Venus Pipes & Tubes Limited
Issue Open
Price Band
Issue Size
Credit of Shares to Demat
Issue Close
Bid Lot
Listing Exchange
Cut off time for UPI Mandate Confirmation
Issue Type
Minimum Order Quantity
Allotment Details
Face Value
Listing On
Refunds
After the
biggest Indian IPO (LIC) announced its issue, several other IPO’s hit the Dalal
Street. Venus Pipes & Tubes (Venus) is one such IPO that has arrived for
listing on the stock markets.
Issue Details:
·
Dates: May 11, 2022 to May 13, 2022
·
Price Band: Rs. 310 to Rs. 326 per
share
·
Minimum Lot: 46 shares
·
Minimum Application Amount at the
Upper Band: Rs. 14,996
Objects of the Issue
The IPO has an
issue size of Rs 165 crores which comprises entirely of fresh issue.The
proceeds of the fresh issue are expected to be utilized towards:
·
Financing the project cost towards
capacity expansion, technological upgradation, cost optimization of its
operations and support to the manufacturing facility and backward integration
for manufacturing of hollow pipes.
·
Funding the long-term working
capital requirements of the Company.
·
General corporate purposes.
Company Overview
Venus Pipes
& Tubes was incorporated on February 17, 2015 as Venus Pipes & Tubes
Private Limited. It is one of the growing stainless steel pipes and tubes
manufacturer and exporter in India based in Gujarat having experience in
manufacturing of stainless steel tubular products in seamless tubes/pipes; and
welded tubes/pipes under five product lines:
1.
Stainless steel high precision &
heat exchanger tubes;
2.
Stainless steel hydraulic &
instrumentation tubes;
3.
Stainless steel seamless pipes;
4.
Stainless steel welded pipes; and
5.
Stainless steel box pipes
The finished
goods from the company are used in various sectors such as; chemicals,
engineering, fertilizers, pharmaceuticals, power, food processing, paper and
oil and gas.
The basic raw
material includes SS coils and hollow pipes and is procured on on market
availability, pricing and quality through domestic suppliers; international
suppliers (mainly from Southeast Asian countries) high sea purchases. The cost
of materials consumed accounts for ~83% of the revenue.
Venus sells its
Products both in the domestic as well as the international markets. They
started exporting in the year 2017 and as on February 28, 2022 they have
exported to 20 countries including Brazil, UK, Israel and countries in the
European Union, etc. The percentage of its revenue from operations from export
is ~10%.
Globally, the
SS pipes and Tube industry was estimated to be valued at nearly USD 32.4
billion in 2019 contributing 23% share in global pipes & tubes industry. In
coming years too, the SS pipe & tube is expected to observe a stable growth
of 4% through 2025 with the total market size estimated to cross USD 40 billion.
Key Strengths
International Accreditations and product approvals: Venus follows international standard manufacturing
practices and its manufacturing facility benefits from quality benchmarking
certifications. These certifications and industrial expertise favourably
position them in servicing client requirements across all segments of the
stainless steel seamless and welded pipes/tubes market.
Specialised production of Stainless Steel Pipes and Tubes: The Company has the sole focus on manufacturing of welded
and seamless pipes in a single metal category, i.e., stainless steel. This
gives them the benefit of segment expertise thereby placing them in a position
of advantage vis-à-vis its competitors.
Multi-fold demand of Products: The demand for the Products in ordinary course of business
is generated from three broad categories i.e. New Projects, Repair and
maintenance, and replacement. The demand from the aforesaid categories ensures
a strong order book on a year-on-year basis. Further, considering the number of
sectors serviced, the Company believes that the demand for their Products shall
increase in the future placing them, in a competitive position.
Customer Diversification:
The Company has a presence in the domestic as well as the international markets.
They started exporting the Products in the year 2017 and as of February 28,
2022 Venus has exported to 20 countries including countries in European Union, Brazil,
UK, Israel etc. In order to increase its share in the international market, Venus
have appointed sole distributors in markets like Italy and Kuwait in addition
to appointing marketing representatives for the European market.
Experienced and Qualified Team: The Promoters and senior management team is well
experienced in this industry both from marketing and distribution of products
in this sector. The Promoters are first-generation entrepreneurs and have an
average experience of approximately 8 years in stainless steel welded/seamless
pipes and tubes industry.
Key Risks
Demand Uncertainties: The
Company has not entered into long-term agreements with customers for purchasing
products nor for the supply of raw materials with suppliers.
Cyclical Business: The
demand and pricing in the steel and steel products industry is volatile and is
sensitive to the cyclical nature of the industries it serves. A decrease in
steel prices may have a material adverse effect on its business, results of
operations, prospects and financial condition.
Competition Risk:
The Company faces substantial competition from competitors in India and in
overseas markets that may have substantially greater brand recognition, which
may affect its prospects. Some of its domestic competitors may possess an
advantage over us due to various reasons, such as captive raw material sources,
greater economies of scale, integrated manufacturing plants, etc.
Negative Cash flows: Company
had negative cash flows in recent Fiscals, i.e. 9MFY22 and FY19. Sustained
negative cash flow could adversely impact its business, financial condition and
results of operations.
Financials
Particulars |
9MFY22 |
FY21 |
FY20 |
FY19 |
Total Income (in millions) |
2782.8 |
3120.3 |
1793.2 |
1205.1 |
EBITDA (excluding
other income) (in millions) |
355.12 |
347.76 |
116.36 |
82.94 |
EBITDA Margin (in %) |
12.83 |
11.24 |
6.54 |
6.98 |
Profit for the
year/period (“PAT”) (in millions) |
235.95 |
236.32 |
41.28 |
37.5 |
PAT Margin (in %) |
8.48 |
7.57 |
2.3 |
3.11 |
Return on Equity (in
%) |
-66.91 |
133.37 |
-17.67 |
-- |
Debt to Equity |
0.42 |
0.94 |
2.62 |
2.42 |
Cash Flow (in millions) |
(579.63) |
113.26 |
24.12 |
(66.58) |
Peer Comparison & Conclusion
Name of the Company |
Total Income (? in millions) |
Face Value per equity share (?) |
P/E Ratio |
EPS |
RoNW |
NAV/Share |
Venus Pipes |
3,120 |
10 |
18.07 |
18.04 |
59.18% |
30.48 |
Jindal Saw |
1,08,720 |
2 |
9.69 |
10.02 |
4.69% |
218.39 |
Ratnamani Metals &
Tubes |
23,415 |
2 |
41.51 |
59.07 |
13.90% |
425.35 |
Conclusion
In a competitive industry, the company has managed to grow
and expand its footprint, not only in India but also internationally. The financials
of the company are healthy, and the fact that the company is aiming to increase
its capacity and also undertake backward integration bodes well for both
the topline as well as the bottom line. With the capex cycle in India expected to
pick up, the growth prospects for the company seem positive. However, the fact
that the company is quite small in size and has no major competitive advantage
in its segment does raise some concerns.
From a valuation standpoint, compared to its peers, the IPO valuation
does not seem very expensive. Considering all these factors and the current
market scenario, investors with a decent risk appetite may SUBSCRIBE WITH
CAUTION.