Evaluating Bansal Wire Industries Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Bansal Wire Industries Ltd and present you with the exclusive IPO details.

About the Issue  

Bansal Wire Industries Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Rs 5. The IPO price range is set between Rs 243 and Rs 256 per equity share, resulting in a total issue size of Rs 745 crore at the upper price band.  

The IPO is scheduled to commence on July 03, 2024, and will conclude on July 05, 2024. The market lot size for the IPO is 58 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 754 shares or a total investment of Rs 1,93,024 assuming the upper price band.

Objects of the Issue  

Considering that the offer is exclusively a fresh issue, it is important to note that the company will directly profit from the offer proceeds. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Repayment or prepayment of all or a portion of certain outstanding borrowings availed by the company and subsidiary

2. Funding the working capital requirements of the company

3. General corporate purposes

Promoter holding  

Arun Gupta, Anita Gupta, Pranav Bansal and Arun Kumar Gupta HUF are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 95.78 per cent in the company.

Company profile  

The company markets and sells its products under the brand name ‘BANSAL,’ which has a strong reputation in the market. Bansal Wire Industries Ltd, along with its subsidiary Bansal Steel & Power Ltd, offers over 3,000 SKUs across three broad segments including high-carbon steel wire, mild steel wire (low-carbon steel wire), and stainless-steel wire.

The company will also be adding a new segment of speciality wires through a manufacturing plant in Dadri, which will help it grow and expand its market presence in the coming fiscal years. It operates from four established manufacturing facilities in the National Capital Region of India, with three facilities in Ghaziabad (Uttar Pradesh) and one in Bahadurgarh (Haryana).

While it has built a network to ensure nationwide presence across all regions of India, the company is currently present in 22 states and 6 union territories through its dealer distribution network.

The company exports its products to several countries through 14 global representatives, including Bangladesh, Brazil, France, Germany, Israel, Italy, the Netherlands, South Korea, South Africa, Sri Lanka, Turkey, the United Kingdom, the United States of America, and Vietnam. In Fiscal 2024, export turnover was significant, with Europe and the U.S. markets collectively accounting for more than 70 per cent of the total exports during that fiscal year.

Financials  

The company has consistently achieved growth in both its top line and bottom line over the past few years. Its profit figures could have been even stronger if not for the substantial interest costs. The company plans to use a significant portion of the net proceeds from its IPO for loan repayment, which will help reduce its debt and subsequently improve its bottom line.

Valuation and outlook  

The issue is priced with a P/BV ratio of 7.72 times, calculated using its Net Asset Value (NAV) of Rs 33.14 as of March 31, 2024. When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 41.

Given the peer comparison, there are other listed stocks with lower valuations and potentially higher return ratios. However, considering the company's consistent financial performance and the strong demand for its IPO in the grey market, investors are advised to consider a cautious, moderate subscription to the offering, focusing on the potential for listing gains.