Prince Pipes IPO: The initial public offer (IPO) of Prince Pipes, one of the leading PVC pipes and fittings manufacturer in India, will open for subscription today. In a move to part-finance repayment/prepayment of certain outstanding loans, setting up of new facility, upgrading of equipment and general corpus fund needs, Prince Pipes is coming up with its maiden IPO, through which it plans to raise Rs 500 crore that consists of a fresh issue and offer for sale of Rs 250 crore each.
Here are 10 key things to know before you place bids for the IPO.
1. About the IPO: The price band for the issue has been fixed at Rs 177-178 per share. The minimum lot size for the IPO is 84 shares, while the maximum lot size is 13 in multiples of 84 shares thereafter, totalling to 1,092 equity shares. JM Financial and Edelweiss Financial Services are the book-running lead managers to the issue while Link Intime India is the registrar to the issue.
2. Offer for Sale: The Offer for Sale (OFS) would result in promoters' stake reducing from 90% to 65.8% post-IPO. The offer for sale through promoters comprises selling of Rs 20 crore worth of shares by Jayant Shamji Chheda; Rs 140 crore worth of shares by Tarla Jayant Chheda; Rs 50 crore worth of shares by Parag Jayant Chheda; and Rs 40 crore worth of shares by Vipul Jayant Chheda. The company will not receive any proceeds from the offer for sale. Promoters offloading stake, however, intend to use OFS proceeds to fully repay the outstanding bonds issued by Express Infra Projects LLP.
3. Pre-IPO placement: Prince Pipes also undertook a pre-IPO placement of 59,26,820 equity shares, representing 6.18% stake for cash consideration of Rs 106.18 crore by South Asia Growth Fund LLP at Rs 178 per equity share.
4. Fresh issue: In the fresh issue of Rs 250 crore, 50% of the shares or Rs 250 crore shares have been reserved for investors from Qualified Institutional Bidders (QIB) category, while 35% of the issue or Rs 75 crore worth of shares will be allotted to Retail Individual Investors (RII). The remaining 15% (Rs 175 crore shares) will get allocated to Non-institutional bidders (NIB). The company plans to utilise an amount aggregating up to Rs 48.17 crore from the net proceeds and the proceeds from the pre-IPO placement to pare certain outstanding loans, to finance the project cost toward the establishment of a new manufacturing facility and upgrade existing equipment at the manufacturing facilities.
5. Important Dates: The Rs 500-crore IPO will open for public subscription on December 18, 2019, and end on December 20, 2019. Post the issue, the finalisation as per the basis of allotment will be done on December 26, 2019. For investors who would place bids for the issue but would not get any shares, the refund process will start on December 27, followed by December 30, when the allotted shares will be credited into the Demat account of shareholders. The shares of Prince Pipes are proposed to be listed on BSE and NSE on December 31, 2019.
6. About the Company: Incorporated in 1987, Mumbai-based end-to-end polymer piping systems' solution provider, Prince Pipes has a diverse product portfolio, coupled with multi-location manufacturing units as well as a network of distributors pan-India. The company has over 30 years of experience in the polymer pipes and fittings manufacturing segments and holds 5% Indian market share manufacturing of both polymer pipes and fittings. Jayant Shamji Chheda, Tarla Jayant Chheda, Parag Jayant Chheda, Vipul Jayant Chheda and Heena Parag Chheda are the promoters of the company. While Jayant Shamji Chheda is the Chairman and Managing Director of the company, Parag Jayant Chheda and Vipul Jayant Chheda are the executive directors.
7. Company Products: The firm owns 6 manufacturing facilities strategically located across India, with an installed capacity of 241,211 tonnes. The company has a product range of 7,167 stock keeping units, meeting the requirements of both the rural and urban markets. The products of the company are used in plumbing, irrigation, soil and rainwater harvesting. The polymer fittings company markets its products under Prince Piping Systems and Trubore. Now, the company is expanding its manufacturing facilities with two new units, one at Jobner near Jaipur in Rajasthan and the second one in Sangareddy (Telangana).
8. Financials: Earning per share (EPS) of the company is 9.26, which is lower when compared to its listed peers Astral Poly Technic, Finolex and Supreme. In terms of valuation, at the upper end of the price band, it is coming with trailing PE of 19, which is fairly priced compared to the competitors. Santosh Meena, Senior Analyst at TradingBells said, "There is decent revenue growth of 10% CAGR whereas 30% CAGR growth in profit for the last four years." As per analysts, the PVC pipes industry's demand is expected to grow at a pace of 10% per annum in India compared to 4% global growth estimates supported by irrigation sector.
9. Balance Sheet: Company's profit stood at Rs 26.91 crore, while its revenue was booked at Rs 380 crore for three months period ended June 2019. Prince Pipes' profit in the financial year 2018-19 stood at Rs 83.35 crore, rising 14.6% over the previous year's profit of Rs 73.31. Revenue grew by 19% to Rs 1,571.8 crore in the financial year 2018-19, as compared to Rs 1,326.57 crore booked in the same period last year. However, PPFL's revenue declined 0.71% and profit fell 1.9 % in FY18 compared to FY17.
10. Broker's Call: Analysts have mostly given a subscribe call to the issue for listing gains as the IPO is priced at attractive valuations. Santosh Meena, Senior Analyst at TradingBells said, "One can subscribe to it with a long-term view while listing gains may depend on HNIs' subscriptions." Motilal Oswal in its IPO note quoted, "While there are concerns on promoter's pledge and related party transactions, valuations seem, reasonable vis-a-vis peers, given its financials and return ratios. Hence, investors can Subscribe the IPO from a listing gains perspective." Brokerage houses such as Reliance Securities, IDBI Capital have given subscribe rating to the IPO, while Capital Market has suggested 'Avoid' for the issue, giving it a rating of 35 out of 100. Rating firm Ventura Securities Limited and Investmentz Ltd on the other hand gave 'Subscribe for Long Term' call to the IPO.