The leading polymer pipes and fittings manufacturer has already garnered Rs 150 crore from anchor investors on December 17, ahead of its initial public offering.
The Rs 500-crore initial public offering of Prince Pipes and Fittings has subscribed 28 percent on the first day of bidding, December 18.
The public issue has received bids for 55.58 lakh equity shares against IPO size of 1.97 crore shares, data on exchanges showed.
The reserved portion of retail investors was subscribed 52 percent and that of non-institutional investors 2.7 percent while the category set aside for qualified institutional buyers subscribed 5 percent.
Prince Pipes is a leading manufacturer of polymer pipes and fittings in India, offering products for varied applications in plumbing, irrigation, and soil, waste and rain water (SWR) management. The company markets its products under two brand names: Prince Piping Systems; and Trubore. With six strategically located manufacturing plants, the company has strong presence in North, West and South India.
"At the upper price band of Rs 178, the company is available at P/E of 23.5x on FY19 which is 22 percent discount to its peers and we have a subscribe rating with short to medium term perspective," said Geojit.
However, Anand Rathi believes that the valuation is slightly expensive considering the debt levels in the capital structure as compared to the industry peers coupled with low margins. Even though the management believes that margins would likely increase going forward, the brokerage has a cautious approach towards the issue due to following reasons:
One is the outstanding litigations against the company. The promoters of the company are partners in Aditya Developers, who has JV with Montana Developers in 2010. The promoter group of the company have contingent liabilities of Rs 904 crore through aditya developers towards Montana developers in damages. Any adverse outcome in these litigations could have an impact on the business, said the brokerage.
Second is that as compared to industry, the company has slightly higher levels of debt in the capital structure. "Even though the company is working on the margins and the management believes that the margins are likely to improve in the upcoming quarters, we remain skeptical about the same," Anand Rathi said.
The leading polymer pipes and fittings manufacturer already garnered Rs 150 crore from anchor investors on December 17, ahead of its initial public offering.
The company intends to utilise the net proceeds from fresh issue for the repayment or prepayment of certain outstanding loans, financing the project cost towards establishment of a new manufacturing facility, upgradation of equipment at the manufacturing facilities and general corporate purposes. The proceeds of the offer for sale will release pledged shares by promoters.The promoter and the promoter group has 90.06 percent stake in the company before the issue.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.