Venus Pipes Limited IPO Updates - Swastika Investmart Swastika
Venus Pipes Limited IPO

Venus Pipes Limited IPO

Venus Pipes & Tubes Limited (“Venus Pipes”) was incorporated on February 17, 2005. Venus Pipes is a pipes and tubes manufacturer with the sole focus on manufacturing welded and seamless pipes in a single metal category, i.e., stainless steel.

  • The company manufactures stainless steel tubular products in 2 broad categories: (i) seamless tubes/pipes; and (ii) welded tubes/pipes.
  • Under their brand name “Venus”, they supply their Products for applications in diverse sectors including Chemicals, Engineering; Fertilizers; Pharmaceuticals, Power, Food Processing; Paper; and Oil and Gas.
  • Venus Pipes has one manufacturing plant which has separate seamless and welded divisions with the latest product-specific equipment and machinery. As of February 28, 2022, their Manufacturing Facility has a total installed capacity of 10,800 MTPA. They are proposing to expand their existing manufacturing capacity for welded pipes/tubes and seamless pipe/tubes.
  • As of February 28, 2022, they have exported their products to 20 countries including Brazil, the UK, Israel and countries in the European Union, etc.

Outlook & Valuation

The company has grown well in the last three financial years due to improvements in the commodity cycles and high steel prices. The company’s current capacity utilization is above 90% and the company expects to more than double its capacity using the SME IPO proceeds. Further, they also plan to set up a piercing line for manufacturing hollow pipes with the capacity of 800 MT per month, as their backward integration strategy.

With the piercing plant, they will be able to produce hollow pipes from the SS round bar. Their products are largely used in industries like pharmaceuticals, food processing, etc. The GoI has announced Production Linked Incentive (“PLI”) schemes for boosting the domestic manufacturing in certain sectors, which shall have a consequent positive impact on their order book.

And schemes like Make in India, and Atmanirbhar Bharat that focus on indigenous manufacturing augur well for the company. China export rebate cessation and BIS norms provide industry tailwinds. The company has priced the issue at a P/E of 21.03 based on annualized numbers for FY22 which is slightly above its industry median P/E. Further, the commoditized & cyclical nature of the business and small issue size makes this issue suitable for aggressive investors only with a long term view.

KEY MANAGERIAL PERSONNEL

  • Jayantiram Motiram Choudhary is the Chairman, Non-Executive Director and one of the Promoters of the company. He has been associated with the company since its incorporation. He has over 10 years of experience in the steel industry and over 4 years of experience as a director of Accuracy Shipping Ltd.
  • Arun Axaykumar Kothari is the Promoter, Managing Director and CFO of the company. He has been associated with the company since September 14, 2021. He looks after and manages the entire accounting and financial operations of the company and is responsible for setting processes, systems and procedures in place to control and streamline the financial and commercial transactions of the Company.
  • Pavan Kumar Jain is the Company Secretary and compliance officer. He has also been associated with the company since August 18, 2020. He has around 3 years of experience in finance, accounting and secretarial work.
  • Kumar Shishir C Sinha is the president (marketing) of the company. He has been associated with the company since March 01, 2021. He has over 30 years of experience in stainless steel pipes and tubes.
  • Kunal Bubna is the president (finance and accounts) of the company. He has been associated with the company since July 01, 2021. He has over 14 years of experience in accounting and secretarial work.
  • Bharat Kumar Prajapati is the production head of the company. He has been associated with the company since September 02, 2020. He has over 20 years of experience in the pipe industry.
  • Om Prakash Mishra is the vice-president (operations) of the company. He has been associated with the company since December 13, 2021. He has over 23 years of experience in the manufacturing industry.

COMPETITIVE STRENGTHS

  • International Accreditations and product approvals
  • Specialized production of Stainless Steel Pipes and Tubes
  • Multi-fold demand of the Products
  • Customer Diversification
  • A key beneficiary of CAPEX in the chemical and engineering sector
  • Venus supplies high-quality pipes for industrial use (B2B) and does not cater to the lower-end market of domestic furniture, retail, etc.

KEY STRATEGIES

  • Increasing existing capacity
  • Backward integration and cost optimization to improve margins
  • Tap new geographies to increase export
  • Continue to improve operating efficiencies through technology enhancements

KEY CONCERNS

  • The issue size is too small.
  • Valuation is on the higher side.
  • Cyclical and commoditized industry
  • Highly competitive industry.

COMPARISON WITH LISTED INDUSTRY PEERS (AS OF 31ST MARCH 2021)

Name of the Company EPS (Basic) NAV P/E Total Income (Cr) RoNW (%)
Venus Pipes & Tubes Ltd 18.04 30.48 28.01 312.0 59.18%
Jindal Saw Ltd 10.02 218.39 9.69 10,872.0 4.69%
Ratnamani Metal & Tubes Ltd 59.07 425.35 41.51 2,341.5 13.9%

 

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions) FY 2021 FY 2020 FY 2019
Equity Share Capital 8.73 8.73 8.73
Other Equity 31.20 7.54 3.44
Net Worth 39.93 16.28 12.17
Revenue from Operations 309.33 177.81 118.75
EBITDA 34.78 11.64 8.29
Profit Before Tax 30.95 6.49 4.95
Net Profit for the year 23.63 4.13 3.75

 

DISCLAIMER:

The information contained herein is strictly confidential and is meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika InvestmartLtd. (“SIL”).

The contents of this document are for information purposes only. This document is not investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company.

All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment.

The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document.

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The users of this document must bear in mind that past performance if any, are not indicative of future results. The actual returns on investment may be materially different from the past. Investments in Securities market products and instruments included in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low-risk tolerance.

Such investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risk factors before making any investment in the Equity Shares of the Company.

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