Vraj Iron And Steel IPO likely to list at 32% premium to issue price

Shares of Vraj Iron and Steel are set to make their Dalal Street debut tomorrow, that is, on Wednesday, July 3, and the company is set to deliver a strong listing pop, analysts believe.

Ahead of its debut, Vraj Iron and Steel shares were trading at a premium of ₹67 in the unlisted market.

According to Shivani Nyati of Swastika Investmart, the IPO has captivated investors, generating a grey market premium (GMP) of ₹67, a staggering 32.37% above its issue price. This surge aligns perfectly with the extraordinary subscription of 126.36 times, showcasing immense investor confidence in Vraj Iron and Steel’s potential, she said.

Nyati said the company’s financial performance paints a positive picture. Vraj Iron has a proven track record of consistent profitability over the past three years, demonstrating its ability to generate healthy returns.

However, the analyst advised investors to acknowledge certain risks, such as the concentration of manufacturing facilities in a single region and the lack of long-term customer contracts. The steel industry’s inherent competitiveness is another factor to consider.

“Despite these considerations, the IPO’s P/E (price-earnings) valuation of 9.48 times appears reasonable. This, coupled with the company’s strong fundamentals, impressive subscription, and soaring GMP, suggests a good listing with significant gains for early investors,” Nyati said.

The IPO was overall subscribed a stellar 119.04 times at close. The category for qualified institutional bidders (QIBs) was subscribed 163.90 times The quota for non-institutional investors was booked 208.81 times, while the portions set aside for retail investors saw bidding for 54.93 times.

Vraj Iron also collected a little over ₹51 crore from anchor investors.

Those who have been allocated shares include Volrado Venture Partners Fund IV, Capri Global Housing Finance, Ashika Global Securities, Rajasthan Global Securities, Leading Light Fund VCC – The Triumph Fund and Astorne Capital VCC-Arven.

The company sold its shares in the range of ₹195 to ₹207 per share, where 72 equity shares in a lot.

The public issue included only a fresh issue with no offer-for-sale component.

The company will use the issue proceeds for expansion project at the Bilaspur facility and general corporate purposes.

Vraj Iron and Steel is into manufacturing of sponge iron, MS (Mid Steel) billets, and TMT (Thermo Mechanical Treatment) bars.

The company operates through two manufacturing plants at Raipur and Bilaspur in Chhattisgarh.

After implementation of the expansion project, the company expects to increase its aggregate installed capacity from 231,600 tonne per annum (TPA) to 500,100 TPA and captive power plants’ aggregate installed capacity from 5 MW to 20 MW.

On the earnings front, the company posted a 88% year-on-year growth in net profit at ₹54 crore for the year ended March FY23 on healthy operating numbers. Its revenue from operations for the year rose by 24.5% to ₹515.7 crore as against the previous year.