Vibhor Steel Tubes IPO receives stellar response from investors; should you subscribe?

The ₹72 crore initial public offering (IPO) of Vibhor Steel Tubes received a remarkable response from investors on its first day of bidding, with subscription reaching 27.63 times. Opened on February 13, the bidding attracted bids for 9.92 crore shares against the available 35.92 lakh shares. The IPO will remain open until February 15. As of noon on the second day, the IPO was subscribed 61.48 times, according to Chittorgarh.

The price band for the offer has been fixed at ₹141–151 per equity share, with a face value of ₹10 each. Retail investors have the opportunity to submit bids for up to 13 lots, with each lot containing 99 shares. At the upper end of the IPO price band of ₹151, retail investors are required to make a minimum investment of ₹14,949 per lot.

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The offering consists entirely of fresh shares, totaling 44.55 lakh, amounting to ₹72.17 crore. These shares will be listed on both the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

About the company

Vibhor Steel Tubes is a manufacturer and exporter of mild steel, carbon steel, ERW black and galvanised pipes, hollow steel pipes, and cold-rolled steel (CR) strips and coils. 

Since 2003, the company has been collaborating with Jindal Pipes Limited, manufacturing and supplying finished goods under the brand name "Jindal Star."

It has recently renewed its agreement with Jindal Pipes for six years, ensuring a minimum annual order of 1 lakh MT with a 2% discount on the gross sale price. This minimum quantity will fill the majority capacity of Units I and II of the company.

The tenure of this agreement is for six years from April 01, 2023, and can be further renewed if required by both parties, the company said in its RHP report. 

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With the help of Jindal Pipes Limited, the company has developed and implemented a wide range of networking channels throughout the industry and society to strengthen the scope of identifying the core customer base, designing the right marketing strategies for procurement, and liaising on projects to deliver customised solutions for clients. 

The company exports its manufactured goods for Jindal Pipes Limited under the brand Jindal to overseas customers. As of September 30, 2023, it had been exported to around 10 countries.

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The company has expanded into a new product line, launched a new product, namely Crass Barriers, under its own brand, and started manufacturing and selling the product. It is also working on expanding its sales under the “Vibhor” brand continuously.

Should you subscribe to the IPO?

Mehta Equities, a domestic brokerage firm, views the IPO as an opportunity for investors to participate in a prominent steel pipes manufacturer and exporter with a rich history spanning over two decades. 

The company's key strength lies in its association with Jindal Pipes, enjoying a longstanding relationship under the brand of Jindal Star. Additionally, capacity expansion offers long-term visibility, it added. 

In terms of financials, the brokerage said that the company has demonstrated robust growth in FY2022 and FY2023, with revenue from operations growing by 60.2% and 36.1%, respectively, along with substantial growth in net profit by 1546% and 85.9% for the same periods.

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Based on annualised FY 2024 earnings and fully diluted post-IPO paid-up capital, the company is asking for a P/E of 16.8x, which seems very reasonably priced by looking at its revenue and profit growth and even by comparison to its peers, which are trading in the range of 30–40x on average.

Considering these factors, Mehta Equities recommends investors to 'SUBSCRIBE' to the issue solely from a listing perspective.

Another brokerage firm, ProfitMart, also recommends 'SUBSCRIBE' to the IPO for long-term investment, expressing confidence in Vibhor Steel Tubes Limited's ability to deliver consistent performance and provide an excellent investment opportunity for investors with a long-term horizon.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.