Wednesday, February 21, 2024

Vibhor Steel Tubes IPO: Rise in gray market, expert gives investment advice

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Vibhor Steel Tubes IPO Rating, GMP: Action continues in the IPO market. The IPO of Vibhor Steel Tubes Limited, a company manufacturing steel pipe and tube products, has opened today i.e. on 13 February 2024. The size of the company’s IPO is Rs 72 crore. The price band for IPO has been fixed at Rs 141-151 per share. Investors will have the opportunity to invest in it till 15th February. This IPO is a completely fresh equity issue. Experts are also bullish on this IPO and are advising to subscribe.

advice to subscribe

Swastika Investmart has advised to subscribe to Vibhor Steel Tubes IPO with caution. Shivani Nyati, Head of Wealth, Swastika Investmart, says that leveraging the strong partnership with Jindal Pipes Limited, Vibhor Steel Tubes offers a broad portfolio of steel pipes and tubes. Strategically located manufacturing units and an experienced leadership team further strengthen its position. International exports and recognitions demonstrate the company’s commitment to quality and global reach.

However, its significant dependence on Jindal Pipes (over 90%) puts it at client concentration risk. Potential disruptions in raw material supply, high working capital requirements and past negative cash flows have created additional concerns. Despite these risks, the P/E valuation of 10.16x looks reasonable. Keeping in mind the growth prospects and expansion plans, it is advisable to subscribe for Vibhor Steel Tubes IPO with caution.

Strengths and weaknesses of the company

Vishnu Kant Upadhyay, Assistant Vice President – ​​Research & Advisory, Master Capital Services, recommends subscribing to Vibhor Steel Tubes for mid to long term. He says that there are some strength points with the company. As…..

strength point

• Collaboration with Jindal Pipes Limited
• Strategic location of manufacturing units.
• Experienced promoters and senior management team
• International recognitions
• Well developed distribution and marketing network
• Integrated Manufacturing Facility
• Stable financial performance

Risk with the company

• Fluctuations in steel prices can have an adverse impact on business.
• The company is mainly concentrated in 2 states and is influenced by many factors related to these states.
• The company’s business is working capital intensive. Insufficient cash flow to meet required payments on working capital requirements may have an adverse impact on the business.
• A major portion of the revenue comes from a single client, Jindal Pipes Limited and more than 90 percent of the revenue comes from a single client.
• The Company has entered into long term agreements with Steel Authority of India Limited and JSW Steel Limited (raw material supplier), in case of any disruption in the agreement, the Company’s costs, revenues and profitability may be impacted.
• Manufacturing processes require workers to work in potentially hazardous conditions. In case of any accident, the company may be held liable for damages and penalties.

GMP: Gray market premium reaches 79%

There is a lot of craze being seen in the gray market regarding the IPO of Vibhor Steel Tubes Limited. Today, on the day of opening of IPO, the unlisted stock of the company is at a premium of Rs 120. That means in terms of upper price band Rs 151, it is likely to be listed at Rs 271. This premium is 79 percent.

minimum investment amount

In the IPO of Vibhor Steel Tubes Limited, there will be 99 shares in 1 lot. Investors will have to bid Rs 14,949 for at least 1 lot. You can bid Rs 1,94,337 for a maximum of 13 lots or 1287 shares. The company will use the proceeds from the IPO for financing working capital needs and general corporate purposes. In the IPO of Vibhor Steel Tubes Limited, 35 percent share is reserved for retail investors. Whereas 50 percent share is reserved for Qualified Institutional Buyers i.e. QIB. Whereas 15 percent share is reserved for non-institutional investors i.e. NII.

what does the company do

Vibhor Steel Tubes is a manufacturer and exporter of Mild Steel ERW Black and Galvanized Pipes, Hollow Steel Pipes, Cold Rolled Steel (CR) Strips. The company has been in business for more than 2 decades. Steel pipes and tubes can be used for many purposes. For example, steel pipes for frames and shafts, steel pipes for bicycle frames, steel pipes for furniture, CDW pipes for shockers, steel pipes for various structural purposes, steel pipes for engineering purposes.

The company has an in-house quality team comprising of 640 employees working under the supervision of the Board of Directors. The quality control team ensures that the raw materials as well as the final products are tested on all quality parameters to ensure that they are in compliance with the international standards.

company financials

The revenue, expense and PAT of Vibhor Steel Tubes in the financial year 2021 were Rs 511.51 crore, Rs 507.35 crore and Rs 0.69 crore, which increased to Rs 818.48 crore, Rs 803.12 crore and Rs 11.33 crore in the financial year 2022. Whereas in the financial year 2023 it became Rs 1114.38 crore, Rs 1086.15 crore and Rs 21.07 crore.

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