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Industry : Steel/Sponge Iron/Pig Iron

Ratnaveer Precision Engineering View all IPOs

Price Band

Rs. 93 – Rs. 98

Ratnaveer Precision Engineering is going public with a Fresh Issue and Offer for Sale. The issue opens on 4th September 2023.

MOJO CALL

Why

Avoid

MOJO CALL

Avoid

Neutral

Low-margin Business

The company has seen its top line and bottom line grow in the last two years mainly due to price increases, but the company has very low margins, with a net profit margin of just 5% in FY23. This is a low-margin market with a low barrier to entry, which may result in reduced company margins as more entrants enter.
For the last two years, the company has recorded a negative cash flow from operations.
The company is facing 21 tax procedures totaling Rs 20 crore, which might put further strain on its finances.
The company also relies majorly on its top two main clients, who account for 30% of overall sales. If any of these clients leave, the company's income might drop significantly in the future.

Fair Valuation

When compared to its listed peers, the company is asking for a PE of 19x and a Market Cap-to-Sales ratio of 1x. However, given the company's low margins and low barriers to entry in this industry, we recommend avoiding this IPO.

Issue Details

Issue Opens	4th September 2023
Issue Closes	6th September 2023
Price Band	Rs. 93 – Rs. 98
Issue size (Upper Band)	Rs. 165 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 475 Cr
Sales- March 2023 (Rs./Crs)	481 Cr
Net Profit - March 2023 (Rs./Crs)	25 Cr
Industry	Steel/Sponge Iron/Pig Iron
Promoters	Vijay Ramanlal Sanghvi
Lead Manager	Unistone Capital Private Limited

Objective of the Issue

Details

Objectives of the Issue & Fresh Issue & Offer for Sale – Rs. 165 cr

The Objectives of the Offer are for:
1.Funding the working capital requirements of the company.
2. General corporate purposes.

List of Shareholders Selling Their Stake

Shareholder	Type	No. of Equity Shares	% of OFS
Vijay Ramanlal Sanghavi	Promoter	30,40,000	100%

Business Operations

About Company

Ratnaveer Precision Engineering is involved in manufacturing Stainless-Steel finished sheets, washers, solar roofing hooks , pipes and tubes.

The company’s major source of income is derived from the sale of finished sheets which makes up 64% of their total revenue.

The company derives 80% of their revenue from Domestic sales and the rest from exports.

Their products have applications in the automotive, solar power, wind energy, power plants, Oil & Gas, Pharmaceuticals, Sanitary & Plumbing.

Segment Revenue Breakup

Revenue breakdown by Product:
Segment	FY 23	FY 22	FY 21
Stainless Steel Finishing Sheets	64%	64%	66%
SS Washers	18%	19%	16%
SS Scrap Metals	10%	6%	7%
SS Tubes & Pipes	6%	10%	11%
SS Solar Roofing Hooks	2%	2%	1%

Financials

Financial Overview

The company’s sales saw a healthy growth in the last two years at 15%.

Despite the company having an ROE of 29%, the ROCE of the company is only 13%

The company’s borrowings have been increasing in the last 3 years with total borrowings at Rs 230 cr in FY23, up from Rs 150 cr of FY21, a 24% increase over the two years.

The company’s EBITDA Margin for FY23 was 9.8% as compared to 6.8% in FY22

Financial Performance (Rs/crore)

Rs./Crs	FY 23	FY 22	FY 21
Sales	481	428	364
Net Profit	25	9	5
Net Profit Margin	5%	2%	1%