IPO Analysis: Ratnaveer Precision Engineering Ltd
IPO Rating: Apply for long-term
About the issue:
Incorporated in 2002, Ratnaveer Precision Engineering Ltd (RPEL) manufactures stainless steel finished sheets, washers, solar roofing hooks, pipes, and tubes. The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 10 per equity share. The price band of the issue has been fixed at Rs 93 to Rs 98 per equity share. The issue size is Rs 165.03 crore at a higher price band.
The IPO opening date is September 4, 2023, and it will be closing on September 6, 2023. The issue is likely to be listed on the exchange on September 14, 2023. The IPO market lot size is 150 shares and in multiple thereof. A retail-individual investor can apply up to a maximum of 13 lots (1950 shares or Rs 191,100) at the upper price band.
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IPO Details:
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IPO Opening Date
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September 4, 2023
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IPO Closing Date
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September 6, 2023
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Issue Type
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Book Built Issue IPO
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Face Value
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Rs 10 per equity share
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IPO Price
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Rs 93 to Rs 98 per equity share
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Min Order Quantity
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150 Shares
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Post Issue implied Market Cap
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Rs 475.29 crore
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Listing At
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BSE, NSE
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Issue Size
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16,840,000 shares of FV Rs 10*
(Aggregating up to Rs 165.03 Cr)*
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Fresh Issue
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13,800,000 shares of FV Rs 10*
(Aggregating up to Rs 135.24 Cr)*
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Offer for Sale
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3,040,000 shares of FV Rs 10*
(Aggregating up to Rs 29.79 Cr) *
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QIB Shares Offered
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50% of the Offer
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Retail Shares Offered
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35% of the Offer
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NII (HNI) Shares Offered
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15% of the Offer
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*At Upper Price Band
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Objects of the Issue
The company intends to utilise the net proceeds from the issue towards the funding of the following objects:
- Funding the working capital requirements of the company.
- General corporate purposes
Promoter holding
The pre-issue shareholding is 86.3 per cent, post the IPO the promoter stake will be 55.48 per cent.
About the company
Ratnaveer Precision Engineering Ltd (RPEL) is a stainless steel (SS) product manufacturer specialising in finished sheets, washers, solar roofing hooks, pipes, and tubes. Stainless steel is a valuable product with excellent corrosion resistance. Increased chromium levels and the addition of other alloy elements improve corrosion resistance.
Stainless steel has a higher corrosion resistance, a better aesthetic finish, and a longer life span than traditional steel. These characteristics have contributed to stainless steel's global popularity. Cold-rolled flat products are the world's most produced stainless-steel product, followed by hot-rolled coils and steel wire rods and bars. Cold-rolled flat products account for approximately 47 per cent of global stainless-steel trade, according to the International Stainless-Steel Forum.
Other SS intermediary products traded globally include hot coils, semi-flat, semislong, hot bar/wire rod, cold bar/wire, hot plate and sheet. RPEL has four manufacturing units, two of which are located at GIDC, Savli, Vadodara, Gujarat (Unit-I and Unit-II), one at Waghodia, Vadodara, Gujarat (Unit-III), and one at GIDC, Vatva, Ahmedabad, Gujarat (Unit-IV).
Its manufacturing units are strategically located near transportation, allowing for easy product transportation. At Unit I, the company produces stainless steel finishing sheets, washers, and solar mounting hooks, while Unit II produces stainless steel pipes and tubes. Units III and IV are dedicated to the backward integration process. Unit III is the melting unit, where steel scrap is melted and turned into steel ingots, and Unit IV is the rolling unit, where flat ingots are further processed to become SS sheets, which are the raw material for SS washers.
It plans to expand its SS washer portfolio by introducing circlips. Customers can now choose from over 2500 different SKUs of stainless steel washers, including inner ring washers, spring washers, nord lock washers, retaining rings, and internal and external tooth washers of various sizes and specifications.
Financial
On the financial performance front, for the last three fiscals, RPEL has (on a consolidated basis) posted a revenue/net profit of Rs 359.66 crore /Rs 5.46 crore (FY21), Rs 426.94 crore/Rs 9.48 crore (FY22), and Rs 479.75 crore/Rs 25.04 crore (FY23).
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Rs (in crore)
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FY20
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FY21
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FY22
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FY23
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Sales
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296.92
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359.66
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426.94
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479.75
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Operating Profit
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24.55
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19.93
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27.53
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45.62
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Other Income
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2.02
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4.39
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1.53
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1.4
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EBITDA
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26.57
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24.32
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29.06
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47.02
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Interest
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-13.95
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-12.05
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-11.67
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-12.29
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Depreciation
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-2.37
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-2.67
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-3.94
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-4.02
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Profit before tax (PBT)
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10.25
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9.6
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13.45
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30.71
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Tax
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-3.05
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-4.14
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-3.97
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-5.67
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Net Profit
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7.2
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5.46
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9.48
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25.04
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Valuation and Outlook
If we attribute FY23 earnings to post-IPO fully diluted paid-up capital, then the asking price is at a P/E of around 18.99x. The issue is priced at a P/BV of 3.19 based on its NAV of Rs. 30.74 as of March 31, 2023, and at a P/BV of 1.96 based on its post-IPO NAV of Rs. 49.92 per share (at the upper cap). Thus, the issue appears fully priced.
According to the offer document, the company has mentioned MM Forgings, Menon Bearings, and Venus Pipes as their listed peers. They are currently trading at a P/E of 18.5x, 28.4x, and 59.7x as of September 04, 2023.
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
The company has recorded strong growth in its topline and bottom line from FY21 to FY23. Furthermore, the company has an improving ROE of 10.15 per cent (FY21), 15.46 per cent (FY22), and 29.12 per cent (FY23). Hence, we recommend investors to subscribe the issue with a long-term perspective.