Rashi Peripherals IPO Review – Details, Positives and Risk Factors

Rashi Peripherals Limited’s IPO is set to open for subscription on February 7, 2024. Company distributes global technology brands in India. This article will provide details about the Rashi Peripherals IPO, including information about the company, its financials, IPO valuation, Grey Market Premium (GMP), as well as a review and analysis.

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Rashi Peripherals IPO Details

IPO Opening Date 07-Feb-24
IPO Closing Date 09-Feb-24
IPO Listing Date 14-Feb-24
Issue Type Book Built Issue IPO
Face Value Rs 5 per equity share
IPO Price band Rs 295 to Rs 311 per equity share
Lot Size 48 Shares
Listing at BSE and NSE
Total Issue Size Rs. 600 Crores

About Rashi Peripherals Limited

They are among the leading national distribution partners for global technology brands in India for information and communications technology (ICT) products in terms of revenues and distribution network in Fiscal 2023.

They are also one of the fastest growing national distribution partners for global technology brands in India in terms of revenue growth between Fiscal 2021 and Fiscal 2023.

Its revenue from operations grew at a CAGR of 26.32% from ₹ 59,250.48 million in Fiscal 2021 to ₹ 94,542.79 million in Fiscal 2023 and were ₹ 54,685.10 million in the six months ended September 30, 2023.

They differentiate ourselves by offering end-to-end services such as pre-sale activities, solutions design, technical support, marketing services, credit solutions and warranty management services.

Rashi Peripherals Limited Financial Summary

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Sep-23
Assets 1,594.39 2,669.76 2,798.60 4,058.64
Revenue 5,930.24 9,321.92 9,468.95 5,473.27
Profit After Tax 136.35 182.51 123.34 72.02
Net Worth 394.19 575.07 700.12 772.74
Reserves and Surplus 395.99 557.84 760.36 686.24
Total Borrowing 488.99 881.74 1,065.76 1,395.20

Rashi Peripherals IPO Valuation

  • The IPO price band is Rs 295 to 311 per share
  • If we consider last 3 years weighted EPS of Rs 34.47, the P/E ratio works out to be 9x
  • If we consider the last year FY23 EPS of Rs 29.5, the P/E ratio works out to be 11x
  • If we annualise 6 months ended Sep-23 EPS, the P/E ratio works out to be 9x
  • There is only listed peer – Redington India Limited trading at P/E 10x. Hence, the IPO Price band at P/E of 11x to 9x is fully priced.

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Rashi Peripherals IPO GMP (Grey Market Premium)

  • According to IPO Watch, the Grey Market Premium (GMP) for Rashi Peripherals Hotels IPO stands at Rs 25.
  • Data from Investorgain indicates a fluctuation in the GMP, rising from 0 to Rs 25 in the last couple of days.

Rashi Peripherals IPO – Positive Aspects

  • Company is the leading and fastest growing Indian distribution partner for information and communications technology products.
  • It has long-term relationships with marquee global technology brands supported by committed engagement strategy with customers.
  • Company has diversified and comprehensive product portfolio and solutions with scalable business model supported by advanced technology stack.
  • Strong revenue growth in the last few years.

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Rashi Peripherals IPO – Risk Factors

  • Company is dependent on various vendors, who are global technology brands, for the products they distribute which is over 82% of its revenue from operations. Any delay or failure on part of such global technology brands to supply products may materially and adversely affect its business.
  • Its business is dependent on global technology brands effectively maintaining, promoting or developing their brands and maintaining standard quality products including launching new information and communications technology products at regular intervals.
  • If company is unable to maintain its relationships with their Channel Partners or customers or if any of these parties change the terms of their arrangements with them, its business could be materially and adversely affected.
  • Its gross margins are low, which magnifies the impact of variation in revenue, operating costs, bad debts and interest expense on its operating results
  • They are reliant on its relationships with certain online market places and disruptions to such relationships or changes in their business practices, may adversely affect its business.
  • They have witnessed negative cash flows in the past.
  • Its EBITDA Margin was 3.63% in FY2021, which decreased to 3.28% in FY2022 and further to 2.83% in FY2023. There can be no assurance that they will be able to maintain its EBITDA Margin in future.
  • Investors should go through all risk factors indicated in IPO RHP

Rashi Peripherals IPO Review and Conclusion

  • Rashi Peripherals Limited distributes global technology brands in India. Its service offerings include value-added services such as pre-sales, technical support, marketing services, credit solutions and warranty management service. Company has strong revenue growth in the past.
  • On the negative side, company is dependent on vendors which are global technology brands. Company margins have been in declining mode. It experienced negative cash flows in the past.
  • It has only one listed peer and compared to their P/E, the issue is fully priced.

Investors who understand all the risk factors can invest in this IPO.

The P/E ratio, or Price-to-Earnings ratio, is a financial metric used to evaluate the valuation of a company's stock. It's calculated by dividing the current market price per share of the company's stock by its earnings per share (EPS). In essence, it represents the amount investors are willing to pay per dollar of earnings generated by the company.

Here's the formula for calculating the P/E ratio:

P/E Ratio = Market Price per Share / Earnings per Share (EPS)

  • Market Price per Share: This is the current price at which the company's stock is trading in the stock market.
  • Earnings per Share (EPS): This is the portion of a company's profit allocated to each outstanding share of common stock. It's calculated by dividing the company's net income by the total number of outstanding shares.

The P/E ratio is a commonly used metric for investors to assess whether a stock is overvalued, undervalued, or fairly valued relative to its earnings and the prevailing market conditions. Here's how the P/E ratio is interpreted:

  • High P/E Ratio: A high P/E ratio typically suggests that investors are willing to pay more for each unit of earnings. It could indicate that the stock is overvalued, but it could also reflect strong growth prospects or investor optimism about the company's future earnings potential.
  • Low P/E Ratio: A low P/E ratio may suggest that the stock is undervalued relative to its earnings. It could indicate that the market has low expectations for the company's future growth or profitability.
  • Comparable Analysis: P/E ratios are often used for comparing companies within the same industry or sector. Investors may compare the P/E ratios of different companies to assess relative valuation and investment opportunities.

Grey market premium is the difference between the unofficial market price of a newly issued IPO share and its official issue price. It reflects investor sentiment and demand before the shares are listed on the stock exchange. Positive premiums indicate strong demand, while negative premiums suggest weaker interest. Grey market trading is speculative and unregulated.

  1. Evaluate company fundamentals, including growth, profitability, and financial health.
  2. Analyze the market opportunity and industry trends.
  3. Consider the experience and credibility of the management team.
  4. Assess the IPO valuation relative to peers and industry standards.
  5. Understand the planned use of IPO proceeds.
  6. Evaluate risks associated with the business, industry, and market conditions.
  7. Consider the reputation of the underwriters.
  8. Take into account lock-up agreements that restrict insider selling post-IPO.

DRHP (Draft Red Herring Prospectus) is the preliminary document submitted by a company to the regulatory authority before an IPO. It outlines key information about the company without final details like issue price.

RHP (Red Herring Prospectus) is the updated version of the DRHP, including final IPO details such as issue price and number of shares offered. It's filed after regulatory approvals and is the document investors use to make investment decisions.

The IPO price is the initial price at which shares are offered to the public during an IPO, set by the company and underwriters.

The share price, on the other hand, is the price at which shares are bought and sold on the stock exchange after the IPO, determined by market forces such as supply and demand.

To decide whether to invest in an IPO:

  1. Research the company.
  2. Review financials and market opportunity.
  3. Understand IPO details and valuation.
  4. Evaluate the management team and risks.
  5. Consult with financial advisors.
  6. Consider diversification and long-term prospects.

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