Vraj Iron and Steel IPO Review 2024: Vraj Iron and Steel Limited is coming up with its Initial Public Offering. The IPO will open for subscription on June 26, 2024, and close on June 28, 2024. In this article, we will look at Vraj Iron and Steel IPO Review 2024 and analyze its strengths, weaknesses, financials and GMP. Keep reading to find out! 

Vraj Iron and Steel IPO Review – About The Company

Incorporated in June 2004, Vraj Iron and Steel Limited is engaged in the manufacture of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. Furthermore, the company also manufactures by-products such as Dolochar, Pellet and Pig Iron to cater to a mix of customers that consist of industrial customers and end-users.

The company operates two manufacturing plants spread across 52.93 acres located at Raipur and Bilaspur and has an installed capacity of 2,31,600 TPA as of December 2023. Additionally, the company’s Raipur plant includes a captive power plant with an aggregate installed capacity of 5 MW as of December 2023.

The company is in the process of increasing the capacities of its existing manufacturing plants and captive power plant, which is expected to increase its aggregate installed capacity from 2,31,600 TPA to 5,00,100 TPA and captive power plants aggregate installed capacity from 5 MW to 20 MW

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The Company operates using a B2B model, selling TMT Bars, Sponge Iron, and MS Billets through commissioned agents. Furthermore, its sales and marketing team focuses on building strong customer relationships, securing orders, and exploring new business opportunities. 

Customer Base

The company mainly sells its products to its o intermediaries who in turn sell them to end customers. In the past three financial years, the company has majorly derived its revenue from its top 5 and top 10 customers. The below table will show you the revenue contribution by the top 5 and the top 10  customers of the company:

Source: RHP of the company

Vraj Iron and Steel IPO Review – Industry Overview

India ranks as the world’s second-largest steel producer, boasting an installed capacity of 161.3 million tonnes in FY23. Additionally, it holds the position of the second-largest consumer of finished steel, with a consumption of 120 million tonnes in the same fiscal year. It is expected that the annual production of steel will exceed 300 million tonnes by 2030-31.

The growth of the Indian steel sector over the years can be credited to the abundant domestic supply of raw materials like iron ore and the availability of cost-effective labour. 

Furthermore, the industry has thrived due to the high domestic demand in key sectors such as construction, real estate, and automobiles. India’s extensive coastline has also facilitated both imports and exports, cementing its position as one of the foremost players in the global steel industry.

Vraj Iron and Steel IPO Review – Financial Highlights

If we look at the financials of Vraj Iron and Steel, we can see that its total revenues have increased from ₹290.93 crores in FY21 to ₹517.42 crores in FY23. 

The rise in revenues is accompanied by an increase in profits from ₹10.98 crores in March 2021 to ₹53.9 crores in March 2023. With the overall increase in profits, the company’s net profit margins stood at 10.47% in FY23.

As of the nine months ended of FY24, the company has earned a revenue of ₹304.80 crores and has retained a profit of ₹44.58 crores.

As of FY23, the company reported an ROE of 38.32% and a RoCE of 44.98%. This indicates a phenomenal return on the capital invested by its shareholders and an excellent utilization of its company resources.

Furthermore, the company’s debt-to-equity ratio stood at 0.27 which means the company has majorly operated using its own funds.

Peers of the Company

Vraj Iron and Steel faces intense competition in the Indian steel market, from various domestic and multinational companies in India and the company is relatively small company to its peers in the market. The below image shows the comparison of Vraj Iron and Steel Limited along with its listed industry peers:

Peers of the Company
Source: RHP of the company

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Strengths of the Company

  • The company operates 2 integrated steel manufacturing plants, enabling it to control all aspects of its operations and operating margins, and also focus on quality and multiple points of sale across the steel value chain.
  • The company has a 5MW captive power plant which helps it reduce energy costs and also decreases its exposure to power disruptions.
  • The company’s manufacturing units are situated in close proximity to the mineral belt in eastern India. This helps the company overcome its entry barriers when compared to its competitors.
  • The company has a diversified product range which reduces its dependency on a particular product and de-risks it revenue streams.
  • The company’s board, management and promoters have long experience in the iron and steel industry which provides it with a competitive advantage during its expansion. 

Weaknesses of the Company

  • The company’s revenue is completely dependent on the sale of its steel products. As the prices of steel are highly subject to market fluctuations, a decrease in steel prices can have an adverse effect on the business.
  • A significant portion of the revenue of the company’s revenue is generated from its top 10 customers. A loss of any of these customers or a reduction in their orders can adversely affect the company’s revenue.
  • The company relies on third-party suppliers, logistics, and transportation services. Any interruptions in these areas could negatively impact its business.
  • The lenders have a claim on the company’s movable and immovable properties for the finance it has availed. If there is a default in loan repayment, the lenders have the right to invoke or forfeit its properties.
  • The company’s production quantity and costs depend on sourcing raw materials at acceptable prices and maintaining a stable supply. Fluctuations or interruptions in raw material supply can adversely affect the business.

Vraj Iron and Steel IPO Review – GMP

The shares of Vraj Iron and Steel Limited traded at a premium of 19.32% in the grey market on June 24, 2024. The shares tarded at Rs.247. This gives it a premium of Rs 40 per share over the cap price of Rs. 207. 

Vraj Iron and Steel IPO Review – Key IPO Information

ParticularsDetails
IPO Size₹171.00 Cr
Fresh Issue₹171.00 Cr
Offer for Sale (OFS)-
Opening dateJune 26, 2024
Closing dateJune 28, 2024
Face Value₹10 per share
Price Band₹195 to ₹207 per share
Lot Size72 Shares
Minimum Lot Size1
Maximum Lot Size13 (936 shares)
Listing DateJuly 3, 2024

Promoters: Vijay Anand Jhanwar, Kusum Lata Maheshwari, Gopal Sponge And Power Private Limited, V.A. Transport Private Limited, Kirti Ispat Private Limited, Bhinaswar Commercial Private Limited And Utkal Ispat Private Limited

Book Running Lead Manager: Aryaman Financial Services Limited

Registrar to the Offer: Bigshare Services Private Limited

The Objective of the Issue

The net proceeds received from the offer for sale will be utilised for the following purposes:

  1. Funding the Capital Expenditure towards the “Expansion Project” at the Bilaspur Plant.
  2. Repayment or prepayment of borrowings from HDFC Bank obtained by the Company.
  3. General Corporate Purposes.

Conclusion

In this article, we looked at the details of Vraj Iron and Steel IPO Review 2024. The company has shown strong financial growth, with revenues and profits increasing significantly over the recent years. However, while the company has shown impressive growth, it remains relatively small compared to its listed peers in the industry.

Investors should carefully weigh the company’s strengths against its challenges when considering participation in this IPO. 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

By utilizing the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


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