RR Kabel IPO off to a slow start; booked 13% in first 3 hours of bidding

The Rs 1,964-crore initial public offering (IPO) of RR Kabel saw a lackluster response from the investors during the first three hours of the bidding process on day one. The issue opened for bidding on Wednesday, September 13 and will conclude for bidding on Friday, September 15.

RR Kabel is selling its shares in the range of Rs 983-1,035 apiece during the three-day bidding process and investors can make a bid of a minimum of 14 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 180 crore, while an offer-for sale (OFS) of up to 17.34 lakh equity shares worth Rs 1,784 crore.

According to the data, the investors made bids for 16,64,894 equity shares, or merely 13 per cent, compared to the 1,33,17,737 equity shares offered for the subscription by 1.30 pm on Wednesday, September 13.

The allocation for employees was booked 36 per cent, while the portion for retail investors fetched 20 per cent bids. The reserved portion of non-institutional investors saw a subscription of only ten per cent. However, the portion reserved for qualified institutional bidders (QIBs) was not even off the mark at the same time.

Incorporated in 1995, RR Kabel provides consumer electrical products used for residential, commercial, industrial, and infrastructure purposes in two major segments, namely wires and cables including house wires, industrial wires, power cables, and special cables; and FMEG including fans, lighting, switches, and appliances.

Brokerage firms are mostly positive on the issue and most of them have suggested subscribing to the issue citing its growth potential and strong business model. However, the major risk has been cited in terms of valuations which are fully priced compared to peers, leaving little room for upside.

RR Kabel is looking to benefit from increasing market share in the Indian W&C and FMEG segment; key government initiatives to boost growth; China+1 strategy; largest consumer electrical manufacturing facilities; fastest growing consumer electrical company among peers, said SMIFS in its IPO note.

"RR Kabel’s ROE and ROCE were reported at 20.67 per cent and 16.19 per cent in FY23 compared to 29.19 per cent and 18.61 per cent in FY22. The P/E translates to 54.47 times on FY23 EPS of Rs 19.49. The company has scope to grow 25 per cent. Given RR Kabel’s growth is aligned with government initiatives, growing EV demand and China+1 strategy," it said with a 'subscribe' tag.

A day before its IPO, RR Kabel has raised Rs 585.62 crore by allotting 56,58,201 equity shares at Rs 1,035 apiece to 54 anchor investors including Abu Dhabi Investment Authority, Government Pension Fund Global, HSBC Global, Ashoka Whiteoak ICAV, Carmignac Portfolio, TIMF Holdings, 3P India Equity Fund, Elara India Opportunities Fund, and Morgan Stanley Asia on Tuesday.

RR Kabel is well-positioned to capture a significant share of growth in the wires and cables industry in India, owing to their longevity in the business, size and scale, B2C mix, scope to improve margins and healthy cash flow growth going ahead. The issue is valued at a P/E of 61 times based on FY2023 earnings, mostly at par with other peers in the industry, said StoxBox with a subscribe rating.

Axis Capital, Citigroup Global Markets India, HSBC Securities & Capital Markets and JM Financial are book running lead managers to the issue, while Link Intime India has been appointed as the registrar for the issue. Shares of the company will be listed at both BSE and NSE with Tuesday, September 26 as the tentative date of listing of shares.

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