Venus Pipes And Tubes Ltd IPO Opens Today: What Brokerage Says?

Venus Pipes and Tubes Ltd is one of the growing stainless steel pipes and tubes manufacturers and exporters in India having over six years of experience in manufacturing of stainless steel tubular products in two broad categories: seamless tubes/pipes and welded tubes/pipes.

The Company have one manufacturing plant which is strategically located at Bhuj-Bhachau highway, Dhaneti (Kutch, Gujarat) in close proximity, around 55 kilometres and 75 from the ports of Kandla and Mundra, respectively, which helps the company in reducing their logistic costs on procurement of raw materials and imports and export of their products.

The Company sell their Products both in the domestic as well as the international markets. In the domestic market, they sell their products to customers as well as traders/stockists while in the international market they supply their products through traders/stockists and authorized distributors that engage with them on an exclusive basis and certain marketing representatives. The Company started exporting their Products in the year 2017 and as on February 28, 2022, they have exported to 20 countries including Brazil, the UK, Israel and countries in the European Union etc.

The cost of materials consumed (including the purchase of stock in trade and changes in inventory) by the company in their operations accounted for 82.09%, 84.53%, 88.29% and 85.58% of their revenue from operations for the nine-month period ended December 31, 2021, and Fiscals 2021, 2020 and 2019, respectively.

All you need to know about the Venus Pipes and Tubes Ltd IPO

As mentioned, the IPO opens or subscription on May 11 and closes on 13 May. The issue size of the IPO is Rs 165.35 crore, it is entirely an offer for sale (OFS). The company has set a price band of Rs 310-326 a share.

The company plans to mop up Rs 165.42 crore through this offer at the upper end of the price band. The offer is a book-built issue and does not comprise any offer for the sale of equity shares by the promoters.
The promoters will surrender a total of 50.74 lakh shares, or 16.07 per cent of their holdings. Their current 64.27 per cent share in the corporation will be reduced to 48.2 per cent.

Qualified institutional buyers will receive 50% of the net offer, while retail investors would receive 35% and non-institutional investors will receive 15%.
The Chairman, Non-Executive Director, and one of the company's promoters is Jayantiram Motiram Choudhary.

Megharam Sagramji Choudhary and Dhruv Mahendrakumar Patel are promoters and Whole-Time Directors, while Arun Axaykumar Kothari is the company's Managing Director and CFO.

The brokerage views on Venus Pipes and Tubes IPO

According to Anand Rathi, "Venus Pipes and Tubes Ltd is a manufacturer of pipes and tubes with the sole focus on manufacturing of welded and seamless pipes in a single metal category i.e. stainless steel. Being present in only one metal segment since inception, the company have gained segment expertise. The Company supply their Products across a diversified range of sectors and the demand for their product is also expected to increase with growth in downstream sector. The Company is planning to double its capacity and backward integrate with the help of IPO proceeds which will help it to increase its revenue and margins. The company is available at the upper end of the IPO price band at 21x its FY22 annualized earnings attributable to post issue equity demanding a market cap of Rs. 6,617 million. At the upper end of the IPO price band, the issue is priced at a P/BV of 10.7x based on its NAV of Rs. 30.5 as of March 31, 2021. The Company has delivered good growth in Sales over the past few years along with an increasing margin profile. However, Venus faces competition from its peers who hold substantial market share in the SS pipes and tubes market. When compared to its listed peers, Venus seems to be richly priced. We recommend an "Avoid" rating to this IPO."

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.