Rajan Shinde, a Research Analyst at Mehta Equities, highlighted that one of the key strengths of Vibhor Steel Pipes, the company issuing the IPO, lies in its association with Jindal Pipes.
This association allows Vibhor Steel Pipes to leverage the longstanding relationship with Jindal, operating under the brand of Jindal Star.
The initial public offering (IPO) by Vibhor Steel Pipes Ltd received overwhelming response from investors on Day 1 of the bidding process. By 11:55 am, the issue garnered a total of 3,29,04,036 bids against the 35,92,445 shares available for subscription.
This indicates a high level of interest from investors, with approximately 1,57,000 applications received, amounting to an estimated value of Rs 400 crore. Notably, the retail portion of the IPO was oversubscribed 14.02 times, while the portions reserved for Employees and Non-Institutional Investors (NIIs) were oversubscribed 14.17 times and 11.39 times, respectively.
The IPO of Vibhor Steel Pipes Ltd, valued at Rs 72.12 crore, is priced within the range of Rs 141 to Rs 151 per share. According to Rajan Shinde, a Research Analyst at Mehta Equities, one of the key strengths of the company lies in its association with Jindal Pipes. This partnership has enabled Vibhor Steel Pipes to benefit from a longstanding relationship with Jindal, operating under the renowned brand name of Jindal Star.
The statement highlights that apart from the association with Jindal Pipes, the capacity expansion of Vibhor Steel Pipes offers long-term visibility for the company. Additionally, Vibhor’s strategic plant locations near ports are advantageous, positioning the company to focus more on its export business in the future.
Shinde’s analysis suggests that Vibhor Steel Pipes’ asking price of a Price-Earnings (PE) ratio of 16.8 times, based on annualized FY24 earnings and fully diluted post-IPO paid-up capital, appears to be reasonably priced.
This assessment takes into account the company’s revenue and profit growth trajectory. Moreover, when compared to its peers, which are trading at higher PE ratios ranging from 30 to 40 times, Vibhor Steel Pipes’ valuation appears favorable.
ProfitMart Securities expresses a positive outlook on Vibhor Steel Pipes (VSTL) for the long term. They highlight the vast growth potential of India’s Steel Tubes market over the next 3-5 years, with applications spanning Infrastructure, Oil & Gas, Housing, and Metro projects.
Additionally, the presence of a prominent anchor customer like Jindal Pipes is viewed as a strength, ensuring steady volumes and safeguarding margins. This positioning is considered strong and is expected to facilitate the company’s expansion in the future, contrary to concerns regarding over-dependence on a single customer.
ProfitMart Securities elaborates on their reasoning, stating that the outsourcing arrangement benefits both Jindal Pipes and Vibhor Steel Pipes (VSTL). They emphasize the importance of timely raw material sourcing and order execution in this process. Additionally, they highlight that VSTL maintains its margins and is awarded committed volumes from Jindal Pipes, which holds a strong brand position in the domestic market.
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