Hariom Pipes Industries Limited is an integrated manufacturer of Mild Steel (MS) Pipes, Scaffolding, HR Strips, MS Billets, and Sponge Iron. They use iron ore to produce Sponge Iron which is then processed across various stages to manufacture their final products viz. MS Pipes and Scaffolding making company manufacturing process cost-effective. The Company cater to the southern and western Indian markets for their products. Its MS Pipes are marketed and sold in these geographies under the brand name 'Hariom Pipes'. Substantial portion of the Sponge Iron, MS Billets and HR Strips produced by them are used for captive consumption in the manufacturing MS Pipes and Scaffolding. They manufacture MS Pipes and Scaffoldings of more than one hundred fifty (150) different specifications and cater, directly and indirectly, to customer requirements in various sectors such as housing, infrastructure, agriculture, automotive, power, cement, mining, solar power and engineering. Company's integrated plant at Mahabubnagar District in Telangana (Unit I) manufactures finished steel products from iron scrap and Sponge Iron and their other plant at Anantapur District, Andhra Pradesh (Unit II) exclusively manufactures Sponge Iron. Unit II is located near Bellary, which is one of the hubs in South India for iron ore production. The iron ore required to produce Sponge Iron at Unit II is mostly procured through the online bidding process. Most of the Sponge Iron produced at the Unit II is transported to the Unit I and used as a raw material for manufacturing MS Billets, HR Strips, MS Pipes and Scaffolding. The manufacturing of Sponge Iron at the Unit II has reduced the dependence on external sources for raw materials since its acquisition in September, 2020. Its quality control team led by qualified chemists and engineers ensure that their raw materials as well as end products are tested on all quality parameters to ensure that they are compliant with the required market standards. They mainly sell MS Pipes through more than two hundred (200) distributors and dealers. They also sell MS Pipes and Scaffoldings to certain developers and contractors directly as B2B sales. The Company is planing to set up two additional Pipe Mills to increase the production capacity. These two mills will be situated at the land adjacent to our existing Pipe Mills. This expansion will increase the production capacity from 84,000 Metric Tons Per annum to 1,32,000 Metric Tons Per annum. Further, they will be undertaking expansion of the existing furnace capacity by setting up of a new 15 Ton electric melting furnace at the existing unit thereby enhancing the production capacity to the extent of 1,04,232 MTPA from the existing capacity of 95,832 MTPA. This expansion will ensure the availability of primary raw materials i.e. MS Billets which is used in the production of HR Strips. HR Strips are used as main raw material in the Pipe Mills. This new electric melting furnace will also help in ensuring availability of HR strips for the additional pipe mills. As per financial performance, Hariom Pipes Industries Limited has posted total income/net profits of Rs 133.91 Cr / Rs 8.02 Cr (FY19), Rs 161.15 Cr / Rs 7.90 Cr (FY20), Rs 254.82 Cr / Rs 15.13 Cr (FY21) and Rs 201.16 Cr / Rs 12.86 Cr (H1 FY22). So company has posted good results. They have posted an average EPS of Rs. 8.10 and average RoNW of 19.85% for last three fiscals. Issue is priced at a P/BV of 1.89 as per NAV of 80.91 on 30.09.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 25.75 and as per FY22 annualised earnings P/E is around 15.14, which looks fairly priced. As per RHP, comparison between listed players is shown in above table. On BRLM's front, One lead manager, ITI Capital Market, is associated with this IPO, and have handled around 2 IPOs in last three fiscals. From last 2 IPOs, One is opened below issue price and remaining are opened above issue on the day of listing. As of now, both are trading above issue . ( As on 28.03.22) As per financials, HPIL has shown good growth, RoNW is 21.38% and P/E is respectively 26 and 15 as per FY21 and annualised FY22 earnings, which looks fairly priced, but if company can maintain same growth in bottom-line is need to be watched. Company is in business of Iron & Steel Products and there is good growth opportunity as GoI is planning huge infrastructure development in next couple of years. There is very high competition in this sector. So, we give SUBSCRIBE rating for this IPO, but it's only for high risk taking investors.
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