Favourable peer comparison notwithstanding, boom-time pricing is bound to correct when the industry cycle takes a turn.
|
HARIOM PIPE OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | 85,00,000 equity shares (Rs 130 Cr) |
| Offer for Sale | Nil |
| Face Value | Rs 10 |
| Price Band | Rs 144–153 |
| Bid Lot | 98 Nos. |
| Implied M-Cap | Rs 390 Cr |
| Implied Equity Cap | Rs 25.47 Cr |
| Free Float | 33.97% |
| Lead Manager | ITI Capital |
| Registrar | Bigshare Services |
| Listing At | BSE, NSE |
|
INDICATIVE ISSUE SCHEDULE |
|
| Opening : 30-Mar-2022 | Closing : 05-Apr-2022 |
| Allotment : 08-Apr -2022 | Refunding : 11-Apr-2022 |
| Demat Credit : 12-Apr-2022 | Trading : 13-Apr-2022 |
The Offer
The Hyderabad-based Hariom Pipe Industries Ltd (HPIL) is entering the capital market with a fresh issue of 85,00,000 equity shares (Rs 130 Cr at the cap price). The offer is being made through the book-building route with a price band of Rs 144-153 for Rs 10 paid-up share.
Applicants should bid for a minimum lot of 98 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE & NSE on April 13, 2022. ITI Capital has been roped in as the lead manager to the offer and Bigshare Services will act as the registrar to the issue. The bidding opens on Wednesday, March 30 and closes on, Tuesday, April 5 2022.
Of the issue amount, the company proposes to utilize Rs 50 Cr for funding the capital expenditure programme, Rs 40 Cr towards working capital requirements and the balance, net of issue expenses, for general corporate purposes.
Lineage
The 15-year-old HPIL has been promoted by Gupta brothers Rupesh Kumar and Sailesh who are third generation entrepreneurs and individually have more than a decade of experience in the iron and steel industry. HPIL was incorporated as Hari Om Concast And Steels (P) Ltd in 2007. The name was changed to Hariom Pipe Industries after a decade, in 2017.
HPIL has two Units. The company commenced production of HR Strips and MS Tubes at Unit I in the year 2010. A year later production of Scaffolding commenced at Unit I. Production of HR Slit Coil & MS Tubes was started at Unit I in 2013. The company achieved a turnover of Rs 100 Cr in 2018. It logged Rs 250 Cr plus revenue in fiscal 2021.
The company’s Unit II at Anantapur was acquired in 2020. HPIL has reportedly received ISO 9001:2015 (Quality Management System) certification in respect of manufacturing of MS Billets, HR Strips, MS Pipes, MS Sections, GP Pipes and Scaffoldings in 2021.
Key Management
Promoter Rupesh Kumar Gupta (45) is the Managing Director of the company. He has more than two decades of experience in steel industry. Brother and co-promoter Sailesh Gupta (40) is a Whole-Time Director of the company. He claims to have an experience of more than a decade in marketing. The promoters’ mother Sunita Gupta (65) is designated as a Non-Executive Director of the company.
Stakeholders
Currently the company has an equity capital of Rs 16.98 cr of which 99.1% (Rs 16.82 Cr) is held by the promoter group which consists of 17 shareholders. The balance 0.9% (less than Rs 16 lakh) is held by 21 shareholders under the public category. Post-public offer, on the enhanced equity capital of Rs 25.48 Cr, promoter group would hold 66% at an average cost of less than Rs 10 as against the public cost of Rs 153 (cap price).
Business Track
HPIL is an integrated manufacturer of mild steel (MS) pipes, scaffolding, HR strips, MS billets, and sponge iron. The company uses iron ore to produce sponge iron which is then processed to manufacture the final products viz. MS pipes and scaffolding. Substantial portion of the sponge iron, MS billets and HR strips produced by the company are used for captive consumption in the manufacturing of MS pipes and scaffolding.
HPIL’s integrated plant (Unit-I) at Mahabubnagar District in Telangana manufactures steel products from iron scrap and sponge iron. The plant at Anantapur District, Andhra Pradesh (Unit-II) exclusively manufactures sponge iron. Unit II is located near Bellary, which is one of the hubs in South India for iron ore production. Most of the sponge iron produced at the Unit II is transported to the Unit I and used as a raw material for manufacturing MS Billets and HR Strips.
The company caters to the southern and western Indian markets. HPIL’s MS Pipes are marketed and sold under the brand name “Hariom Pipes”. The company reportedly manufactures MS pipes and scaffoldings of more than 150 specifications and caters to various sectors such as housing, infrastructure, agriculture, automotive, power, cement, mining, solar power and engineering.
Financial Track
HPIL has put up an encouraging performance during last four years. Revenue has surged from Rs 105 Cr in fiscal 2018 to Rs 254 Cr in fiscal 2021. EBIDTA has steadily increased from Rs 15.49 Cr to Rs 35 Cr. Net profit has leapt from Rs 6.52 Cr to Rs 15.34 Cr. At the end March 2021 the company’s equity capital stood at Rs 16.96 Cr and reserves amounted to Rs 54 Cr. The company proposes to enhance the capital base to Rs 25 Cr through the public offer. Should the company maintain the first half performance for the whole of fiscal 2022, its bottom line would exceed its enlarged capital.
|
Hariom Pipe Standalone Financials (in Cr) |
|||||
| Period Ended |
Sep-21 |
Mar-21 | Mar-20 | Mar-19 |
Mar-18 |
| Months |
6 |
12 | 12 | 12 |
12 |
| Revenue |
200.87 |
254.14 | 160.78 | 133.60 |
105.09 |
| Operating Profit |
25.57 |
34.28 | 23.49 | 17.03 |
15.22 |
| OPM% |
12.7 |
13.5 | 14.6 | 12.7 |
14.5 |
| Other Income |
0.29 |
0.68 | 0.37 | 0.32 |
0.28 |
| EBIDTA |
25.86 |
34.97 | 23.86 | 17.35 |
15.49 |
| EBIDTA % |
12.9 |
13.7 | 14.8 | 13.0 |
14.7 |
| Interest |
4.17 |
7.51 | 7.37 | 3.55 |
2.87 |
| Depreciation |
3.98 |
6.26 | 5.16 | 2.15 |
2.58 |
| Net Profit |
13.22 |
15.34 | 8.02 | 8.35 |
6.52 |
| Equity (Implied) |
25.48 |
25.48 | 13.23 | 13.23 |
4.22 |
| Reserves (Implied) |
188.30 |
188.30 | 35.07 | 22.86 |
8.59 |
| Borrowing |
88.31 |
65.91 | 59.68 | 50.42 |
21.24 |
| Fixed Assets |
66.70 |
67.20 | 49.60 | 42.80 |
12.80 |
Valuation
HPIL has kept a price band of Rs 144-153 for the IPO. The cap price discounts fiscal 2021 earnings more than 25 times which indeed compares well with the company’s listed peers. If the first half trend is anything to go by, the company could post an EPS of more than Rs 10 for the fiscal 2022 which should keep the P/E at less than 15.
Perhaps the only worry is the timing of the IPO. The company is floating the public issue during the peak cycle of the industry. Hence, when the current uptrend in the industry eases out the P/E may drop significantly as traditionally MS steel pipe is one of the low discounting industries in the stock market.
|
HOW HARIOM COMPARES WITH SELECT LISTED PEERS |
|||||
|
Financials |
|||||
| (Amount in Cr) |
Hariom |
APL Apollo | JTL Infra | Hi-Tech |
Rama |
| Market Cap |
390 |
23199 | 1388 | 621 |
536 |
| Borrowing |
66 |
442 | 63 | 295 |
82 |
| Fixed Assets |
67 |
1706 | 29 | 232 |
52 |
| Revenue |
254 |
8500 | 436 | 1341 |
470 |
| Other Income |
1 |
36 | 5 | 1 |
3 |
| EBIDTA |
35 |
715 | 37 | 72 |
22 |
| Interest |
8 |
66 | 9 | 32 |
8 |
| Net Profit |
15 |
408 | 20 | 23 |
11 |
| Equity Cap |
25 |
50 | 12 | 12 |
8 |
| Reserves |
188 |
1645 | 107 | 194 |
90 |
|
Stock Features |
|||||
| Current Price (Rs) |
153 |
928 | 235 | 508 |
319 |
| Face Value (Rs) |
10 |
2 | 2 | 10 |
5 |
| Book Value |
84 |
68 | 20 | 169 |
59 |
| Promoter Stake % |
66.0 |
34.5 | 56.0 | 59.2 |
62.3 |
| Debt/Equity |
0.3 |
0.3 | 0.5 | 1.4 |
0.8 |
|
Profitability |
|||||
| OPM % |
13.5 |
8.0 | 7.5 | 5.3 |
3.9 |
| Net Margin % |
6.0 |
4.8 | 4.6 | 1.7 |
2.3 |
| Cash EPS |
8.48 |
18.54 | 3.68 | 25.49 |
8.69 |
| Earnings Per Share |
6.02 |
14.43 | 3.39 | 18.67 |
6.61 |
|
Growth |
|||||
| CAGR 3Yr Sales % |
34.9 |
15.7 | 36.8 | 8.4 |
8.7 |
| CAGR 3Yr EBIDTA % |
31.2 |
23.5 | 35.7 | 5.2 |
-6.9 |
|
Return |
|||||
|
RONW % |
18.3 | 24.1 | 16.9 | 11.1 |
11.2 |
| ROCE % |
19.2 |
28.6 | 19.6 | 12.6 |
10.9 |
|
Discounting |
|||||
| Price/Earnings |
25.4 |
64.3 | 69.2 | 27.2 |
48.3 |
| Price/Cash EPS |
18.1 |
50.0 | 63.8 | 19.9 |
36.7 |
| Price/Book Value |
1.8 |
13.7 | 11.7 | 3.0 |
5.4 |
| Price/EBIDTA |
11.2 |
32.5 | 37.1 | 8.7 |
24.7 |
| Price/Revenue |
1.5 |
2.7 | 3.2 | 0.5 |
1.1 |
| Price/Fixed Assets |
5.8 |
13.6 | 48.8 | 2.7 |
10.4 |