The initial public offer of Prince Pipes and Fittings has been subscribed 2.21 times so far on its final day of bidding, December 20.
Retail investors remained at the forefront as their portion set aside (10 percent of total IPO size) has been oversubscribed 1.89 times.
The Rs 500-crore public issue has received bids for 4.37 crore equity shares against offer size of 1.97 crore shares (excluding anchor book), exchanges data showed.
The reserved portion of qualified institutional buyers subscribed 3.54 times and that of non-institutional investors 1.21 times.
The polymer pipes and fittings manufacturer already raised Rs 150 crore from eight anchor investors on December 17, the day before issue opened for subscription on December 18.
Prince Pipes IPO opens on December 18; 10 things to know
The issue consists a fresh issue and offer for sale of Rs 250 crore each. Promoters will reduced their stake by selling shares through an offer for sale and intend to use the proceeds for repayment of the outstanding bonds issued by Express Infra Projects LLP.
The fresh issue money and proceeds from the pre-IPO placement would be used for repayment of certain outstanding loans, financing the project cost towards establishment of a new manufacturing facility and upgradation of equipment at company’s manufacturing facilities.
Umesh Mehta, Head of Research at Samco Securities, advises investors to avoid this IPO as the company doesn't have any powerful product portfolio moat compared to its peers. "It has a high debt to equity ratio while its competitors operate with negligible debt and EBITDA margin (12.2 percent) is the least among its peers (15-20 percent)," he said.
Should you subscriber or avoid?
"The company has not disclosed Q2 FY20 quarterly performance in their red herring prospectus filed with Registrar of Companies and the promoters have also pledged 35 percent of total equity share capital with Express Infra Projects, which is in the realty space. However, the management has communicated that they will eventually release the pledge post the IPO," he added.
Also, the company along with its book runners and lead managers have received complaints in relation to non-disclosure of certain litigation in the DRHP filed with SEBI, Mehta said
On the valuation front too, Prince Pipes is fairly valued compared to Finolex Industries, therefore it provides little margin of safety. "Hence, retailers should avoid investing in this IPO for the long-term," he stated.
But Astha Jain of Hem Securities said looking after below reasons along with reasonable pricing, she recommended that investors with risk appetite can 'subscribe' the issue.
"Company is bringing the issue at P/E multiple of approximately 24 at higher end of price band of Rs 177-178 per share. Company with its strong brands in the pipes and fittings segment with over 30 years’ experience has multiple industry awards and accolades," she said.
"Company has comprehensive product portfolio across polymers serving diverse end-use applications with strategically located manufacturing facilities. However there are concerns related to shares pledge & certain outstanding litigations," she added.
Prince Pipes markets its products under two brand names: Prince Piping Systems; and Trubore. Its products are used for varied applications in plumbing, irrigation, and soil, waste and rain water (SWR) management.
Company has an advantage of being one of the leading organised players in this highly fragmented market. Company had a market share of approximately 5 percent in Fiscal 2019 and are amongst the top six organised players, which collectively have a total market share of 49 percent in Fiscal 2019.
"Company has a strong management team led by Jayant Shamji Chheda, its Chairman and Managing Director and one of company's promoters, who has more than three decades' experience in the pipes segment. Parag Jayant Chheda, one of company’s executive Directors and one of company’s Promoters, has more than two decades’ experience in the pipes and fittings segment," Astha Jain said.
Company has six strategically located manufacturing plants, which gives it a strong presence in North, West and South India. The total installed capacity of company's six existing plants is 2,41,211 tonnes per annum as at October 2019.
Company plans to set up a new manufacturing plant in Sangareddy (Telangana), with a total estimated installed capacity of 51,943 tonnes per annum. Company plan to commence production at the Telangana plant in fiscal 2021.