Hariom Pipe Industries shares listed at a stellar premium to the IPO price on Wednesday while domestic markets soared higher. Shares of the company began trading at Rs 220 per share on the NSE, up 43.79% from the upper end of the IPO price of Rs 153 per share. Hariom Pipe had a market capitalisation of Rs 545 crore on its market debut. The IPO of the company was oversubscribed by all pockets of investors earlier this month. Retail investors subscribed to the issue in the largest numbers. Sensex and Nifty were trading with gains, up more than 0.50% each, attempting to reverse their bearish momentum.
Hariom Pipe Industries Rs 130 crore initial public offering was entirely a fresh issue of equity shares. The promoter shareholding, post-issue, has been brought down to 66% from 99.1% earlier. Public shareholding in the company has increased to 34%. The IPO of the company was subscribed a total of 7.93 times by investors. Retail investors bid for 12.15 times their portion of the issue while Non-Institutional Investors (NII) bid for 8.87 times the quota reserved for them. Qualified Institutional Buyers (QIB) had subscribed the issue 1.91 times.
The company’s good listing can be attributed to good market sentiments and good prospects for the Steel Pipes industry, said Santosh Meena, Head of Research, Swastika Investmart Ltd. “The company has an integrated nature of operations, a cost-effective process and an experienced management team, however, the cyclical nature of the industry, and commoditized nature of products make it suitable only for the aggressive investors in the long term. Those who applied for listing gains can maintain a stop loss of Rs 195,” he added.
The company is seen by many analysts as a long-term bet. Domestic brokerage firm Anand Rathi a note earlier had advised investors to subscribe to the IPO with a long term view. “The Company has delivered good growth in Sales over the past few years along with a stable margin profile. When compared to its listed peers, Hariom Pipe Industries is fairly valued,” they had said. Hariom Pipe Industries plans to use the funds raised for the expansion of MS Pipe manufacturing capacities and the expansion of sponge iron furnace capacity.
Arihant Capital valued the company at an EV/EBITDA of 10.2x based on FY21 EBITDA, on the upper end of the price band. The brokerage firm had a ‘Subscribe for Long Term’ rating on the public issue. Further, seeing strong potential for revenue growth and scope for further improvement in profitability, Ventura Securities too had a ‘Subscribe’ rating on Hariom Pipe Industries.
During FY19-21, Hariom Pipe Industries’ revenue grew at a CAGR of 37.9% to Rs 254 crore, EBITDA/ PAT grew at a CAGR of 41.9%/ 37.3% to Rs 34 crore and Rs 15 crore, respectively. Founded in 1962, Hariom Pipe is an integrated manufacturer of MS Pipes, Scaffolding, HR Strips, MS Billets, and Sponge Iron.