- 25 Jun 2024
- ICICI Securities
IPO OF VRAJ IRON AND STEEL
News: Vraj Iron and Steel Ltd, a manufacturer of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj, is launching an IPO in the coming week i.e.; June 26-28 2024, at an IPO price band of ₹ 195-207/share. The total IPO size pegged at ~₹ 171 crore and is entirely a fresh issue, with proceeds earmarked for capital expenditure towards the expansion project, repayment of debt, and general corporate purpose. At the upper price band, the company will command a market cap of ~₹ 680 crore.
Views: As per RHP, the company operates two integrated steel manufacturing plants in Bilaspur and Raipur, Chhattisgarh with a combine capacity of 2,31,600 tonnes per annum (TPA) comprising of intermediaries and final products. It plans to expand its capacity to ~5 lakh TPA with significant expansion in sponge iron, which is set to double from 1.2 lakh TPA to 2.35 lakh TPA. Currently, sponge iron forms more than ~50% of revenue, followed by TMT Bar at ~30% and MS Billets at 14%. For 9MFY24, the revenue came in at ₹ 304.8 crore, EBITDA of ₹ 65 crores (EBITDA Margin of 21.6% & EBITDA Per ton of ~₹7869/tonne) and PAT of ₹ 44.5 crores (PAT Margin of 14.8%) with ROCE at ~25%. At the upper price band range, it commands a valuation of ~3.5x P/B and ~8x EV/EBITDA on trailing basis. Considering the company’s ambitious expansion plans, a robust balance sheet and healthy RoCE profile, we hold a positive view on Vraj Iron and Steel and expect it to list at a premium to its IPO price band.
Impact: Positive