Ratnaveer Precision Engineering IPO opens for subscription: Should you subscribe to the issue?

The Rs 165-crore initial public offering (IPO) of Ratnaveer Precision Engineering kicked off for subscription on Monday, September 4 and the three-day bidding process is set to conclude on Wednesday, September 6. The company is offering its shares in the range of Rs 93-98 apiece with a lot size of 150 shares and its multiples thereafter.

The issue includes a sale of 1.38 crore fresh equity shares while its promoter Vijay Ramanlal Sanghavi will offloard 30.40 lakh equity shares via offer-for-sale (OFS) route. The net proceeds from the issue shall be utilized towards funding the working capital requirements and general corporate purposes

Ahead of its IPO, Ratnaveer Precision Engineering raised Rs 49.5 crore after finalising the allocation of 50,52,000 equity shares to six anchor investors at Rs 98 per share. Societe Generale, Sixteenth Street Asian Gems Fund, Saint Capital Fund, Coeus Global Opportunities Fund and Leading Light Fund VCC - The Triumph Fund paricipated in the anchor book.

Ratnaveer Precision Engineering, which was incorporated in 2002, manufactures stainless steel finished sheets, washers, solar roofing hooks, pipes, and tubes. Ratnaveer Precision Engineering has four manufacturing units located at Vadodara and Ahmedabad, Gujarat.

Brokerage firms are mostly positive on the stock and suggested to bid for the issue citing its strong business fundamental and in-line valuations. However, some analysts have a word of caution for the investors, who have cited rising competetion from unorganized players as a key risk for the issue.

"The business has displayed a consistent improvement in its revenue performance along with expansion in its margins and EBITDA margins to 11.8 per cent and 9.8 per cent in FY23, respectively. On the financial front, the ROE and ROCE increased to 29.1 per cent and 12.6 per cent in FY23,respectively, while the debt-to-equity lowered to 2.2 times in FY23, said StoxBox.

"The issue is valued at a P/E of 13 times based on FY2023 earnings which we feel is fairly valued compared to its listed peers. However, it is to be noted that the business operates in a highly fragmented and competitive industry with low barriers to entry which makes its ability to sustain this consistent growth momentum a key monitorable," it added with a 'subscribe' rating.

Ratnaveer Precision Engineering manufactures stainless steel-based products for automotive, solar power, wind energy, power plants, oil & gas, pharmaceuticals, sanitary & plumbing, instrumentation, electromechanics, architecture, building & construction, electrical appliances, transportation, kitchen appliances, chimney liners, and other industries.

For the year ended on March 31, 2023, Ratnaveer Precision Engineering reported a net profit of Rs 25.04 crore, with a revenue of Rs 481.14 crore. The company had clocked a net profit of Rs 9.48 crore with a revenue of Rs 428.47 crore in the previous financial year 2021-22.

There are no peer companies that have product profiles similar to RPEL. However, we have considered the above companies for benchmarking the valuation. The company’s P/E multiple at a higher price band, after adjusting for post-IPO fully diluted paid-up equity, comes out to 19 times, which seems fully priced with respect to its performance, said Choice Broking.

"The company's top and bottom lines have been growing at a respectable rate, and it has reported an operating margin in the single digits. Since the market in which the company operates is fragmented and where small and medium-sized unorganized players dominate, considering its growth outlook with the growing competition, it added with a 'subscribe with caution' rating.

The company has reserved half of the issue, or 50 per cent equity shares, for qualified institutional bidders, while non-institutional investors will get 15 per cent of the allocation in the primary offering. Remaining 35 per cent shares shall be reserved for the retail investors of the issue.

Unistone Capital is the sole manager to the issue, while Link Intime India has been appointed as the registrar to the issue. Shares of the company will be listed at both exchanges- BSE and NSE- with September 14, Thursday, as the tentative date of listing.


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