Prince Pipes and Fittings lists at 11% discount to issue price


Shares of Prince Pipes and Fitting Ltd made a tepid debut on the stock markets on Monday. The stock was listed at ?157.55, down 11.49% from its issue price of ?178 on BSE. This is the last stock markets listing of 2019.

At 10.06 am, the stock was trading 6.74% lower at ?166, whereas the benchmark index, Sensex, gained 0.17% to 41647.27.

The initial public offering (IPO) of the company that makes polymer pipes and fittings was open for subscription from 18 to 20 December with a price band of ?177-178 per equity share.

The Mumbai-based firm aimed to raise ?500 crore via the IPO, of which fresh issue was worth ?250 crore. The remaining portion would be promoters selling their stake partially.

The company plans to use ?184 crore of the net proceeds towards setting up a new plant at Sangareddy in Telangana. The firm plans to start production at the plant by fiscal 2021, and expects its installed capacity to reach 51,943 tonnes per annum.

The remaining funds would be used for repayment of certain outstanding loans ( ?48 crore) and upgrading equipment at its manufacturing facilities ( ?82 crore).

Marketed under brand names, Prince Piping Systems and Trubore, the pipes manufacturer runs six plants across India with a total installed capacity of 0.24 million tonnes per annum, as on 31 October.

The company plans to increase its capacity to 3,00,000 by FY21 from 241,000 currently with focus on higher margin business.

Prince Pipes has 1,408 distributors across India.

During FY13-19, its revenue and net profit witnessed 12% and 13% CAGR, respectively, while the average EBITDA and net margin stood at 11% and 4%, respectively.

It has healthy return ratios with average return on equity (RoE) of 22% and return on capital employed (RoCE) of 20% for the same period.

“Assuming revenue growth of 13% CAGR through FY19-21E, the company is valued at 14 times of FY21 earnings, which appears to be justified considering its business model, steady growth and healthy return ratios,” said Reliance Securities in a report on 17 December.

Promoters have a pledge on 35% of shares, followed by 16% shares as non-disposal undertaking for securing loans worth ?200 crore under promoter entity — Express Infra Projects LLP. Both of these were released on condition to fully repay the amounts from the offer-for-sale (OFS) proceeds within two days of the credit of proceeds.

“The issue is priced at 23.5 times FY19 EPS (fully diluted). While there are concerns on promoter’s pledge and related party transactions, valuations seems reasonable vis-à-vis peers, given its financials and return ratios,” said Motilal Oswal Financial Services Ltd in a note on 17 December.

News Source:- livemint

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