Vraj Iron IPO subscribed about 47 times, HNI portion booked 112x; GMP rises

29/06/2024

The initial public offering (IPO) of Vraj Iron and Steel saw a strong response from the investors during the third and final day of the bidding process. The bidding was mostly led by HNI and retail investors but institutional investors were not left behind.

The Raipur-based Vraj Iron and Steel is selling its shares in the price band of Rs 195-207 apiece. Investors can apply for a minimum of 72 shares and its multiples thereafter. It is looking to raise Rs 171 crore via IPO, which entirely includes a fresh share sale of 82,60,870 equity shares.

According to the data, the investors made bids for 28,83,29,040 equity shares, or 46.97 times, compared to the 61,38,462 equity shares offered for the subscription by 13.05 pm on Friday, June 28. The three-day bidding for the issue, which opened on Wednesday, June 26, concludes today.

The allocation for retail investors was subscribed 37.01 times, while the portion reserved for non-institutional investors saw a subscription of 113.26 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for 15.66 times as of the same time.

Incorporated in June 2004, Vraj Iron and Steel manufactures Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. The company's product portfolio comprises offerings such as Sponge Irons, TMT Bars, MS Billets, and by-products Dolochar, Pellets, and Pig Iron, which cater to a mix of industrial customers and end-users.

The grey market premium of Vraj Iron and Steel has remained firmed after the first day of the bidding. Last heard, the company was commanding a premium of Rs 85-90 in the unofficial market, suggesting a listing pop of about 42-45 per cent for the investors. However, the premium in the grey market stood around Rs 75 levels, before the bidding opened for the issue.

They operate two integrated steel manufacturing plants located in Bilaspur and Raipur, Chhattisgarh. These facilities enable them to maintain control over all operational aspects, except for sourcing primary raw materials, and contribute to their operational margins, said Ventura Securities.

"Their product portfolio primarily consists of Sponge Iron, TMT Bars branded as 'Vraj' TMT Bars, and MS Billets. Their diversified range of products has led to a balanced product mix, reducing dependence on any single product and thereby mitigating risks associated with revenue streams," it added with a subscribe rating for the IPO.

Vraj Iron and Steel raised Rs 51.29 crore via anchor book and allocated 24,78,259 equity shares at Rs 207 equity share. For the nine-months ended on December 31, 2023, Vraj Iron reported a net profit of Rs 44.58 crore with a revenue of Rs 304.81 crore. The company's bottomline came in at Rs 54 crore with a revenue of Rs 517.42 crore for the financial year ending March 2023.

The company is engaged in manufacturing and marketing of sponge iron, MS Billets, TMT Bars under its own brand 'Vraj'. Its captive power plants are helping them in reduced power costs. It is on an expansion spree to meet rising demand for its products. It has posted good performances so far and post expansion, the company is confident of maintaining the trends, said SMC Global.

"Its all expansion plans are likely to be on stream from Q1 of FY26. However, all of the company's manufacturing facilities are located in the same region (Raipur and Bilaspur, Chhattisgarh).This concentration makes the company vulnerable to disruptions specific to that region, such as natural disasters or infrastructure issues. Long term investors may apply," it said with a two-star rating.

Vraj Iron and Steel has reserved 50 per cent of the net offer for the qualified institutional bidders (QIBs) and 15 per cent shares shall be allocated towards non-institutional investors (NIIs). Retail investors will have only 35 per cent of the allocation in the issue.

Vraj Iron and Steel Ltd is well-positioned in the steel industry, with strategically located integrated manufacturing facilities in Chhattisgarh, close to raw material sources. A significant capacity expansion, nearly doubling its production capabilities from 231,600 TPA to 500,100 TPA, which is expected to be completed by Q1FY26, said Arihant Capital Markets.

"At the upper band of Rs 207, the issue is valued at an PE(x) of 11.48 times based on FY24 EPS (post issue, annualized) of INR 18.03. We recommend 'subscribe' to this issue," it added.

Aryaman Financial Services is the sole book running lead manager of the Vraj Iron and Steel IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with July 03, Wednesday as the tentative date of listing.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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