Ratnaveer Precision Engineering IPO Review: Ratnaveer Precision Engineering is coming up with its Initial Public Offering. The IPO will open for subscription on September 4th, 2023, and close on September 6th, 2023.
In this article, we will look at Ratnaveer Precision Engineering IPO Review 2023 and analyze its strengths, weaknesses, GMP and more. Keep reading to find out!
Ratnaveer Precision Engineering IPO – About The Company
Ratnaveer Precision Engineering Limited, incorporated in 2002, produces stainless steel finished sheets, washers, solar roofing hooks, pipes, and tubes.
The company produces stainless steel-based products for the automotive, solar power, wind energy, power plants, oil and gas, pharmaceuticals, sanitary and plumbing, instrumentation, electromechanics, architecture, building & construction, electrical appliances, transportation, kitchen appliances, chimney liners, and other industries.
Ratnaveer Precision Engineering has four production plants, two of which are located at GIDC, Savli, Vadodara, Gujarat, Unit-III at Waghodia, Vadodara, Gujarat, and Unit-IV at GIDC, Vatva, Ahmedabad, Gujarat.
As of FY23. the company has 2,500 SKUs of washers and intends to expand its portfolio of SS washers by adding circlips to the product line. During this time period, it has generated 80,79% domestically and 19.21% from its exports
Ratnaveer Precision Engineering IPO Review – Industry Overview
Because of its diverse range of uses, India is one of the fastest-growing stainless steel markets. Because of its better endurance and lesser maintenance, stainless steel is used in infrastructure projects, manufacturing industries, and the manufacture of high-quality products.
According to Crisil Ratings, domestic stainless steel demand will expand at a CAGR of 9% till FY25. In FY22, this demand stood at 4 MT.
Stainless steel demand is expected to rise due to greater use in railways, as well as increased application in the automobile and construction industries.
Railway demand is expected to more than triple by fiscal 2025, accounting for 20% of the metal’s additional demand between fiscal 2023 and fiscal 2025.
Other major stainless steel industries, such as consumer goods and the process industry, are expected to grow at a respectable rate of 7-9% over the next 3-5 fiscal years, thanks to increased consumer expenditure and a recovery in consumption.
Ratnaveer Precision Engineering IPO Review – Financials
If we look at the financials of Ratnaveer Precision Engineering IPO Review we find out that their assets have moderately increased from ₹255.92 crores in March 2021 to ₹389.05 crores in March 2023.
Their revenues follow a similar trend, increasing from ₹364.05 crores in March 2021 to ₹481.14 crores in March 2023. The rise in revenues is accompanied by increasing profits, which have increased five times from ₹5.46 crores in March 2021 to ₹25.04 crores in March 2023.
Since the company operates in a high-cost industry, its margins will be comparatively low. But over the past three years, it has increased its net profit margins from 1.50% to 5.21%. This can be partly attributed to the company’s focus on backward integration.
In terms of return ratios, it has a ROE of 29.12% and a RoCE of 12.62% as of FY23. This suggests a good return on shareholders’ capital. But, at the same time, a lower RoCE than the ROE can suggest that the company has high debts.
The debt-to-equity ratio of 2.17 further clarifies the above statement of the company having high debt. The high debt of the company is due to the high cash flow requirements of the company to run its operations. Apart from paying back the capital borrowed, the company has an additional burden of paying the interest on it, which in turn reduces the overall net profits.
Peers of the Company
The following image will show you the peers of the company along with their important metrics:
Additionally, the company operates in a highly fragmented and competitive industry d we compete with a range of organized and unorganized players, both at the national and regional level.
Strengths of the Company
- The company has developed a system of backward integration wherein, it processes the waste generated from manufacturing and converts it back to raw material used in manufacturing. The raw materials generated through backward integration and raw materials acquired from external resources are as follows:
- The company has a wide diversified product portfolio which enables it to meet the trends and changing demands of its customers. It also gives it an edge to efficiently compete with our competitors.
- The company has a diverse customer base in domestic as well as international markets. In the domestic market, it sells its products to manufacturers, traders and end users. In the international markets, it supplies its products to traders.
- The company has an in-house R7D facility wherein it develops tools and molds for its products which helps it enhance its product offerings.
- The company has developed quality control processes for inspecting the raw materials as well as the final products that ensure the production of quality products that help it enhance its brand value.
Weaknesses of the Company
- The company does not have any long-term agreements with its raw material suppliers. An inability to procure the desired raw materials in a timely manner and at a reasonable cost, or at all, can have a negative impact on its business.
- Steel pricing is affected by market demand, volatility, and economic factors. Steel price fluctuations may have an adverse impact on the company.
- A majority portion of the total revenue is attained from the top 10 customers of the company. Additionally, the company does not enter into any long-term contracts with its customers and any failure to continue the existing arrangements could adversely affect its business.
- The company requires huge working capital requirements to run its operations. The inability to meet the cash flow requirements can have a negative impact on its operations
- The company operates in a highly competitive and fragmented industry with low barriers to entry and may be unable to compete successfully against existing or new competitors from the organized and unorganized.
Ratnaveer Precision Engineering IPO Review – GMP
The shares of Ratnaveer Precision Engineering traded at a premium of 38.78% in the grey market on August 30, 2023. The shares tarded at Rs.136. This gives it a premium of Rs 38 per share over the cap price of Rs 98.
Ratnaveer Precision Engineering IPO – Key IPO Information
|IPO Size||₹165.03 Cr|
|Fresh Issue||₹135.24 Cr|
|Offer for Sale (OFS)||₹29.79 Cr|
|Opening date||September 4, 2023|
|Closing date||September 6, 2023|
|Face Value||₹10 per share|
|Price Band||₹93 to ₹98 per share|
|Lot Size||150 Shares|
|Minimum Lot Size||1(150)|
|Maximum Lot Size||13(1950)|
|Listing Date||September 14, 2023|
Promoters: Vijay Ramanlal Sanghavi
Book Running Lead Manager: Unistone Capital Private Limited
Registrar to the Offer: Link Intime India Private Limited
The Objective of the Issue
The net proceeds from this issue will be utilized for the following purposes:
- Financing the company’s working capital requirements.
- General corporate purposes.
In this article, we looked at the details of Ratnaveer Precision Engineering IPO Review 2023. We have to note that the company operates in a low-profit margin industry with many competitors. If the company manages to increase its volumes and focus more on backward integration, it has a good potential for the future.
What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written By Aaron Vas
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