Hariom Pipe Industries begins trading at a premium of 43% to the issue price.

  • April 13, 2022, 12:23 p.m.

Hyderabad-based iron and steel products maker Hariom Pipe Industries got a decent listing as the stock clocked a 39.87 percent premium on the BSE to the issue price on April 13, in line with expectations given the firm's good financial performance and decent subscription to the IPO.

The stock was listed at Rs 214 on the BSE, while on the NSE it was listed at Rs 220 (up 43.79%) against an issue price of Rs 153 per share. Analysts had expected double-digit listing gains for the stock.

The maiden public issue fetched Hariom Rs 130 crore, which will be utilised for capital expenditure and working capital requirements. The IPO price band was Rs 144-153 per share.

Hariom, a manufacturer of mild steel (MS) pipes, scaffolding, HR strips, MS billets, and sponge iron, has an integrated plant at Mahabubnagar in Telangana that manufactures finished steel products from iron scrap and sponge iron, and another plant at Anantapur in Andhra Pradesh that exclusively manufactures sponge iron.

With the net issue proceeds from the IPO, the company will expand MS pipe manufacturing capacity from 84,000 to 1,32,000 million tonnes per annum (mtpa) by setting up two additional pipe mills next to the Mahabubnagar plant.

It will also increase furnace unit capacity from 95,832 to 1,04,232 mtpa.

The company, in September 2020, acquired the Anantapur facility as a part of a backward integration initiative.

Most analysts had a subscriber rating on the issue given reasonable valuations.

Marwadi Financial Services had assigned a "subscribe (with caution)" rating to the IPO. "The backward integration of the production process provides a cost advantage over its competitors and is available at a reasonable valuation as compared to its peers." However, client concentration risk and the cyclical nature of the business keep us cautious from a long-term perspective (the top 10 customers account for 62 percent of the overall revenue), "it reasoned.

Choice Broking had also said that, at the higher level of the price band, Hariom was demanding an enterprise value/sales (EV/S) multiple of 1.4x (to FY21 sales), which was at a discount to the peer average of 1.7x. The demand for EV/S multiple is less than 1x, thus the issue is attractively priced. "

With infrastructure creation as one of the key themes of the government's plan to revive the economy, the brokerage feels that there will be no dearth of demand for Hariom's products. "However, being a commodity play, we assign a "subscribe with caution" rating to the issue."

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

Related News