Hariom Pipe Industries IPO - 7 things to know

Hariom Pipe Industries Ltd, the Hyderabad based manufacturer of steel tubes and billets, had filed its draft red herring prospectus (DRHP) in September 2021 and SEBI has already approved the IPO in January 2022.

However, due to the fairly volatile market conditions as well as due to IPOs reducing to a trickle, Hariom Pipe Industries Ltd is yet to announce the dates of its IPO. The Hariom Pipe Industries IPO will be entirely a fresh issue with fresh issue with no offer for sale (OFS) component to it.
 

7 important things to know about Hariom Pipe Industries Ltd IPO

1) Hariom Pipe Industries Ltd has filed for an IPO with SEBI which comprises entirely of a fresh issue of 85 lakh shares aggregating to Rs.100 crore to Rs.120 crore, depending on the final indicative price band arrived at. There will be no offer for sale or OFS portion in the IPO.

Hariom Pipe Industries Ltd was incorporated in the Southern city of Hyderabad to manufacture steel billets and steel tubes and is a small sized but backward integrated player in the steel industry. 

2) There is no OFS component to the issue. Normally, the OFS is not capital dilutive or EPS dilutive but will enable the early investors to partially monetize their stake and also improve the free float in the company. Most companies use OFS purely to improve the free float ahead of listing the stock.

In the case of Hariom Pipe Industries Ltd, none of the promoters plan to offer their existing stake in the company to the public. However, due to the fresh issue, the promoter stake in the company will effectively come down.

3) The fresh issue size of Hariom Pipe Industries Ltd will be in the range of Rs.100 crore to Rs.120 crore. This fresh issue component will be used for funding the capital expenditure of the company and also for meeting some of its working capital needs.

In addition, the company will use a small portion of the fresh issue for general corporate expenses also. The fresh issue will be EPS dilutive and also capital dilutive. The company will issue a total of 85 lakh shares via the fresh issue and that will enhance the equity base and effectively reduce the promoter stake.

4) The Hyderabad based metals company, Hariom Pipe Industries Ltd, has adopted a backward integrated model and is into the manufacture of mild steel billets (MSB), pipes & tubes, hot rolled coils (HRC) etc.

The company has a wide distribution network spread across Western India and South India and this network has been effectively leveraged to market its steel products. The company is also into manufacture of scaffolding systems.

5) Hariom Pipe Industries Ltd caters to a wide spectrum of end user industries and these include sectors like housing, construction, automobiles, infrastructure, agriculture, solar, fabrication and engineering. In short, the products of Hariom Pipe Industries Ltd find applications in most of the core infrastructure industries.

6) The company, Hariom Pipe Industries Ltd, plans to set up a new manufacturing plant at Sanga Reddy district, which is in close proximity to Hyderabad. The plant will have total estimated capacity of 51,943 tonnes per year.

The production at this plant is expected to commence during the year 2022. For FY21, the company reported total income of Rs.255 crore against Rs.161 crore in the FY20 period. Its profits nearly doubled to Rs.15.30 crore YoY for FY21. That translates into net profit margins of around 6%, which is a good margin for a steel manufacturing company.

7) The IPO of Hariom Pipe Industries Ltd will be lead managed by ITI Capital. They will act as the sole book running lead managers or BRLMs to the issue.

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