IPO Corner: Vraj Iron and Steel Limited

A book built issue of Rs 171 crore opens on June 26! Aggressive Promoter & Reasonably Priced Offer Makes it Attractive.
Vraj Iron and Steel Limited
  • Issue Opens: Wednesday, June 26, 2024
  • Issue Closes: Friday, June 28, 2024
  • Face Value: Rs 10 each
  • Price Band: Rs 195 to Rs 207 per share
  • Lot Size: 72 Shares
  • Listing On: BSE & NSE
  • Issue Size: 8,260,870 shares
  • Fresh Issue: 8,260,870 shares (Rs 171 cr)
  • Issue Type: Book Built IPO
  • Basis of Allotment: Friday, July 1, 2024
  • Initiation of Refund: Monday, July 2, 2024
  • Credit to Demat: Monday, July 2, 2024
  • Listing Date: Tuesday, July 3, 2024

Vraj Iron and Steel Limited shall open its initial public offer of Equity Shares on Wednesday, June 26, 2024. The total issue size of Equity Shares of face value Rs 10 each aggregated up to Rs  1,710 million (Rs 171 crore) comprises of fresh issue. The Anchor Investor Bidding shall be on Tuesday, June 25, 2024.  The Issue will close for subscription on Friday, June 28, 2024. The Price Band of the Issue has been fixed at Rs 195 to Rs 207 per Equity Share. Bids can be made for a minimum of 72 Equity Shares and in multiples of 72 Equity Shares thereafter. The Equity Shares are proposed to be listed on the BSE and NSE.

Issue Analysis

Post-IPO, its current paid-up equity capital of Rs. 24.72 crore will stand enhanced to Rs. 32.98 crore Based on the upper cap of the IPO price band, the company is looking for a market cap of around Rs. 683 crore.  Looking at FY24 annualized earnings and to its post-IPO fully diluted paid-up equity capital, the IPO price is at a P/E of 11.49 whereas based on FY23 earnings, the P/E comes about 12.65. As per the offer document, the company has shown Sarda Energy, Godawari Power and Shyam Metalics as their listed peers. Sarda Energy is currently trading at a P/E of 15.2, Godawari Power at 16.5, and Shyam Metalics trading at P/E of 18. Comparing with these already listed entities the asking issue price is quite reasonable.

Expansion Plan

The Company proposes to utilize net proceeds towards funding for Capital Expenditure towards the Expansion Project at Bilaspur Plant estimated to be Rs 1,64.50 crore and balance amount towards General corporate purpose. The Company has already deployed Rs 70 crore from loan from HDFC Bank which is proposed to be repaid from net proceeds of the IPO. For the balance amount of Rs 94.5 crore the Company has already deployed Rs 32 crore from internal accrual and further wish to deploy Rs 3 crore from internal accruals. The rest of the Rs 59.5 crore is further to be funded from the net proceeds of the IPO in FY 2024-25. Aryaman Financial Services Limited is the Book Running Lead Manager.

Its manufacturing plant at Raipur has a captive power plant with an aggregate installed capacity of 5 MW, as of December 31, 2023. The company is in the process of increasing the capacities of its existing manufacturing plants from 2,31,600 TPA to 5,00,100 TPA and captive power plants aggregate installed capacity from 5 MW to 20 MW. The proposed expansion of Sponge Iron and Captive Power Plant are expected to become operational in Q4 of FY 2024-25 whereas MS Billets is expected to become operational in Q1 of FY 2025-26.

The Company

Vraj Iron and Steel Limited manufactures Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. The company runs two manufacturing plants in Raipur and Bilaspur, Chhattisgarh, covering 52.93 acres. As of March 31, 2023, the total installed capacity of the manufacturing plants was 231,600 tons per year, including intermediate and final products. The company currently has a production capacity of 57,600 TPA of MS Billets, which its rolling mills can use to manufacture TMT Bars with a production capacity of 54,000 TPA. The company’s product portfolio comprises offerings such as Sponge Irons, TMT Bars, MS Billets, and by-products Dolochar, Pellets, and Pig Iron, which cater to a mix of industrial customers and end-users.

Promoter

The company is promoted by Vijay Anand Jhanwar, who is a young (Born 09 July 1980) and aggressive entrepreneur. Deeply involved at the industry’s leading associations and promotional body holding prominent positions he has been well-established in the industry for more than two decade. He is a task force member of the Ministry of Steel, constituted for low carbon emissions and to protect the Environment from Industrial Carbon. He has served in various position of Chhattisgarh Sponge Iron Manufacturing Association as a General Secretary from 2014 to 2016 as a President 2016 to 2019 and thereafter as Co-chairman for the year 2019-2020. He was an apex committee member of Joint Plant Committee of Ministry of Steel.

Key Performance Indicator

KPIValues
ROE23.78%
ROCE25.34%
Debt/Equity0.27
RoNW23.78%
P/BV2.73
PAT Margin (%)3.61

Financials

Vraj Iron and Steel Limited’s revenue increased by 24.87% and profit after tax rose by 88.12% between the financial year ending with March 31, 2023 and March 31, 2022.

Period Ended31 Dec 202331 Mar 202331 Mar 202231 Mar 2021 
Assets253.05191.54150.77126.33
Revenue304.81517.42414.38290.93
Profit After Tax44.5854.0028.7010.99
Net Worth187.50140.9287.1457.79
Reserves and Surplus162.78135.9782.1952.85
Total Borrowing49.3022.9842.5145.78
Amount in Rs Crore 
About the author: IE&M Team
IE&M Team
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