Choice Equity Broking IPO report on Hariom Pipe Industries
Hyderabad based steel product manufacturer, Hariom Pipe Industries Ltd. (HPIL), is coming up with an IPO to raise Rs. 130cr, which opens on 30th Mar. and closes on 5th Apr. 2022. The price band is Rs. 144 - 153 per share. The IPO only comprises of fresh issue of shares. From the net proceeds, Rs. 50cr will be utilized to fund the capital expenditure; Rs. 40cr will be used to fund the working capital requirement of the company. Residual funds will be used for general corporate purposes. In Dec. 2020, the company converted certain preference shares/loans into equity shares at a price of Rs. 36 per share. Moreover, in Mar. - May 2021, HPIL allotted certain equity shares on preferential basis to a group of individual investors at a price of Rs. 36 per share.
Valuation and Outlook
At the higher price band, HPIL is demanding an EV/S multiple of 1.4x (to its FY21 sales), which is at discount to the peer average of 1.7x. Annualizing the H1 FY22 revenue, the demanded EV/S multiple is less than 1x, thus the issue is attractively priced. With infrastructure creation being one of the key themes of the government to revive the economy, we feel that there will be no dearth of demand for HPIL’s products. However, being a commodity play, we assign a “Subscribe with Caution” rating for the issue.
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