Venus Pipes and Tubes IPO Review – Should you Invest or Avoid?
Venus Pipes and Tubes IPO (Venus Pipes and Tubes Limited IPO) Details
Venus Pipes and Tubes is coming up with IPO, which would open for subscription on 11th May, 2022. Venus Pipes is a manufacturer and exporter of stainless steel pipes and tubes in India. Company revenues have grown significantly in the last 3 years and 9 months. Its margins are also improving year on year for a similar period. Should you invest to Venus Pipes and Tubes IPO? What are the risk factors in this IPO? For a 23 Crore profit making company, is the IPO Valuation justified? Let me do this IPO review and provide complete analysis.
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About Venus Pipes and Tubes Limited
Company is one of the growing stainless steel pipes and tubes manufacturer and exporter in India. It has 6 years of experience in manufacturing of stainless steel tubular products in two categories:
i) Seamless tubes/pipes and
ii) Welded tubes/pipes
Under which company is manufacturing 5 product lines, namely
(i) Stainless steel high precision & heat exchanger tubes
(ii) Stainless steel hydraulic & instrumentation tubes
(iii) Stainless steel seamless pipes
(iv) Stainless steel welded pipes
(v) Stainless steel box pipes
Under its brand name “Venus”, they supply Products for applications in diverse sectors including (i) chemicals, (ii) engineering; (iii) fertilizers; (iv) pharmaceuticals, (v) power, (vi) food processing; (vii) paper; and (viii) oil and gas.
Venus Pipes and Tubes IPO – Dates, issue details, Size and Price Band
|IPO Opening Date||11-May-22|
|IPO Closing Date||13-May-22|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 310 to Rs 326 per equity share|
|Lot Size||46 Shares|
|Listing at||BSE and NSE|
|Total Issue Size (Fresh issue)||Rs. 165.4 Crores|
What are the competitive strengths of Venus Pipes and Tubes Limited?
1) Company has international accreditations and product approvals
2) It has a specialized production of stainless steel pipes and tubes
3) Company has multi-fold demand of its products
4) Company with customer diversification
5) It has an experienced and qualified team
What are the Objects of the IPO Offer?
Venus Pipes and Tubes IPO Size is Rs 165.4 Crores which is for fresh issue and would be used for the following:
- To meet long-term working capital requirements.
- General corporate purposes.
- Financing project costs for capacity growth, technology upgrades, operational cost optimization, manufacturing facility support, and backward integration for hollow pipe manufacturing.
Who are the promoters of Venus Pipes and Tubes Limited?
Megharam Sagramji Choudhary, Jayantiram Motiram Choudhary, Dhruv Mahendrakumar Patel and Arun Axaykumar Kothari are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 9 months.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||37.5||41.3||236.3||236.0|
Positive Factors in Venus Pipes and Tubes IPO
Here are the key reasons to invest in this IPO.
1) Company is India’s fast growing manufacturer and exporter of stainless steel pipes and tubes.
2) Company has specialized production in steel pipes and tubes with international accreditations, product approvals and multi-fold demand.
3) Company has generated strong revenue growth in the last 3 years and 9 months.
4) Company margins have improved significantly from Rs 3.7 Crores – 3.1% of the revenues (FY2019) to Rs 23.6 Crores – 7.5% of revenues (FY21). For 9 months ended Dec-21, it maintained a similar level in margins.
Risk Factors of investing in Venus Pipes and Tubes IPO
1) Continuing effect of Covid-19 pandemic on its business is uncertain and cannot be predicted.
2) Company has a significant portion of income from top 10 customers and can continue in the future to which can pose risks.
3) Company faces stiff competition from other large and established competitors. In case they are not able to compete against them, demand for its products can reduce.
4) Company does not have long term agreements with its customers for purchasing its products, nor supply of raw materials with its suppliers.
5) Company faces certain challenges because of its limited operating history in the highly competitive stainless steel pipes and tubes market which can affect its future performance.
6) Demand in the steel and steel products industry are volatile and decrease in demand of steel may have an effect on its business.
7) Investors should read complete risk factors indicated in the RHP before investing in this IPO.
Venus Pipes and Tubes IPO valuation
Venus Pipes and Tubes IPO price band is Rs 310 to 326 per share.
1) If we consider last 3 years weighted average EPS of Rs 10.55 and the upper price band of Rs 326, P/E works out to 31x.
3) Similarly, if we consider FY2021 EPS of Rs 18.04 and the upper price band of Rs 326, P/E works out to be 18x.
4) If we take 9 months ended Dec-21 EPS and annualize it, the P/E works out to be 16x.
5) Means company is asking IPO price of Rs 326 in the P/E ratio of 16x to 31x.
As per the RHP, there are listed peers like Ratnamani Metals trading at P/E 41.5x (Highest) and Jindal Saw trading at P/E 9.7x (Lowest) and the industry average P/E is 25.6x. Hence the IPO Price of Venus Pipes at P/E range of 16x to 31x is fully priced.
Venus Pipes and Tubes IPO Dates – Subscription, Allotment and Listing Dates
|Finalization of Allotment||19-May-22|
|Initiation of Refunds||20-May-22|
|Credit to Demat Account||23-May-22|
|IPO Shares Listing Date||24-May-22|
How to buy Venus Pipes and Tubes IPO online through Zerodha?
You can login to your demat account, visit the IPO section and apply for this IPO during the subscription dates.
You can also apply this IPO on Zerodha. If you do not have Zerodha account, sign-up here and proceed to the next step.
Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to Console.
2) Go to Portfolio and click the IPOs link.
3) Visit ‘Venus Pipes and Tubes Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on ‘Submit’ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
Venus Pipes and Tubes IPO – Should you Invest or not?
Venus Pipes and Tubes Limited is the fastest growing manufacturer and exporter of Steel Pipes and Tubes in India.
Company generated good revenue growth in the past.
Its margins are improving year on year.
Its issue price is fully priced.
Considering all these positive factors and negative factors indicated above, investors may subscribe to this IPO for medium to long term perspective. Since markets are in bearish mode, one may or may not get listing gains.
Source: Venus Pipes and Tubes IPO Prospectus (RHP)
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