Prince Pipes IPO – Should you Invest?
Prince Pipes and Fittings IPO Review
Mumbai based Prince Pipes and Fittings is coming up with an IPO that would open for subscription on 18th December, 2019. Prince Pipes and Fittings Limited are engaged in the manufacturing of polymer pipes and fittings in India. Should you invest in the Prince Pipes IPO? What are the risk factors you should consider before investing in this IPO?
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About Prince Pipes and Fittings Limited
Company is recognized as one of the leading polymer pipes and fittings manufacturers in India in terms of number of distributors. They market its products under two brand names: Prince Piping Systems; and Trubore. Due to its comprehensive product range, they are positioned as an end-to end polymer piping systems solution provider. They have more than 30 years’ experience in the polymer pipes segment.
Prince Pipes and Fittings IPO Issue details
What are the Objects of the Prince Pipes and Fittings IPO?
Here are the objects of the IPO issue.
1) Offer for Sale: The proceeds from the Offer for Sale shall be received by the Promoter Selling Shareholders and Company shall not receive any proceeds from the Offer for Sale.
2) Repayment or prepayment of certain outstanding loans of the Company.
3) Financing the project cost towards establishment of a new manufacturing facility, either set up directly or indirectly (through a wholly-owned subsidiary that Company may set up in the future)
4) Upgradation of equipment at company manufacturing facilities.
5) General corporate purposes, subject to the applicable laws.
Who are the Company Promoters?
Jayant Shamji Chheda, Tarla Jayant Chheda, Parag Jayant Chheda, Vipul Jayant Chheda and Heena Parag Chheda are the promoters of the company.
How is the company doing in terms of Financial Performance (Reinstated)?
1) Company revenues increased from Rs 1,081 Crores for FY2016 to Rs 1,578 Crores in FY2019 indicating a CAGR of 10% in the last 4 years. Its revenues for 3 months ended Jun-2019 is Rs 380 Crores.
2) Company profits increased from Rs 29.5 Crores for the year ended Mar-16 to Rs 83.3 Crores for the year ended Mar-19 indicating 30% CAGR growth. It posted Rs 26.6 Crores profit for 3 months ended Jun-2019.
3) Its EPS in the last 3 years is 8.63 and FY2019 is 9.26. For 3 months ended Jun-2019, its EPS is at 2.96.
What are the key strengths of Prince Pipes and Fittings Limited?
Every investor should understand the company’s key strengths so that they can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the Prince Pipes and Fittings.
1) Strong brands in the pipes and fittings segment with over 30 years’ experience and multiple industry awards and accolades.
2) Comprehensive product portfolio across polymers serving diverse end-use applications.
3) Strategically located manufacturing facilities with a core focus on quality.
4) Large and growing distribution network.
5) Its technical collaboration with a reputed international player for almost the last five years, which has helped to improve the quality of its products and its manufacturing efficiency.
6) Strong management team.
What are the various strategies of Prince Pipes and Fittings Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Continue to optimize its product mix to improve margins.
2) Increase its sales of DWC pipes.
3) Increase sales of our Prince Piping Systems products by reaching out to more retailers and expanding its distribution network both in new areas as well as in areas where they already have a strong presence.
4) Set up a new manufacturing plant in Telangana and expand capacity at our plant in Rajasthan.
5) Expand the Trubore brand to new geographies.
6) Brand building through major marketing initiatives.
Positive Factors to invest Prince Pipes and Fittings IPO
These positive factors can impact company growth, its revenue and margins which can increase its share price. Investors should go through these points and understand these positive factors while investing.
1) The company is leading polymer pipes and fittings manufacturers in India.
2) Consistent growth in revenue in the last few years. Its revenues grew at 10% CAGR in the last 4 years.
3) Consistent and improved margins.
Major risk Factors to consider before investing in Prince Pipes and Fittings Limited IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand these risk factors before investing.
1) Demand for its plumbing products and soil, waste and rainwater management products is closely tied to the levels of residential and non-residential construction activity in India. Any reduction in the activity in one or both of these markets could have a material adverse effect on its business, results of operations and financial condition.
2) If governments cease to encourage the building of new houses and related infrastructure, it could have a material adverse effect on its business, results of operations and financial condition.
3) Demand for its products for use in irrigation is influenced by the growth of the agriculture segment and any reduction in the activity in this segment could have a material adverse effect on its business, results of operations and financial condition.
4) They engage in a highly competitive business and if we fail to compete effectively, it would have a material adverse effect on its business, financial condition and results of operations.
5) They face competition from substitutes for many of its products and if consumers’ preferences for any of these substitutes increase it could lead to a reduction in the demand for its products, which could have a material adverse effect on its business, financial condition and results of operations.
6) Increases in the cost of raw materials could have a material adverse effect on its results of operations and financial condition.
7) For complete internal and external risk factors, you can refer the RHP of the company.
Prince Pipes and Fittings IPO Schedule
Offer Opens – 18-Dec-2019
Offer Closes – 20-Dec -2019
Finalization of Basis of Allotment – 26-Dec-2019
Unblocking of ABSA and Initiation of Refunds – 27-Dec-2019
Credit of shares to Demat Accounts – 30-Dec-2019
IPO Shares Listing Date – 31-Dec-2019
Is the issue price of Prince Pipes IPO reasonably priced or over priced?
On the upper price band of Rs 178 and the last 3 years average EPS of Rs 8.63, the P/E works out to be 20.6x. Similarly, on the upper price band of Rs 178 and the last year FY19 average EPS of Rs 9.26, the P/E works out to be 19x. Even if we take 3 months ended Jun-2019 EPS of 2.96, P/E works out to be 15x. Hence the company is asking the higher price band of Rs 178 in the P/E or 15x to 20.6x. Its peers like Astral Poly Technik is trading at P/E of 65.3x (Highest) and Finolex Industries at 19.1x (Lowest) and industry average P/E is 38.8x. Hence, Prince Pipes IPO Price is reasonably priced.
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Should you invest in Prince Pipes and Fittings IPO?
Prince Pipes is leading polymer and pipes manufacturer in India. It shows consistent revenue growth. Its margins are on improving mode. Company IPO price is also reasonably priced. Considering all these positive factors, one can invest in this IPO for 3-5 years time frame. One may or may not get listing gains.
Readers, what do you feel about investing in this this IPO?
Disclaimer: This article is for educational purpose only. Please consult your investment advisor before you invest in such high risk IPOs.
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Prince Pipes IPO Review