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Venus Pipes IPO review (May apply)

Review By Dilip Davda on May 6, 2022

•    VPTL is in the business of stainless steel pipes and tube manufacturing and marketing.
•    In line with rising commodity prices, this company reaped benefits with higher margins.
•    Based on super earnings, the issue is fully priced. 
•    It is on an expansion spree and aiming for more than doubling its capacity.
•    Investment may be considered for medium to long term rewards.

ABOUT COMPANY:
Venus Pipes & Tubes Ltd. (VPTL) is one of the growing stainless steel pipes and tubes manufacturers and exporters in India having over six years of experience in manufacturing stainless steel tubular products in two broad categories: (i) seamless tubes/pipes; and (ii) welded tubes/pipes, under which it is currently manufacturing five product lines, namely, (i) stainless steel high precision & heat exchanger tubes; (ii) stainless steel hydraulic & instrumentation tubes; (iii) stainless steel seamless pipes; (iv) stainless steel welded pipes; and (v) stainless steel box pipes ("Products"). 

Under its brand name "Venus", VPTL supplies Products for applications in diverse sectors including (i) chemicals, (ii) engineering; (iii) fertilizers; (iv) pharmaceuticals, (v) power, (vi) food processing; (vii) paper; and (viii) oil and gas. The company has one manufacturing plant which is strategically located at Bhuj-Bhachau highway, Dhaneti (Kutch, Gujarat) having a capacity of 10800 MT per annum. As of February 28, 2022, it has a total of 362 employees on its payroll. 

Post completion of the expansion, its overall capacity will stand enhanced to 24000 MT per annum. This leads to bright prospects going forward.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its funding requirements for capacity expansion, technology up-gradation, cost optimization (Rs. 107.95 cr.), working capital (Rs. 25.00 cr.) and general corporate purposes, VPTL is coming out with a maiden IPO of 5074100 equity shares of Rs. 10 each via book building process. It has fixed a price band of Rs. 310.00 to Rs. 326.00 per share and mulls mobilizing Rs. 165.42 cr. at the upper cap. The issue opens for subscription on May 11, 2022, and will close on May 13, 2022. The minimum application to be made is for 46 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25% of the post-IPO paid-up capital of the company. VPTL has allocated 50% for QIBs, 15% for HNIs and 35% for Retail investors.

The issue is solely lead managed by SMC Capitals Ltd. and KFin Technologies Ltd. is the registrar to the issue. 

Having issued initial equity at par, the company issued further equity at Rs. 280 per share in October 2021. It has also issued bonus shares in the ratio of 1 for 2 in September 2021. The average cost of acquisition of equity shares by the promoters is Rs. NIL, Rs. 7.66, Rs. 13.72 and Rs. 29.89 per share. 

Post-IPO, VPTL's current paid-up equity capital of Rs. 15.22 cr. will stand enhanced to Rs. 20.30 cr. Based on the upper price band of the IPO pricing, the company is looking for a market cap of Rs. 661.65 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, VPTL has posted turnover/net profits of Rs. 120.51 cr. / Rs. 3.75 cr. (FY19), Rs. 179.32 cr. / Rs. 4.13 cr. (FY20) and Rs. 312.03 cr. / Rs. 23.63 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 23.60 cr. on a turnover of Rs. 278.28 cr. It has posted bumper growth in its top and bottom lines for the last 21 months working following rising demands coupled with spiralling commodity prices.   

For the last three fiscals, it has posted an average EPS of Rs. 10.55 and an average RoNW of 19.58% The issue is priced at a P/BV of 4.12 based on its NAV of Rs. 79.15 as of December 31, 2021, and at a P/BV of 2.31 based on its post-IPO NAV of Rs. 140.86 per share. 

If we annualize FY22 earnings and attribute it on fully diluted post IPO equity capital, then the asking price is at a P/E of 21.03. 

COMPARISON WITH LISTED PEERS:
As per offer documents, VPTL has shown Ratnamani Metals and Jindal Saw as its listed peers. They are currently trading at a P/E of 32.96 and 6.21 (as of May 06, 2022). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
SMC Capital has not handled any public issue in the last three fiscals (including the ongoing one). Hence it has no recent track record for these periods. 


Conclusion / Investment Strategy

Rising trends in commodity markets helped this company to post super performance and considering bright prospects, it is on an expansion spree. Based on its latest performance, the issue appears fully priced. Its capacity will be more than doubled post-expansion. As the issue is below Rs. 250 cr. its initial listing will be in “T” group with restricted circuits and that will remove speculative activities for the initial listing period. Investors may consider an investment with medium to long term perspectives.

Review By Dilip Davda on May 6, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Venus Pipes & Tubes IPO FAQs

  1. 1. Why Venus Pipes & Tubes IPO?

    The initial public offer (IPO) of Venus Pipes & Tubes Limited offers an early investment opportunity in Venus Pipes & Tubes Limited. A stock market investor can buy Venus Pipes & Tubes IPO shares by applying in IPO before Venus Pipes & Tubes Limited shares get listed at the stock exchanges. An investor could invest in Venus Pipes & Tubes IPO for short term listing gain or a long term.

  2. 3. Venus Pipes & Tubes IPO what should investors do?

    Venus Pipes & Tubes IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Venus Pipes & Tubes IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Venus Pipes & Tubes IPO good?

    Our recommendation for Venus Pipes & Tubes IPO is to subscribe for long term.

  4. 5. Is Venus Pipes & Tubes IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Venus Pipes & Tubes IPO.

  5. 6. When will Venus Pipes & Tubes IPO allotment status?

    The Venus Pipes & Tubes IPO allotment status will be available on or around May 19, 2022. The allotted shares will be credited in demat account by May 23, 2022. Visit Venus Pipes & Tubes IPO allotment status to check.

  6. 7. When will Venus Pipes & Tubes IPO list?

    The Venus Pipes & Tubes IPO will list on Tuesday, May 24, 2022, at BSE, NSE.

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