The public issue of Vibhor Steel Tubes received decent response from all sorts of investors with over 8 times subscription so far on the first day of bidding. The public offer, which is entirely a fresh issue of shares, has received favourable ratings from several analysts because of its reasonable valuation, robust financials and its long-standing relationship with the Jindal group.
The business
Vibhor Steel Tubes is a manufacturer and exporter of mild steel/carbon steel ERW black and galvanised pipes, hallow steel pipes and cold-rolled steel strips/ coils. The company has a long-term agreement for six years with Jindal Pipes. Under the agreement, Jindal will provide orders with a minimum quantity of 1,00,000 tonnes per annum to fill the majority capacity of Unit I and Unit II of the company. The company has two manufacturing facilities in Raigad, Maharashtra, and Mahabubnagar, Telangana, and a warehouse in Haryana's Hisar.
The public issue
The price band for the Rs 72.17-crore issue, which opened for subscription on February 13 and will close on February 15, has been fixed at Rs 141-151 a share. It is entirely a fresh issue of shares. The anchor book opened for a day on February 12 with the company raising Rs 22 crore from Saint Capital Fund, Chhattisgarh Investments Ltd and Neomile Growth Fund-Series I.
The financials
In the six months ended September 30, 2023, the company's revenue stood at Rs 530.51 crore, net profit at Rs 8.52 crore and EBITDA at Rs 23.69 crore. In the same period, the PAT margin was at 1.61 percent, the EBITDA margin at 4.47 percent, the debt-to-equity ratio at 1.83 times, RoCE at 6.97 percent and RoE at 8.37 percent.
Also Read: Vibhor Steel Tubes IPO: 10 things to know before subscribing to Rs 72-crore issue
The company's revenue in FY23 rose 36 percent to Rs 1,113.12 crore from FY22. Profit after tax jumped 86 percent to Rs 21 crore on recovery from the Covid-19 pandemic.
Should you subscribe to the issue? Let's check out what brokerages have to say on the IPO...
Mehta Equities: Subscribe for listing gains
The key strength of the company comes from its association with Jindal Pipes enjoying a long-standing relationship with Jindal under the brand of Jindal Star. Along with this rationale, capacity expansion gives long-term visibility in terms of long-term.
“On valuation parse at the upper band, the issue is asking for a market cap of Rs 286 crore. Based on annualized FY 2024 earnings and fully diluted post-IPO paid-up capital, the company is asking a P/E of 16.8x which seems very reasonably priced by looking at its revenue and profit growth and even by comparison to its peers which are trading in the range of 30-40x on an average. There is good room for listing gains due to the valuation gap between listed peers and Vibhor Steel Tubes. Considering all the parameters, we are recommending investors to ‘Subscribe’ the issue from the listing perspective only,” said Rajan Shinde, research analyst.
Profit Mart: Subscribe for long-term
“We are confident that Vibhor Steel Tubes will deliver consistent performance and provide an excellent investment opportunity for investors with a long-term horizon. Hence, we recommend ‘Subscribe’ for long-term investment.” analysts said in a note.
Also Read: Vibhor Steel Tubes IPO subscribed 8 times, retail portion booked 12 times on Day 1
Mastertrust: Subscribe
“The company's focus will remain on improving operating efficiencies through technology enhancements which will strengthen its competitive position. Investors looking to invest can invest in this IPO with a medium to long-term perspective,” said an analyst.
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