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Vraj Iron and Steel Ltd IPO

One of the finest iron and steel manufacturers in India is entering the market with robust financials. Find out more about Vraj Iron and Steel IPO.

Vraj Iron and Steel Ltd IPO

India is gradually increasing its focus on the manufacturing industry. In this process, there is a need for modern and robust machinery, equipment, and infrastructure. The iron and steel industry stands strong to cater to these needs. India stood as the 2nd largest steel manufacturer in the world, as of FY 2023. The anticipated production of steel by 2030-2031 is 300 Million Tonnes

India holds the 5th largest iron ore repository in the world. The growth in iron and steel manufacturing also attracts growth for its raw material supply industries. The raw materials needed for iron and steel production are iron ore, coal, sponge iron, etc. 

Vraj Iron and Steel Ltd is one of the key raw material suppliers of steel manufacturing in Chhattisgarh. Read more about this amazing opportunity to invest in the IPO of Vraj Iron and Steel Ltd.

About Vraj Iron and Steel Ltd IPO

The Vraj Iron and Steel Ltd is a Chattisgarh-based company processing iron. The company manufactures raw materials for high-quality steel. It is the subsidiary company of Gopal Sponge and Power Pvt Ltd. 

The company started its operations as Phil Ispat Pvt Ltd in 2012. The company has two manufacturing plants in Bilaspur and Raipur (state – Chhattisgarh with a capacity of 2,31,600 tonnes per annum). Moreover, a captive power plant in Raipur with a capacity of 5 MW gives it a strategic edge over local competitors. It is planning to expand the same to 20 MW. 

The domestic suppliers provide the raw material like iron ore, iron ore pellets, coal, etc for the company. The company mainly produces these three products:

ProductDetails and UsageContribution in Revenue of December 2023 (9MFY24)
TMT BarUsed at construction sites for slabs.30.31%
Sponge IronRaw material for the production of high-quality steel.52.58%
MS BilletsSemi-finished casting product3.12%

Know more: What Is Initial Public Offer?

Details of Vraj Iron and Steel Ltd IPO

The initial public offering (IPO) of Vraj Iron and Steel is raising funds of 171 crores for mainly its ‘Expansion Project’ in Bilaspur, Chhattisgarh, and repayment of debt to HDFC bank. Moreover, it is planning to gain a strategic edge in the competitive industry of iron and steel manufacturing by listing itself in the equity market. 

The following are details of Vraj Iron and Steel IPO:

IPO price range₹195-₹207 per share
Lot size72 shares
Fresh Issue₹171 Crore
Offer-for-sale
IPO Opening DateJune 26, 2024
IPO Closing DateJune 28, 2024
Listing DateJuly 3, 2024 

Source: Vraj Iron and Steel Ltd RHP 

The IPO of Vraj Iron and Steel Ltd experienced a strong demand on the 2nd day in the grey market. The company issue was subscribed 16.9 times at the start of day 3. The retail investor subscribed to the issue by 25.51 times, and the non-institutional investors subscribed by 53.25 times. The qualified institutional buyers (QIBs) have subscribed to the issue by 0.92 times. 

Moreover, post the IPO promoters are going to have the majority shareholding of the company which anchors the confidence of investors.

Read more: Types of IPO: A complete guide to IPO investing

Key financials

ParticularsFor nine months till December 2023FY 2022-23FY 2021-22
Net worth187.49140.9187.13
Total revenue304.80517.42414.38
Net profit44.5853.9928.70
Total borrowings49.29
Return on Capital Employed25.34%44.98%32.14%
Return on equity23.78%38.32%32.94%

Source: Vraj Iron and Steel Ltd RHP 

Vraj Iron and Steel Ltd has showcased strong financial growth historically. The net profit has grown with a CAGR of 121.7% from 2021 to 2023. Moreover, the net profit margin till December 2023 is promising at 21.61%. The overall profit and loss statement is sound enough to experience the growth ahead.

The return on capital employed becomes a crucial indicator of operational efficiency in the manufacturing industries like iron and steel. The company has been working efficiently in past years to increase the capacity of its manufacturing plant. The latest ROCE in December 2023 stands at 25.34%, but the expansion project at the Bilaspur plant is expected to increase operational efficiency. 

Capital expenditure heavy industries usually experience negative cash flow due to the credit cycles in the market and constant investments in plants and machinery. However, the negative operating cash flow should be improved as soon as possible to meet the pace of industry growth.

Also read: NFO or IPO – What do you think is the better option?

SWOT analysis

StrengthsWeaknessOpportunity Threats
Strategic locations of manufacturing plants in places with raw material abundanceMajor revenue from top 10 customers only. Finished steel consumption growth is projected to be 14.8%.The negative net cash flow in the highly competitive industry.
Strong growth in Net Profit Margin and 38.32% ROESingle region concentration in Chhattisgarh. Narrow span of operations. The funds from the IPO are raised for capacity expansion in the Bilaspur plant.There is a dependence on third parties for suppliers, logistics, and transportation.

Bottomline

India’s ambition to expand domestic steel production to 500 MT per annum indicates the potential growth opportunity for Vraj Iron and Steel Ltd. The industry has very competitive market players and some local raw material suppliers. Operational efficiency is the key to success in this sector. Moreover, the country is working hard to gain manufacturing efficiency with the help of industries like iron and steel.

The IPO of Vraj Iron and Steel Ltd offers an excellent opportunity for investors to experience growth in this manufacturing-focused rally in India. The companies’ issue is raising funds to expand the capacity which is a future benefit to the investors. 

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