Hariom Pipe Industries has a strong retail participation in the IPO. Key things to know

The IPO fever is not taking its name to stop.

The IPO of Hariom Pipe Industries (Hariom) opened for subscription on 30 March 2022.

About the manufacturer of steel products is looking to increase 1.3 billion by offering 8.5m fresh equity shares.

Let’s know some special things about this IPO …

Issue Period: 30 March 2022 to 5 April 2022

IPO Size: 1.30 billion

Price Band: from 144 153 per equity share

Bid Lot: 98 Shares and its multiples

Face value: 10 per equity share

Purpose of Issue: To fund its capital expenditure, working capital requirements, and expenditure for general corporate purposes.

The stock will be listed on the exchanges (Bombay Stock Exchange and National Stock Exchange) by 13th April 2022.

#1 About the company

Headquartered in Hyderabad, Hariom is a small size but backward integrated manufacturer of Mild Steel (MS) Pipes, Scaffolding, Hot Rolled (HR) Strips, MS Billets and Sponge Iron.

The company caters to diverse end-use industries such as infrastructure, automotive, housing, agriculture, solar, fabrication and engineering.

Currently, the manufacturing process is split between 2 plants: Unit I in Mahbubnagar district, Telangana and Unit II in Anantapur district, Andhra Pradesh.

Unit II is dedicated to the manufacture of Sponge Iron and is strategically located near Bellary, the center of iron ore production in South India. Iron ore is mainly procured through online bidding process.

Unit I converts sponge iron and iron scrap into finished steel products. The USP of the company lies in the wide range of product specifications and customization.

The company has a strong network of dealers and distributors (approximately 200) in the southern and western regions of India. Sales to some developers and contractors are also done directly through business-to-business (B2B).

#2 Financial at a glance

For the financial year ended March 2021, the company’s revenue had grown by almost 60%.

Net profit margin came in at about 6% and the bottom line nearly doubled from approx. 79.1 m (FY 2020) to 151.3 m

For more information see Hariom’s RHP,

#3 Peer comparison

APL Apollo Tubes, Hi-Tech Pipes, Rama Steel Tubes, and JTL Infra are the listed industry competitors of the company.

#4 Argument in favor of business

Benefit Kanfa

The company’s synchronous manufacturing process leads to cost and time efficiency.

The company benefits from uninterrupted power supply at a competitive rate from IEX through online bidding process, especially during peak agriculture season.

The use of crusher reduces wastage as the iron material extracted from the slag is recycled in furnaces to produce MS billets.

eco-friendly manufacturing process

Establishment of hot charging process for manufacturing as well as rail trolley system for internal transfer of raw materials has significantly reduced the carbon footprint of the company.

Chimneys are equipped with pollution control devices that store the collected dust particles in filter bags which are further sold to industries like cement for their operational purposes.

Both the units are equipped with rain water harvesting pits.

Experienced Management Team

The senior management is well versed in the industry, some with over a decade of experience in marketing and distribution.

#5 Risk Factors

Demand for steel products is volatile as it serves cyclical industries such as housing and automobiles.

The consumption of raw materials and reserves accounted for 77.2% of the total expenditure for FY21. Volatility in the prices of energy and raw materials such as iron ore, iron ore fines, scrap and electricity directly affects profitability.

Income Source Concentration: During the fiscal years 2021 and 2020, 60.7% and 49.8% of the revenue from operations was represented by the top 10 customers, respectively.

Outstanding legal proceedings involving the company, promoters and certain directors

Lack of special delivery arrangement: Delay or default in payment occurs due to deficiency in services provided by any channel partner.

Risk of geographic and political unrest due to the locations of manufacturing plants.

The industry attracts high scrutiny of environmental and safety laws.

IPO membership status as on 5th April 2022

There was no anchor placement in the IPO.

So far, the 30% Qualified Institutional Buyer (QIB) share has been subscribed 1.44x. The non-institutional buyers (NII) share of 35% was oversubscribed by 4.61x.

The remaining 35% for retail investors was subscribed more than 10.9 times. Retail investors are clearly supporting the issue. They are applying for this issue after a long gap in the primary market.

Overall the issue was subscribed 5.85 times till the time of writing this news.

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

Note: Equitymaster.com is currently unavailable due to technical reasons. We are sorry for the inconvenience caused. In the meantime, please access our content at livemint.com, you can also track us youtube And Wire,

(This article is syndicated from) equitymaster.com,