Vraj Iron and Steel Limited

Vraj Iron & Steel Limited is engaged in manufacturing of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. The product offerings such as Sponge Iron, TMT Bar, MS Billets and by-products Dolochar, Pellet and Pig Iron cater to a mix of customers that consist of industrial customers and end-users. They sell the products directly as well as through brokers / dealers. Company currently operates through two manufacturing plants which are located at Raipur and Bilaspur in Chhattisgarh spread across 52.93 acres. As of December 31, 2023, the aggregate installed capacity of the manufacturing plants was 2,31,600 tons per annum ('TPA') (comprising of intermediate and final products). The manufacturing plant at Raipur also includes a captive power plant with an aggregate installed capacity of 5 MW, as of December 31, 2023. They are in the process of increasing the capacities of the existing manufacturing plants and captive power plant, which is expected to increase the aggregate installed capacity (comprising of intermediate and final products) from 2,31,600 TPA to 5,00,100 TPA and captive power plants aggregate installed capacity from 5 MW to 20 MW. The proposed expansion of Sponge Iron and Captive Power Plant are expected to become operational in Q4 of FY 2024-25 whereas MS Billets is expected to become operational in Q1 of FY 2025-26. The capacity utilisation of Sponge Iron, MS Billets, TMT Bar and Captive Power Plant was 83.42%, 66.14%, 20.77% and 47.48% respectively for FY21, 88.26%, 58.90%, 39.93% and 48.93% respectively for FY22, 95.29%, 79.41%, 62.71% and 57.27% respectively for FY23 & 70.57%, 55.22%, 36.13% and 36.88% for upto Q3 FY24 (not annualised). As per financial performance, Vraj Iron & Steel Limited has posted total income / net profits of Rs 290.93 Cr / Rs 10.98 Cr (FY21), Rs 414.38 Cr / Rs 28.70 Cr (FY22), Rs 517.42 Cr / 53.99 Cr (FY23) and Rs 304.80 Cr / Rs 44.58 Cr (Q3 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 15.53 and average RoNW of 38.32% for last three fiscals. Issue is priced at a P/BV of 2.73 as per NAV of Rs 75.84/- as on 31.12.23. If we attribute latest earnings of FY22, FY23, and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 23.79, 12.64, and 11.49 respectively, which looks fairly priced. As per RHP, comparison between listed peers is given in above table. On BRLM's front, one lead managers are associated with this IPO, and have handled around 13 IPOs in last three fiscals. Aryaman Financial Services Limited is associated with this Main Board IPO and handled 8 SME IPOs and 2 Main board IPO in last 3 year. From last 8 SME IPOs, one opened below issue price and remaining above issue price or at par on the day of listing and From last 2 Main board IPOs, all opened above issue price on the day of listing. As of now from last 8 SME IPOs, two are trading below issue price and remaining are trading above issue price and From last 2 Main board IPO, one is trading above below issue price and remaining is trading above issue price. (As on 20.06.24) As per financials, Vraj Iron & Steel Limited has shown good growth, RoNW is 38.32% and P/E is respectively 23.79, 12.64, and 11.49 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fairly priced. Company is engaged in manufacturing of Sponge Iron, M.S. Billets, and TMT bars, which is highly competitive and fragmented business segmented. Performance of BRLM is good. Expansion plan will help company to achieve sales growth in future. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

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