Vibhor
Steel Tubes was founded by Vibhor Kaushik and Vijay Kaushik in 2003. The
company is a manufacturer and exporter of mild steel and carbon steel ERW (electric
resistance welded) black and galvanized pipes, hallow steel pipe, and cold
rolled steel (CR) strips and coils.
The company’sproducts
find application in the construction, domestic, agriculture and the industrial
sectors. It operates out of two manufacturing facilities.The first is based at Sukheli,
Maharashtra, with a production capacity of 125,000 tonnes per annum (tpa). The
second is based out of Mehboob Nagar, Telangana, with a production capacity of
96,000 tpa. The company has installed 2-MW solar rooftop solar power units (1
MW each at both the units) for captive consumption.
The company
manufacture steel pipes and tubes in various shapes and sizes such square,
round, rectangular and elliptical or any special shape.Steel pipes and tubes
can be used for many purposes. Steel pipesare used for frames and shafts. Steel
pipes are used for bicycle frames, steel pipes for furniture. CDW (cold drawn
welded) pipes are used for shockers.
The company
is working with Jindal Pipes since 2003. It manufacturesand supplies finished
goods to Jindal Pipes via a renewed agreement of 01 April 2023 under the brand
name Jindal Star. It has a long-term agreement for the six years with the
Jindals. Under the agreement, Jindal will provide orders with a minimum
quantity of 1,00,000 tpato fill majority of capacity of Unit I and Unit II of
the company. In the event of any
shortfall in offtake by Jindal Pipes or in supply by Vibhor Steel Tubes,
compensation at Rs 2,000 per tonne of shortfall will be paid by the erring
party. However, there will be no compensation liability once the minimum quantity
of orders is achieved.
The company
has a long-term agreement but no exclusive agreement. As per the agreement,
there are no restrictions on selling products in the open market without the
brand name of Jindal Star.
In November
2023, the company received an allotment letter for land to set up a new
facility of Vibhor Steel Tubes in Odisha as the stateis the biggest market of iron.
This will help it to reduce the cost of raw material and improve the margins in
future. The company expects to start production in FY2025.
The capacity
utilization of the plants was 77.84% in H1FY2024 and 71.68% in FY2023.
The Offer and the Objects
The offer
comprises fresh issue of up to 4779444 equity shares at the upper price band of
Rs 151 and 5118411 equity shares at the lower price band of Rs 141, aggregating
Rs 72.17 crore.
The company
proposes to utilize the net proceeds from the fresh issue towards funding
working capital requirements of the company amounting Rs 62 crore and balance
towards general corporate purpose.
Strengths
The company
signed in April 2023 a memorandum of understanding (MoU) with JPL for six years,
assuring a minimum offtake arrangement of 100,000 tpa and compensation at a
rate of Rs 2,000 per tonne for any shortfall. Furthermore, it also takes care
of the company’s major manufacturing costs.
Production
of steel tubes and pipes recorded a CAGR of about 10% in the past five years
from FY2019. In these years, the industry witnessed a decline only in FY2021
due to the outbreak of Covid-19. In FY2023, production increased 27.3%, backed
by healthy domestic demand. In YTD FY2024, production of steel tubes and pipes
increased by 16.2% over the year.
Consumption
of steel tubes and pipes in India has recorded a CAGR of 8.5% from 5,253
thousand tonne in FY2019 to 7,282 thousand tonne in FY2023. After witnessing an
uptrend till FY2020, the industry observed a de-growth of 14.7% in consumption in
FY2021 due to the pandemic.In FY2023, the industry witnessed a strong growth of
around 29.3% in consumption on account of the factors such as improvement in
construction and real estate activities and continuous investment in
infrastructure and policy support by the government. The industry observed a
growth rate of 18.9% in YTD FY2024 over the corresponding period of last year.
The company
exports its manufactured goods under the brand of Jindal. It directly deals
with foreign customers and delivers the products directly to customers and
invoices them directly instead of Jindal.
The company
considers Unit-I’s location at Raigad, Maharashtra, the best place for export
of goods. It exported 100% of sales from Unit-I. Unit-II is located around 70 km from
Hyderabad in the Mahabubnagar District, Telangana, and close to the Jadcherla
industrial area. This proximity enables ease of logistics, power, water supply
and raw materials for its operations in Unit-I. Skilled personnel for Unit-I
also comes from Hyderabad.
The per
capita finished steel consumption in India was 81.1 kg in CY2022. This is
significantly lower than the world average of 222 kg per capita. The National
Steel Policy 2017 envisages that per capita steel consumption will increase to
158-160 kg by FY2031.
The usage
of steel tubes and pipes is significant in construction activities and building
infrastructure. These materials are used in the construction sector for
creating structural elements such as columns, beams, and trusses to provide
strength and support the formation of building. They are also used in water
infrastructure such as drinking water supply, plumbing, drainage, and sewerage
systems. Apart from this, they are also used by the manufacturing sector
including for oil and gas pipelines, agricultural equipment, automobile
components, and electrical cable conduits.
Weaknesses
The company
derived approximately 88-92% of revenue in the last three years ended FY2023
from sales to Jindal Pipes. In FY2023, the quantity sold to Jindal more than
the minimum offtake. Jindal has a network of dealers across India and sells
pipes and tubes under the brand, Jindal Star. Higher dependence on a single
customer exposes the company to customer concentration risk, which is partly
mitigated by minimum offtake clause. Other customers of the company include
companies De Wit Bouwmachines BV and Macro Metal Handelsgesellschaft MBH.
The company
reported negative cash flows from its operating activities in H1FY2024 and FY2021
as well.
The company’s
business is working capital intensive. If it experience insufficient cash flows
to meet required payments on its working capital requirement, there may be an
adverse effect on the results of operations.
Compliance
with, and changes in, safety, health and environmental laws and various labour,
workplace related laws and regulations, including terms of the approvals
granted to it, may increase the compliance costs and as such adversely affect
business, prospects, results of operations, and financial conditions.
The pricing
in the steel industry is subject to market demand, volatility and economic
conditions. Fluctuations in steel prices may have amaterial adverse impact on business,
results of operations, prospects, and financial conditions.
The company
is required to obtain consents under certain environmental laws, which are
critical for operating its manufacturing facility.
The company
is in the process of enhancing its manufacturing and galvanising capacity at
the Telangana plant and is setting up new plant in Odisha. Furthermore, it
added new products such as crash barriers and square pipes to its product
portfolio in the current fiscal. The capex of around Rs 60 crore (Rs 20 crore
towards Telangana unit and Rs 40 crore towards setting up the Odisha unit) is
expected to be incurred over FY2024-FY2025, which is funded through a mix of
debt and internal accruals. While the company has incurred close to 30% of cost
for Telangana capex (funded through term loan of Rs 6 crore and rest through
internal accruals), the Odisha-based project is in nascent stage, with land
acquired and pending financial closure pending. The Odisha unit is expected to
commence operations in the near term. As it is ata nascent stage of completion,
it is exposed to execution risk.
The company
operates in the steel pipes and tubes manufacturing industry, which is highly
fragmented in nature with presence of manyunorganised players. Operating in the
fragmented industry with low entry barriers restricts bargaining power against
suppliers and customers, resulting in lower profitability Valuation
For FY2023,
consolidated sales were up by 36% to Rs 1113.12 crore.The OPM rose 50 bps to 4.1%,
leading to a 54% increase in OP to Rs 45.59 crore.OIrose to Rs 1.26as compared
to Rs 48 lakh. Interest cost increased 41% to Rs 12.26 crore. Depreciation rose
4% to Rs 6.37 crore. PBT went up84% to Rs 28.22crore. Tax expenses were 78% higher
at Rs 7.16 crore. Net profit spurted85% to Rs 21.01 crore.
The FY2023
EPS on post-issue equity works out to Rs 11.1. At the upper price band of Rs 151,
P/E works out to be 13.7
As of 09February
2023, its listed peers such as APL Apollo Tubestradedat TTM P/E of 48.9, Hi-Tech
Pipestrades at TTM P/E of 41.5, Rama Steel Tubestrades at TTM P/E of 65.5, andGoodluck
India trades at TTM P/E of 26.9.
For FY2023,
Vibhor Steel Tubes’Ebitda margin and ROE stood at 4.2% and 25.5%, respectively,
as compared to 6.6% and 21.4% for APL Apollo Tubes, 4.2% and 9% for Hi-Tech
Pipes,4.5% and 11% for Rama Steel Tubes, and7.2% and 14.2% for Goodluck India
Vibhor
Steel Tubes:Issue Highlights
|
Fresh
issue (in Rs crore)
|
72.17
|
For Fresh
Issue Offer size (in number of shares )
|
|
- in Upper price band
|
4779444
|
- in Lower price band
|
5118411
|
Price Band
(Rs)
|
141-151
|
Pre issued
capital (Rs crore)
|
14.18
|
Post issue
capital (Rs crore)
|
19.0
|
Pre issue
promoter shareholding (%)
|
98.24
|
Post issue
Promoter shareholding
|
73.48
|
Bid Size
(in No. of shares)
|
99
|
Issue open
date
|
13-02-2024
|
Issue
closed date
|
15-02-2024
|
Listing
|
BSE,NSE
|
Rating
|
44/100
|
Vibhoor
Steel Tubes: Consolidated Financials
|
Particulars
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2306 (06)
|
Total
Income
|
510.47
|
818.00
|
1113.12
|
530.51
|
OPM
|
3.7
|
3.6
|
4.1
|
4.3
|
Operating
Profits
|
18.87
|
29.70
|
45.59
|
22.96
|
Other
Income
|
1.04
|
0.48
|
1.26
|
0.73
|
PBIDT
|
19.92
|
30.18
|
46.84
|
23.69
|
Interest
|
9.17
|
8.70
|
12.26
|
8.75
|
PBDT
|
10.74
|
21.48
|
34.59
|
14.94
|
Depreciation
|
6.58
|
6.12
|
6.37
|
3.59
|
PBT
|
4.16
|
15.36
|
28.22
|
11.35
|
Share of
Profit/loss of JV
|
0.00
|
0.00
|
0.00
|
0.00
|
PBT Before
EO
|
4.16
|
15.36
|
28.22
|
11.35
|
EO
|
0.00
|
0.00
|
0.00
|
0.00
|
PBT after
EO
|
4.16
|
15.36
|
28.16
|
11.35
|
Provision
for Tax
|
3.47
|
4.03
|
7.16
|
2.83
|
Profit
after Tax
|
0.69
|
11.33
|
21.01
|
8.52
|
EPS (Rs)*
|
0.4
|
6.0
|
11.1
|
#
|
*EPS
annualized on post issue equity capital of Rs 19.0 crore of face value of Rs
10 .each
|
# Not
annualised due to seasonality of business
|
Figures in
Rs crore
|
Source:
Capitaline Corporate Database
|
|