The Rs 1,964-crore initial public offering of RR Kabel kicks off for subscription on Wednesday as the company will sell its shares in a fixed price band of Rs 983-1035 apiece with a lot size of 14 equity shares and its multiples thereof. The three-day bidding will conclude on Friday.
Incorporated in 1995, RR Kabel provides consumer electrical products used for residential, commercial, industrial, and infrastructure purposes in two major segments, namely wires and cables including house wires, industrial wires, power cables, and special cables; and FMEG including fans, lighting, switches, and appliances.
The IPO includes a fresh issue worth Rs 180 crore,. Besides, promoters MahendraKumar Rameshwarlal Kabra, Hemant Mahendrakumar Kabra, Sumeet Mahendrakumar Kabra and Kabel Buildcon Solutions and selling shareholders Ram Ratna Wires and TPG Asia VII SF will offload up to 1,72,36,808 equity shares offer-for-sale (OFS) route.
Read More: Stock Market’s High Time! What Is NIFTY That Touched Historic 20k Mark
The net proceeds from the fresh issue would be utilised towards repayment or prepayment, in full or in part, of borrowings availed by the company from banks and financial institutions and general corporate purposes.
The company has two manufacturing units located at Waghodia, Gujarat, and Silvassa, Dadra and Nagar Haveli, and Daman and Diu which primarily carry out manufacturing operations of wire and cables and switches. It also owns and operates three integrated manufacturing facilities which are located at Roorkee, Uttarakhand; Bengaluru, Karnataka; and Gagret, Himachal Pradesh.
Ahead of the issue, RR Kabel raised Rs 585.62 crore by allotting 56,58,201 equity shares at Rs 1,035 apiece to 54 anchor investors including Abu Dhabi Investment Authority, Government Pension Fund Global, HSBC Global, Ashoka Whiteoak ICAV, Carmignac Portfolio, TIMF Holdings, 3P India Equity Fund, Elara India Opportunities Fund, and Morgan Stanley Asia on Tuesday.
Shares worth Rs 10.80 crore have been reserved for eligible employees of the company, who will get a discount of Rs 98 per share. Overall, 50 per cent of the net offer is reserved for qualified institutional bidders (QIBs). A total of 15 per cent shares of the quota will go to non-institutional investors (NIIs) and the rest 35 per cent is reserved for retail investors.
For the financial year ended on March 31, RR Kabel reported a net profit at Rs 189.87 crore with a total revenue of Rs 5,633.64 crore. Its net profit stood at Rs 213.94 crore with a revenue from operations at Rs 4,432.22 crore in the previous financial year ended March 31, 2022.
Read More: Adani Power shares fall 9% from 52-week high; what lies ahead?
Axis Capital, Citigroup Global Markets India, HSBC Securities & Capital Markets and JM Financial are book running lead managers to the issue, while Link Intime India has been appointed as the registrar for the issue. Shares of the company will be listed at both BSE and NSE with Tuesday, September 26 as the tentative date of listing of shares.
Brokerage firms are mostly positive on the issue. Most analysts suggested ‘subscribe’ on the issue, citing growth potential and strong business model. That said, subdued profitability and return ratios, and valuations that look
fully priced compared to peers, leave little room for upside in near term, analysts said. Here’s what a host of brokerage firms said about the issue:
Reliance Securities
Rating: Subscribe
The structural growth drivers for consumer electrical business continues may remain strong. RR Kabel has a diverse suite of products; it has scaled the business in B2C in W&C, expanding the FMEG segment using its extensive global and domestic network, said Reliance Securities.
“We believe the premiumisation path could potentially result in structural margin expansion and B2C sales are likely to remain strong in coming years; the recent correction in input prices and the strong surge in multiple demand drivers augurs well for the company,” it added with a ‘subscribe’ rating for the issue.
Read More: Stocks to Watch: Infosys, Paytm, DMart, Vedanta, Coal India, SpiceJet, and Others
Choice Broking
Rating: Subscribe with caution
With solid brand recognition, diversified product profile, scale of operations, certified manufacturing facilities and wide & largest distribution network, RKL is well positioned to capture the growth in the domestic consumer electrical market, said Choice Broking, which has a ‘subscribe with caution’ rating for the issue.
“Profitability margins and return ratios are likely to improve going forward mainly in the anticipation of lower raw material prices and improved business dynamics. At a higher price band, RKL is demanding a TTM P/E multiple of 47.4 times, which is at discount to the peer average. However, the issue seems to be fully priced considering its subdued profitability and return ratios,” it added.
Canara Bank Securities
Rating: Subscribe for long term
The company’s majority of the revenue is generated from wires and cables with a 40 per cent share in the segment. The company has 74 per cent of the revenues coming from the B2C segment with a strong distribution network, said Canara Bank Securities.
“In wires and cables, the company witnessed revenue growth of 63 per cent in FY2022 with a volume growth of 23 per cent and a growth of 21 per cent with a volume growth of 20 per cent in FY2023. However, the margin got impacted due to commodity prices. Based on the EPS of FY2023, the company seems fairly priced,” it added with a ‘subscribe for long term’ rating.
Equirus Securities
Rating: Subscribe
RR Kabel is India’s fastest growing consumer electric company and the fifth largest in the wires & cables space. The company is also amongst India’s leading wires & cables exporters, which contributed 89 per cent of the company’s FY23 revenues but RR Kabel has been focussing on growing its FMEG business both organically and inorganically, said Equirus Securities with a ‘subscribe’ rating.
InCred Equities
Rating: Subscribe
We expect revenue, EBITDA and PAT CAGR of 16 per cent, 33 per cent and 36 per cent over FY23-26F, respectively led by capacity expansion, higher domestic sales growth and higher margins. At the upper price band, the implied P/E is 32 times, which is better than peers. We find the risk-reward ratio favourable, said InCred Equities with a ‘subscribe’ tag.
LKP Securities
Rating: Subscribe
Outlook remains healthy given the strong industry growth expected across the Indian wires and cables market with broad based growth across sub-sectors while the long-term growth drivers remain in place across both B2C and B2B segments, said LKP Securities with a ‘subscribe’ recommendation for the IPO.
Sushil Finance
Rating: Subscribe for long term
RR Kabel is asking for a PE multiple of 60.6 times as at FY23 and if we attribute FY24 earnings, then the asking price is at P/E of 39 times. The listed peers like Havells India trading at P/E 79 times and Finolex Cables is trading at P/E of 34 times and industry average P/E is 58 times. The issue seems fully priced, said Sushil Finance with a subscribe rating for aggressive investors for the long term.
Ventura Securities
Rating: Subscribe
RR Kabel is strategically positioned for growth with an extensive PAN India distribution network including over 3,400 distributors, 3,600 dealers, 1,14,000 retailers, and an impressive 2,98,000 electricians. This vast network sets it apart as it has the highest reach among its industry peers, enabling the company to effectively serve customers across India, said Ventura with a ‘subscribe’ rating.
Disclaimer: The content of this webpage is not an investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product(s). It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial circumstances. Investment involves risk. You should refer to the offering documentation of the product(s) for detailed information (including risk factors) prior to investing in any product(s). If you have any queries on the discussed subject matter, you should seek independent professional advice. Business Today does not guarantee, vouch for, endorse any of its contents and hereby disclaims all warranties, express or implied, relating to the same.
