Vraj Iron IPO: Shares list at 16% premium; know analysts views

Shares of sponge iron maker Vraj Iron and Steel Ltd made a decent debut on the stock exchanges as the stock listed at a 16% premium over the issue price of ₹240 today. The listing gains were, however, lower than a 24% premium estimated by the unregulated grey market.

Shares of the company opened at ₹240 on the BSE and hit the day's high at ₹251.95, thus gaining 21.71% over the issue price of ₹207. At the current share price, its m-cap stands at ₹831 crore. On the NSE, the shares opened at a 13.75% premium over the issue price and hit the day's high of ₹252, up 5% from today's listing price.

Vraj Iron brought the IPO at a price band of ₹195-207 per share. The issue size was ₹171 crore comprising the fresh issue of 1,710 million shares, with a minimum lot size of 72. The IPO was subscribed to 119.04 times, with the non-institutional investors subscribing 208.81 times, followed by qualified institutional buyers(QIBs) at 163.90 times, and retail individual investors(RIIs) at 54.93 times.

The company is engaged in the manufacturing of Sponge Iron, M.S. Billets, and TMT bars under the brand Vraj. It operates through two manufacturing plants located at Raipur and Bilaspur in Chhattisgarh, spread across 52.93 acres.

As of December 31, 2023, the aggregate installed capacity of its manufacturing plants was 2,31,600 tons per annum (“TPA”). The plant at Raipur also includes a captive power plant, with an aggregate installed capacity of 5 MW, as of December 31, 2023.

The company’s product offerings include sponge iron, TMT bar, MS billets, and by-products Dolochar, Pellet, and Pig Iron, which cater to industrial customers and end-users. It sells products directly as well as through brokers or dealers.

Brokerage Anand Rathi, in its IPO note, had given a 'Subscribe- Long Term' rating to the Vraj IPO, saying the company has an integrated and well-established manufacturing setup, with a diversified product mix with a strong focus on value-added products and manufacturing plants are strategically located, leading to cost efficiencies and a stable supply chain.

Hem Securities, in its June 25 note, recommended “Subscribe” on the issue, saying it has experienced promoters, a board and a management team, with a consistent track record of growth and financial performance.

Shivani Nyati, head of wealth, Swastika Investmart, maintains a buying rating on the stock, with a price target of ₹300. “Vraj Iron & Steel has a proven track record of consistent profitability over the past three years, demonstrating its ability to generate healthy returns. However, investors should acknowledge certain risks, such as the concentration of manufacturing facilities in a single region and the lack of long-term customer contracts. Despite these considerations, the IPO's P/E valuation of 9.48x appears reasonable”.

The company's total revenue for nine months ending FY2023-24 was recorded at ₹301 crore, while revenue in FY23 was ₹515 crore. Profit after tax came in at ₹41.5 crore in M9 FY24, while FY23 profit was ₹51.1 crore.