IPO Analysis: Rashi Peripherals Ltd

IPO Rating: Apply for the long-term

About the Issue  

Rashi Peripherals Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 5 each. The IPO price range is set between Rs 295 and Rs 311 per equity share, resulting in a total issue size of Rs 600 crore at the upper price band.  

The IPO is scheduled to commence on February 07, 2024, and will conclude on February 09, 2024. The market lot size for the IPO is 48 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 624 shares or a total investment of Rs 1,94,064 assuming the upper price band.   

Objects of the Issue  

Considering that the offer is exclusively a fresh issue, it is crucial 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 prepayment or scheduled repayment of all or a portion of certain outstanding borrowings availed by the company, funding working capital requirements of the company and general corporate purposes.

Promoter holding  

Krishna Kumar Choudhary, Sureshkumar Pansari, Kapal Suresh Pansari, Keshav Krishna Kumar Choudhary, Chaman Pansari, Krishna Kumar Choudhary (HUF), and Suresh M Pansari (HUF) are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 89.65 per cent in the company.   

Company profile  

Rashi Peripherals Ltd emerged as one of the top national distribution partners in fiscal 2023 for global technology brands in India, both in terms of revenue and distribution network. The company provides comprehensive services, including pre-sale activities, solution design, technical support, marketing services, credit solutions, and warranty management services, across the spectrum of information and communications technology (ICT) products.

The company initially began its operations by manufacturing peripherals. However, following the liberalization of the Indian IT sector in 1991, it underwent a transition to focus on the distribution of ICT products from global technology brands in India. As of September 30, 2023, the company has become a national distribution partner for 52 renowned global technology brands, including ASUS Global Pte Ltd, Dell International Services India Pvt Ltd, HP India Sales Pvt Ltd, Lenovo India Pvt Ltd, NVIDIA Corporation, Intel Americas, Inc, Eaton Power Quality Pvt Ltd, LG Electronics India Pvt Ltd, among others.

The company is mainly structured around two business verticals:

Personal Computing, Enterprise, and Cloud Solutions (PES): This encompasses personal computing devices, enterprise solutions, embedded designs/products, and cloud computing.

Lifestyle and IT Essentials (LIT): This segment includes graphic cards, central processing units (CPUs), motherboards, storage and memory devices, keyboards, mice, web cameras, monitors, wearables, casting devices, fitness trackers, UPS, and inverters.

In Fiscal Year 2023, the company secured notable market shares by value in various categories, with graphic cards holding 47 per cent, CPUs at 45 per cent, pen drives at 42 per cent, and routers at 33 per cent. As of September 30, 2023, the company's extensive pan-India distribution network includes 50 branches, functioning both as sales and service centres, along with 63 warehouses.

Financials  

The company has shown a consistent growth in revenue over the last few years, with a remarkable 57 per cent year-on-year growth in FY22. Although there was a modest uptick in revenue for FY23, the annualized figure for FY24 is expected to be impressive once again. Profitability was impacted in FY23 following robust profits in FY22. However, the potential annualized figure for FY24 suggests a possible recovery. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 19 per cent and 14 per cent, respectively, for the fiscal year 2023.

Valuation and outlook  

The issue is priced with a P/BV ratio of 1.68 times, calculated using its Net Asset Value (NAV) of Rs 184.94 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 8.52. The company's performance aligns with that of its listed peers.

Given the growing ubiquity of technology, rising data volumes, governmental emphasis on e-governance and digitization, as well as the demand for effective supply chain solutions, the industry outlook appears optimistic. The company, boasting a diversified product portfolio, holds a prominent market share across multiple products. Furthermore, with over 90 per cent of its revenue coming from repeat customers, it underscores the company's strength and the establishment of long-term relationships. Hence, we recommend investors to consider subscribing to the issue with a long-term perspective.