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Prince Pipes IPO to open on Wednesday; will it add to IPO frenzy?

While the recent IPOs have seen a solid response, analysts are mixed on this particular IPO. The outstanding litigations against promoters, who have exposure to sectors such as infrastructure and real estate sector, is a key concern. Besides, analysts see a few listed pipe players as more appealing bets in the highly-competitive industry.

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Last Updated: Dec 18, 2019, 09.18 AM IST
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Prince Pipes having a market share of 5 per cent competes with a handful of players in the organised segment that accounts for 60-65 per cent of the total pipes industry.
NEW DELHI: The Rs 500-crore initial public offer (IPO) by Prince Pipes and Fittings will hit the primary market on Wednesday. The price band for the issue has been fixed at Rs 177-178 per share.

While the recent IPOs have seen a solid response, analysts are mixed on this particular IPO. The outstanding litigations against promoters, who have exposure to sectors such as infrastructure and real estate sector, is a key concern. Besides, analysts see a few listed pipe players as more appealing bets in the highly-competitive industry.

Prince Pipes having a market share of 5 per cent competes with a handful of players in the organised segment that accounts for 60-65 per cent of the total pipes industry. The company offers different categories of polymer pipes to plumbing, irrigation and SWR (soil waste and rainwater) segments. Products to plumbing accounts for 37 per cent of the company’s revenue, then come irrigation (32 per cent) and SWR (30 per cent).

The company’s revenue grew by 12.6 per cent year-on-year between FY17 and FY19 to Rs 1,571 crore. Net profit for FY19 stood at Rs 83.4 crore.

“The issue is expensively priced at 20.6 times P/E and 3.4 times Price to book. We feel that there are much better players already listed such as Finolex Industries which trades at 19.6 times P/E and 1.8 times price to book having better return ratios and comfortable debt levels,” said BP Wealth in a note.

Supreme Industries, Astral Polytechnik and Ashirvad Pipes are other competitors of the company, with none of them holding more than 11 per cent of the market share.

Taking into account its debt position and the increased competitiveness of the market it operates in, the stock does not look attractive, the brokerage said.

On a trailing basis, the IPO demands price-earnings (P/E) multiple of 23.5 on a trailing basis.

Ventura Securities expects revenue, Ebitda and PAT of the company to grow at a CAGR of 5 per cent, 14 per cent and 18 per cent, respectively. For FY21, the stock is available at the offer price of 177-178 at 16 times on a fully diluted basis, this brokerage estimated.

This brokerage has a subscribe on the issue for listing gains.

The company intends to raise Rs 250 crore in fresh equity and sell Rs 250 crore worth of existing equity shares, as a part of its offering. A majority of the net proceeds from the fresh issue will be utilised for setting up a manufacturing facility and repayment of loans. The company has raised over Rs 106 crore in a pre-IPO placement.

The recent IPO by Ujjivan Small Finance Bank was subscribed 165.66 times. The issue by CSB Bank was subscribed 86.71 times while that of IRCTC by 111.91 times.

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