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Swastik Pipe Limited IPO

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About :

Since its incorporation in 1973, Swastik Pipe Limited has produced and exported a variety of products, including Swaged Type Tubular Poles, Solar Structure, API Pipe, Hollow Steel Pipe, and Cold Rolled Steel (CR) Strips and Coils.

With a combined installed capacity of 2,01,250 MT, the company’s two factories are situated in Bahadurgarh, Distt. Jhajjar, Haryana (Unit No. 1), and Kotwan, Kosi Kalan, Distt. Mathura, Uttar Pradesh (Unit No. 2).

In addition to producing solar module mounting structures, transmission towers, steel tubular poles, solar poles with special structures for railways, scaffolding, and formwork, Swastik Pipe has expanded its manufacturing operations.

One of the first companies to manufacture and provide steel pipes and tubes to various heavy engineering sectors in India and overseas is Swastik Pipe Ltd. Customers of the business include, among others, HPSCSC, SHIMLA, Emanate Pipe Private Limited, Vindhya Telelinks Limited, Harsh Steel Pipes, and SUPER STAR STEELS (P) LTD.

Details on IPO :

The Swastik Pipe IPO will begin on September 29, 2022, and end on October 3, 2022. The Swastik Pipe Initial Public Offering bid date is from September 29, 2022, 10:00 AM, to October 3, 2022, 5:00 PM. On the day of the issue’s conclusion, at 5 PM, UPI Mandate confirmation must be received.

1200 shares make up the Swastik Pipe IPO lot. Retail investors may submit applications for up to 1 lot (1200 shares or 120,000 pounds).

Objective of the Issue :

1. To fulfill the Company’s need for Working Capital.

2. To fulfill the overall corporate objectives.

3. To cover the issue’s costs.

IPO Review:

  1. One of the oldest manufacturers of steel tubes and pipes in India is SPL.
  1. For FY19, it had a loss, but since then, it has seen some profits.
  1. Super earnings for FY22 totaled Rs. 15.64 crore in unusual items.
  1. Despite the book building route IPO, no QIB quota has been set.
  1. There is no risk in skipping this issue due to its high price.

Preface :

The firm has not allocated any portion for QIBs, despite the fact that this IPO is via the book-building process and it declared a deficit for FY20. The net issue post market maker component is allocated at 50% for HNIs and 50% for retail investors instead of the required 75%. (refer IPO ad). This is very unexpected. It is alarming to see how these kinds of rules are received by the exchanges. Given its present paid-up equity capital, a mainboard IPO for a straight listing would have been the better option. Its intentions for a SME IPO raise questions. The offer documents contain numerous typos.

Management claims that they chose the SME IPO route on the merchant banker’s recommendation because it was a modest IPO in order to reduce the costs associated with the mainboard issuance.

Financial Performance : 

In terms of financial performance, SPL reported turnover/net profit – (loss) of Rs. 658.07 cr. / Rs. – (13.89) cr. (FY20), Rs. 523.84 cr. / Rs. 1.49 cr. (FY21), and Rs. 612.20 cr. / Rs. 20.41 cr. for the previous three fiscal years (FY22). For FY20, the business lost money. Profit for FY22 includes unusual items worth Rs. 15.64 crore.

SPL has reported average EPS of Rs. 5.44 and average RoNW of 4.91% during the past three fiscal years. According to its NAV of Rs. 83.45 as of March 31, 2022, and according to its post-IPO NAV of Rs. 88.00 per share, the issue is valued at a P/BV of 1.20 and a P/BV of 1.14, respectively. (at the top of the pricing range).

Dividend Policy :

For any fiscal year, the corporation has not declared or paid a dividend. Following the IPO, it will implement a conservative dividend policy based on its financial performance and prospects for the future.

Conclusion :

Even though the company qualifies for a mainboard IPO, it chose the SME route instead, which is creating questions. Due to extraordinary items, it showed a loss for FY20 and super profits for FY22. The issue has a low price based on FY22 performance, excluding unusual items. Since it competes fiercely in its market, maintaining profit margins is a top priority. There is no harm in avoiding this IPO with its high price.

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