RASHI PERIPHERALS LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

The second IPO we cover this week is Rashi Peripherals Limited (RPL), the first being The Park Hotel. With over three decades in the business, the company distributes global technology brands in India. It opens for subscription on the 7th of February and closes on the 9th of February.

In this article, we look at the various aspects of RPL's business to help you decide whether to subscribe or invest in the IPO.

Rashi Peripherals Limited IPO: Key Details

Below are the key details related to the RPL IPO:

• Issue Size: Rs 600 crore
• Price Band: Rs 295 - Rs 311
• Lot Size: 48 Shares
• Issue Details: Only Fresh Issue
• Market Cap: At the upper price band, Rs 2,049 crore
• Minimum Investment: Rs 14,928

Rashi Peripherals Limited IPO: The Business

Rashi Peripherals commenced operations with the manufacturing of peripherals. With the liberalization of the Indian IT sector in 1991, they transitioned to the distribution of ICT products of global technology brands in India.

RPL is among the leading national distribution partners for global technology brands in India for information and communications technology (ICT) products in terms of revenues and distribution network in FY23. They are also one of the fastest-growing national distribution partners for global technology brands in India in terms of revenue growth between FY21 and FY23.

They primarily operate the following two business verticals:

• Personal Computing, Enterprise, and Cloud Solutions (PES): Under this vertical, they distribute personal computing devices, enterprise solutions, embedded designs/ products, and cloud computing.
• Lifestyle and IT essentials (LIT): It includes the distribution of products such as (i) components that include graphic cards, central processing units (“CPUs”) and motherboards; (ii) storage and memory devices; (iii) lifestyle peripherals and accessories that include keyboard, mice, web cameras, monitors, wearables, casting devices, fitness trackers and gaming accessories; (iv) power equipment such as UPS and invertors; and (v) networking and mobility devices.

They have a pan-India distribution network comprising 50 branches that operate for sales and as service centers and 63 warehouses, as of September 30, 2023. Through their branches and warehouses, they cover 680 locations in India.

Rashi Peripherals Limited IPO: Industry Overview

The ICT sector significantly contributes to the country’s GDP, ICT sector includes value arising from Information Technology enabled Business Process Outsourcing (ITeBPO), e-commerce, domestic electronics manufacturing, digital payments, digital communication services (including telecom), etc.

Globally, the Electronics and ICT products market is expected to grow at a CAGR of 14% between 2020 and 2025 and is projected to cross approximately USD 350 billion in sales by 2025.

India’s IT spending includes IT spending on products (hardware, software) and services. In 2022, all subsegments within IT spending have depicted growth, however, devices, enterprise software, and IT services have grown the fastest in the last two years owing to the positive impact of the pandemic on the technology industry. IT spending is projected to reach a value of Rs 10,870 billion by 2025 growing at a CAGR of 10%.

Rashi Peripherals Limited IPO: Listed Peers

The company has only one listed peer - Redington India. Let us compare the FY23 financials to give you an idea of their business:

• In revenue terms, RPL is smaller between two - the revenue one-eight that of Redington.
• Earning per share is higher for Rashi Peripherals.
• Return on Net Worth is lower for Rashi Peripherals.

Check the below table for exact numbers.

Rashi Peripherals Limited IPO: Financials

Let us look at financial numbers from recent years:

• The revenue from operations grew at a CAGR of 26.32% from Rs 5,925.05 crore in FY21 to Rs 9,454.28 crore in FY23 and was Rs 5468.51 crore in the six months ended September 30, 2023.
• RPL has reported an EBITDA of Rs 215.23 crore, Rs 305.22 crore, and Rs 267.61 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 3.63%, 3.28%, and 2.83%, respectively. The margins have come down in this period.
• They have reported a net profit (PAT) of Rs 136.35 crore, Rs 182.51, and Rs 123.34 crore for FY21, FY22, and FY23. The profits were reduced due to lower margins.
• For the last three financial years, RPL has reported a fully diluted average of Rs 35.76 and an average RoNW of 27.44%.
• If we attribute annualized FY24 earnings to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 14.23.
• Return on Capital Employed (ROCE) has increased from 29.68% in FY21 to 30.62% in FY23. ROE has reduced from 38.91% in FY21 to 33.33% in FY23.
• The debt to Equity ratio has increased from 1.23 in FY21 to 1.53 in FY23.
• Working Capital Days have increased from 36 days in FY21 to 53 days in FY23.

Risks associated with Rashi Peripherals Limited

Below are the risks associated with their business:

• They are dependent on various vendors, who are global technology brands, for the products they distribute.
• The business is dependent on global technology brands effectively maintaining, promoting, or developing their brands and maintaining standard quality products including launching new information and communications technology products at regular intervals. 
• If RPL is unable to maintain its relationships with its Channel Partners or customers or if any of these parties change the terms of their arrangements with them, the business could be materially and adversely affected. 
• Their gross margins are low, which magnifies the impact of variation in revenue, operating costs, bad debts, and interest expense on their operating results.