Venus Pipes IPO Review and Brokerage Calls – May Apply

Venus Pipes & Tubes Limited IPO is to open on May 11 for the subscription. The firm goes to lift ₹165.42 crores from the first market by way of preliminary public choices. They fastened the worth band at  ₹310 to ₹326 per fairness share. The IPO will stay open until May 13.

Venus Pipes & Tubes Limited is a producer of chrome steel pipes and tubes. As per the present situation, the commodity costs rising within the sector would possibly give profit the corporate with increased margins in its enterprise. The firm is aiming to develop its enterprise. The firm reported ₹312 crores revenues in 2021 towards ₹179 crores in 2022. Based on the earnings it impacted very excessive on the revenue that proven an increase on 6 occasions in 2021 to ₹23.63 crores towards ₹4.13 crores in 2020. The monetary outcomes present that 2022 shall be 12 months as the three months information exhibits good enchancment as properly.

About Company:

Gujarat Based Venus Pipes Limited is a producer and exporter of chrome steel tubular merchandise like chrome steel pipes and tubes. The firm’s manufacturing plant is situated in Kutch, Gujarat, The manufacturing facility is unfold throughout 11 acres space. They have an put in capability of 10,800 MT each year. The firm has a worldwide presence in additional than 18 nations internationally.

Venus Pipes product vary consists of Stainless Steel High Precision and Heat Exchanger Tubes, Stainless Steel Hydraulic and Instrumentation Tubes, Stainless Steel Seamless Pipes, Stainless Steel Welded Pipes, and Stainless Steel Box Pipes. They promote their merchandise in native markets of India and nations together with Brazil, the UK, Israel, and European Union, and so on.

Listed Peers Comparision:

Jindal Saw Limited and Ratnamani Metal & Tubes Limited are the listed peer group corporations. The P/E is buying and selling at 32.96 and 6.21 as of May 06, 2022. Jindal Saw is buying and selling within the vary between ₹90 to ₹110 final 12 months whereas Ratnamani Metal & Tubes is buying and selling within the vary between ₹1900 to ₹2600 in final one 12 months.

Antique Stock Broking IPO Review:

Doubling capability within the area of interest chrome steel pipe phase Venus Pipes & Tubes Limited (Venus) is a Gujarat-based producer & exporter of stainless-metal pipes & tubes, primarily catering to business-grade necessities with finish makes use of spanning throughout chemical substances, prescribed drugs, meals processing industries and different engineering wants. Global chrome steel (SS) pipes & tubes business was estimated to be valued at USD32.4 bn in 2019 and is predicted to develop at a CAGR of 4% by means of 2025. India’s per capital chrome steel consumption at 2.5 kg in 2019 is considerably decrease in comparison with the world common of 6 kg per capita indicating the alternatives current within the sector. Indian per capita consumption of metal pipes and tubes is lower than half of the worldwide common (21-22 kg) and about one-fifth of the Chinese consumption.

The firm’s FY21 income jumped 74% YoY to INR3,093mn aided by elevated quantity, increased capability utilization pushed by a strong development of home and export demand. Venus elevated its capability from 6.9ktpa to 10.8ktpa over FY19-21. Increasing capability utilization has pushed a 60% income CAGR over the interval. The web debt quantities to INR631mn (as on 31.12.2021, together with LC of INR 205.1mn) and leverage stage at ~0.4x debt/ fairness is snug. Return ratios have improved strongly with sturdy asset utilization & improved profitability. Venus Pipes is planning to double capability to satisfy the rising demand, enrich the product portfolio, improve operational effectivity by means of backward integration and goals to lift the required funding by means of the IPO route.

Strong capability enlargement plans to drive revenues

Currently, the corporate has a complete manufacturing capability of 10.8 ktpa, of which 3.6 ktpa is devoted to seamless SS pipes & 7.2 ktpa for welded SS pipes. The firm plans to develop its seamless capability to 9.6 ktpa and welded capability to 14.4 ktpa, along with 9.6 ktpa of latest capability in the direction of backward integration to fabricate mom hole pipes.

Total capability would double from 10.8ktpa to 24ktpa.

Backward integration and enriched product combine to enhance margins Backward integration with in-home manufacturing of hole pipes, acquisition of slitting machine for slicing metal strips/coils as per desired width and enriched product combine with increased diameter pipes would result in continued enchancment in margins.

Export and home alternatives to extend with removing of Chinese export rebate

China accounted for 54% of India’s complete SS pipes & tubes imports in FY21. The cancellation of export rebates on Chinese metal merchandise together with welded and seamless metal pipes, as introduced by the Chinese Government on 28 April 2021, is predicted to erode away the associated fee benefit loved by Chinese producers, offering impetus to home pipes and tubes producers. Domestic producers are additionally protected with the stipulation that solely BIS-licensed merchandise can be utilized for tasks within the nation.

Capex in chemical and prescribed drugs business to drive demand

SS Pipes & tubes are used throughout the chemical, engineering, prescribed drugs and meals processing Industries, amongst others. Venus Pipes & Tubes Ltd derives round 33% of its gross sales from chemical substances (19%) and engineering (14%) phase. Approximately 10% of the capital expenditure for a chemical plant is within the type of SS pipes & tubes. The Atmanirbhar Bharat Initiative and different PLI schemes are set to spice up these sectors, thus driving the demand for SS pipes & tubes within the nation.

Centrum Institutional Research IPO Review:

Impressive development briefly time period; working efficiency to enhance additional

During FY19-21, it has grown properly with gross sales CAGR of 61% to Rs3.09bn and EBITDA CAGR of 105% to Rs348mn in FY21. During 9MFY22, it has already surpassed FY21 numbers and recorded EBITDA of Rs355mn. The EBITDA margins improved from ~7% in FY19 to ~12.8% in 9MFY22. Blended EBITDA/t inched up sharply from ~Rs19,813/t in FY19 to ~Rs38,906/t in Q1FY22. As a outcome, PAT elevated by ~94% CAGR to Rs272mn. Significant increased earnings improved return ratios. ROE improved sharply from 31% in FY19 to 59% in FY21 whereas ROCE improved from 14.7% in FY19 to 36% in FY21.

Doubling SS pipes capability by FY23 finish, backward integrating helps in securing development

Venus has a producing plant having put in capability of 10,800tpa of SS pipes and tubes at Kutch, Gujarat. It has excessive diameter welded pipes of seven,200tpa (66%) and excessive diameter seamless pipes of three,600tpa (33%). The capability utilization has improved from common 61% in FY19 to 92% in FY21. Venus has embarked to develop capability to 24,000tpa, anticipated to be commissioned by FY23 finish. Post commissioning, welded pipes shall be 14,400tpa (60%) and seamless pipes 9,600tpa (40%). The capital outlay required for enlargement venture is ~Rs1060mn funded by means of IPO proceeds. Future development shall be fueled from each quantity enlargement in addition to price saving on account of backward integration as it’s establishing 9,600tpa piercing plant for seamless pipes which might help in saving Rs15-20k/t (at full capability utilization, can save ~Rs150mn).

Our view: Rough calculation suggests ~20% upside to IPO value

The stability sheet is robust with web debt/EBITDA of 1x (FY19: 3.5x). Venus has the potential to generate EBITDA of Rs900mn-1bn/12 months (~2x from FY22 annualized EBITDA) at full capability which might occur in FY25. The EBITDA improve ought to occur on quantity enlargement (capability rising from 10,800tpa to 24,000 tpa), improved buyer combine by shifting gross sales from stockiest to direct gross sales/tender primarily based, backward integration and enhancing working efficiencies. It can generate web income of ~Rs600mn (assuming EBITDA of ~Rs900mn). Assigning 14x (30% low cost to Ratnamani Metal and Tubes’s FY24 consensus P/E), potential market cap might be ~Rs8.4bn, offering ~20% upside.

Venus current capability and enlargement plans

Venus has manufacturing plant at Dhaneti, Kutch in Gujarat, having put in capability of SS pipes and tubes of 10,800tpa. It manufactures welded in addition to seamless SS pipes. Venus is amid rising the general SS pipes capability to 24,000tpa and improve product choices of various sizes and increased diameter. Welded pipes capability is proposed to extend from

current 7,200tpa to 14,400tpa and seamless pipes from 3,600tpa to 9,600tpa. It is predicted to be accomplished by FY23 finish at complete capex of Rs1060mn. 

Conclusion: Should You Invest or Not?

As the commodity costs are rising we’ll see increased development and the revenue margin will improve within the coming quarters and fiscal 12 months. The firm is on a plan of enlargement, to double the capability in FY23. The monetary outcomes are trying sturdy and the rising sector will give extra increase within the coming years. As the difficulty measurement is beneath Rs.250 crores the itemizing shall be within the “T” Group. There shall be a circuit restrict of 5% on the itemizing value on a list day. As per the information we noticed within the above thread we advocate making use of IPO with medium to long run views.

Note: All the information revealed within the article is added as per the analysis from on-line sources and brokerage companies. The information is for instructional functions solely. We don’t declare any info, or figures talked about right here.