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New Delhi: The initial public offering (IPO) of Venus Pipes and Tubes kicked off for subscription on Wednesday. The company is looking to raise Rs 165.42 crore via the primary market route.

Venus Pipes and Tubes is a manufacturer and exporter of stainless steel pipes and tubes in two broad categories – seamless tubes/pipes and welded tubes/pipes.

The issue consists of the issuance of 50.74 lakh fresh equity shares with a face value of Rs 10 each in the price band of Rs 310-326 apiece. The IPO will run till Friday, May 13. Investors can make bids in multiples of 46 equity shares.



The net proceeds from the issue will be utilised for meeting the long-term working capital requirements, financing projects for capacity growth, technology upgrades and general corporate purposes.

Venus Pipes and Tubes has one manufacturing plant which is located at Bhuj-Bhachau highway, Gujarat with an installed capacity of 10,800 MT per annum.

The company sells products in both domestic and international markets. It exports its products to 18 countries including Brazil, the UK, Israel and countries in the European Union.

It reported a profit after tax (PAT) of Rs 23.63 crore with a topline of Rs 312.03 crore in the financial year 2021-22. For the nine months ended December 2021, the company reported a net profit of Rs 23.6 crore with a revenue of Rs 278.28 crore.

A day before its IPO, the company raised Rs 49.62 crore from anchor investors on Tuesday by allocating 15,22,186 shares at Rs 326 per share, the company said in a BSE circular.

Nippon India Small Cap Fund,

Mahindra Life Insurance Company Ltd & India SME Investments – Fund I are among the investors that participated in the anchor book.

The company has reserved 75 per cent of the net offer for qualified institutional buyers (QIBs), whereas non-institutional buyers (NIIs) will get a 15 per cent allocation. The remaining 10 per cent shares will be given to the retail bidders.

SMC Capitals is the sole book-running lead manager to the issue, whereas Kfin Technologies is the registrar to the issue. The equity shares of the company are proposed to list on BSE and NSE.

Majority of the brokerages are positive on the issue and have suggested subscribing to it, tracking its sound financials, growth prospects, healthy margins and expansion plans. However, a few of them are wary of the valuations of the company.

Here’s a look at what brokerages have to say and recommend about the IPO of Venus Pipe and Tubes:

Securities

Rating: Subscribe

Venus is in the process of increasing pipes capacity as well as backward integration, which is likely to help in cost-saving, said the brokerage. “It is a key player in specialized stainless steel pipes and tubes production.”

Given the company’s healthy financials with double-digit EBITDA margin, controlled D/E ratio, strong capacity expansion from IPO proceeds, diverse customer base, backward integration and valuation comfort, the brokerage has suggested subscribing to it.

Hem Securities

Rating: Subscribe

The company with international accreditations and product approvals specializes in the production of stainless steel pipes and tubes with multi-fold demand for its products, said Hem Securities with a ‘subscribe’ rating.

Centrum Broking

Rating: Not Rated

The balance sheet is strong and Venus has the potential to generate an EBITDA of Rs 90-100 crore/year. The EBITDA increase should happen on volume expansion, improved customer mix by shifting sales from stockist to direct sales/tender based, backward integration and improving operating efficiencies, said the brokerage.

Marwadi Financial Services

Rating: Avoid

Considering the FY21/FY22 (Annualised) EPS of Rs 11.64/Rs 15.50 on a post issue basis, the company is going to list at a P/E of 28.00x/ 21.03x with a market cap of Rs 661.7 crore whereas its peers namely

and & Tubes are trading at P/E of 5.99x and 31.74x, said the brokerage.

“We assign ‘Avoid’ rating to this IPO as the company has negative operating cash flows and geographic concentration of revenues as 3 states contribute more than 90 per cent to domestic revenues,” it added.

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