Ratnaveer Precision Engineering IPO fully subscribed within an hour. Should you apply?

The firm mopped up Rs 49.5 crore from six anchor investors, including Societe Generale, Sixteenth Street Asian Gems Fund, Saint Capital Fund, Coeus Global Opportunities Fund and Leading Light Fund VCC - The Triumph Fund, on September 1.

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The stainless steel product manufacturer, with four manufacturing units in Gujarat, makes finished sheets, washers, solar roofing hooks, pipes and tubes. Stainless steel is a value-added product with high corrosion-resistant properties.

There are no peer companies that have similar product profiles. The company’s P/E multiple at a higher price band, after adjusting for post-IPO fully diluted paid-up equity, comes out to 19.0x (to its FY23 EPS of Rs. 5.16), which seems fully priced with respect to its performance.

Only a handful of analysts are covering the issue.

The company's top and bottom lines have been growing at a respectable rate and it reported an operating margin in the single digits, analysts at Choice Broking said.

“Since the market in which the company operates is fragmented and where small and medium-sized unorganized players dominate, considering its growth outlook with the growing competition, we assign a ‘subscribe with caution’ rating for the issue,” they said.

Backed by an expansion of product portfolio, the company's revenue from operations increased at a CAGR of 17.3 percent from FY20 to FY23, with a 12.4 percent annual growth in FY23. EBITDA grew at a CAGR of 22.9 percent from FY20 to FY23.

Similarly, reported PAT showed a CAGR of 51.6 percent from FY20 to FY23, with a substantial 164.3 percent increase in FY23.

This is facilitated by a less-than-proportional increase in expenses, especially employee benefit expenses, which have increased merely by 0.9 percent YoY in FY23.

EBITDA margin showed substantial improvement, reaching 9.5 percent in FY23. The increase of 306 basis points from FY22 indicates enhanced operational efficiency and cost control, said Choice Broking. One basis point is a one-hundredth of a percentage point.

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