue and EBITDA grew at a CAGR of 26.3 percent and 10.1 percent respectively during the FY2021-23 period.

“Given a highly competitive environment and thin margins of the business, we recommend investors to ‘Subscribe’ to the issue for listing gains,” said analysts at BP Wealth.

SBI Securities: Subscribe

The company is raising Rs 600 crore through fresh issues, among which the company will use part of the proceeds to reduce debt (Rs 326 cr) and fund working capital requirements.

“This will significantly reduce the Debt/Equity ratio to 0.8x on post-issue capital. We recommend investors subscribe to the issue for long-term investment horizon,” said analysts at SBI Securities.

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