IPO Analysis: Hariom Pipe Industries Ltd
IPO Rating: Invest for long-term
About the issue:
Hariom is an integrated manufacturer of Mild Steel (MS) Pipes, Scaffolding, HR Strips, MS Billets, and Sponge Iron. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises a fresh offer of shares worth Rs 130.05 crore, according to its red herring prospectus. The price band of the issue has been fixed at Rs 144 to Rs 153 per equity share. The IPO opening date is March 30, 2022, and it will be closing on April 5, 2022. The issue will be listed on the exchange on April 13, 2022. The IPO market lot size is 98 shares. A retail-individual investor can apply up to a maximum of 13 lots (1,274 shares or Rs 194,922).
The objects of the offer are:
Funding capital expenditure requirements.
Funding the working capital requirements of the company.
General corporate purposes.
Hariom Pipe Industries IPO Details:
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IPO Opening Date
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Mar 30, 2022
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IPO Closing Date
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Apr 5, 2022
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Issue Type
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Book Built Issue IPO
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Face Value
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₹10 per equity share
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IPO Price
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₹144 to ₹153 per equity share
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Market Lot
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98 Shares
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Min Order Quantity
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98 Shares
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Listing At
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BSE, NSE
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Issue Size
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8,500,000 Eq Shares of ₹10
(aggregating up to ₹130.05 Cr)
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Fresh Issue
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8,500,000 Eq Shares of ₹10
(aggregating up to ₹130.05 Cr)
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QIB Shares Offered
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Not more than 30%
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Retail Shares Offered
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Not less than 35%
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NII (HNI) Shares Offered
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Not less than 35%
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About the company:
Hariom Pipe Industries Limited manufactures iron and steel products including Mild Steel (MS) Pipes, Scaffolding, HR Strips, MS Billets, and Sponge Iron. The company sells and markets MS Pipes in the western and southern parts of India under the brand name "Hariom Pipes". As part of the B2B sales, the company sells MS Pipes and Scaffoldings to specific developers and contractors. Hariom Pipe Industries has more than 200 dealers and distributors for selling its products. The company is located in Hyderabad, Telangana.
The company operates two plants, one at Mahabubnagar District in Telangana (Unit I) that manufactures finished steel products from iron scrap and sponge iron and the second plant at Anantapur District, Andhra Pradesh (Unit II) that only manufactures Sponge Iron.
Hariom Pipe Industries has more than 200 employees, 1400 plus Retailers distribution network, 150 plus manufacturing specifications, and a total of 300832 MT manufacturing capacity.
Competitive Strengths:
Integrated nature of our operations.
Environment-friendly manufacturing process.
The strategic location of manufacturing units.
Cost advantage in manufacturing products.
Competitive pricing of the products.
Experienced & Qualified Team.
Company Financials:
For the period FY19 to FY21, the revenue has grown with a CAGR of nearly 38 per cent. Also, the EBITDA has grown exponentially with a CAGR of 42 per cent and the PAT too has jumped with a CAGR of 37.35 per cent. Also, the company has a modest EBITDA margin of 13.72 per cent in FY21.
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Summary of financial Information (Restated Consolidated)
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Particulars
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For the year/period ended (Rs in Lakhs)
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30-Sep-21
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31-Mar-21
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31-Mar-20
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31-Mar-19
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Total Assets
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19,881.96
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17,374.03
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13,967.72
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10,335.11
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Total Revenue
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20,116
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25,482.31
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16,115.05
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13,391.56
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Profit After Tax
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1,286.90
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1,513.20
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790.83
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802
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Recommendation:
The company uses iron ore to produce sponge iron which is then processed across various stages to manufacture its final products viz. MS Pipes and Scaffolding making its manufacturing process cost-effective. The integrated nature of operations is one of the major strengths and differentiators of the company. For the ESG theme-based investors, the company has installed the hot charging process for manufacturing our products as it significantly reduces the usage of coal and power. It recycles the water used in its manufacturing process to minimize wastage and water pollution.
The company has embarked on a phase of growth to build scale and expand its portfolio of value-added products. From the Net Proceeds of the Issue, it plans on deploying funds for expansion of its MS Pipe manufacturing capacity by setting up of two additional pipe mills. This expansion will increase its capacity from the present 84,000 MTPA to 1,32,000 MTPA. It will also be expanding its Furnace Unit capacity which will enhance its production capacity to the extent of 1,04,232 MTPA from the existing capacity of 95,832 MTPA.
The financial outlook of the company is looking good. It has a good ROE & ROCE of 21.38% and 27.41% for FY21. The topline growth has been in line with the bottom line which reflects operational efficiency. Above all, the increased focus of the Indian government on infrastructure spending augurs well for the company. Hence, we recommend to invest in the IPO for the long term.