Abha Power and Steel Limited, a company with over 20 years of experience serving industries like Indian Railways, steel, cement, heavy engineering, mining, and power, is now raising ₹38.54 Crores through its fixed-price IPO. The Abha Power and Steel IPO consists of a fresh issue of 41.39 lakh shares worth ₹31.04 Crores and an offer for sale of 10 lakh shares worth ₹7.5 Crores. The subscription period for the IPO opened on November 27, 2024, and closed on November 29, 2024. The shares will be listed on the NSE SME platform on December 4, 2024.

IPO Details and Subscription

The share price for the Abha Power and Steel IPO is set at ₹75 per share, with a market capitalization of ₹100.86 Crores at the IPO price. The lot size for the IPO is 1,600 shares, requiring a minimum investment of ₹1,20,000 for retail investors, while High-Net-Worth Individuals (HNIs) need to invest ₹2,40,000 for 2 lots. The grey market premium (GMP) for the IPO stands at ₹0, indicating no price advantage in the grey market.

Financial Performance

The company reported revenues of ₹5,182.68 Lakhs in FY 2024, ₹5,511.82 Lakhs in FY 2023, and ₹5,498.40 Lakhs in FY 2022. The EBITDA for these years were ₹822.18 Lakhs, ₹375.79 Lakhs, and ₹211.11 Lakhs, respectively. Importantly, the Profit after Tax (PAT) for FY 2024 was ₹378.19 Lakhs, compared to a loss of ₹71.53 Lakhs in FY 2022, showing significant improvement.

For the IPO, the pre-issue earnings per share (EPS) is ₹2.62, and the post-issue EPS is ₹2.03. The pre-issue P/E ratio stands at 28.63x, and the post-issue P/E ratio is 36.86x, compared to the industry P/E ratio of 26.65x. While the company has shown growth, its valuation seems fully priced.

Use of IPO Proceeds

The company plans to utilize the IPO proceeds as follows:

1. ₹1,638.93 Lakhs will be allocated for capital expenditure aimed at modernizing and upgrading the manufacturing facilities in Bilaspur, Chhattisgarh.
2. ₹300 Lakhs will be used for working capital requirements.
3. ₹745.06 Lakhs will be directed toward general corporate purposes.

IPO Valuation and Market View

While Abha Power and Steel has shown improvement in profitability, its P/E ratio suggests that the IPO is fully priced. The GMP stands at 0%, meaning that no significant listing gains are expected, which is typically a concern for short-term investors seeking quick returns.

The company’s Return on Capital Employed (ROCE) for FY 2024 stands at 23.64%, and its Return on Equity (RoE) is 24.17%, which are solid figures but not exceptional enough to justify a significant premium over the industry average. As such, this IPO might not provide high returns either in the short term or long term, especially considering the absence of any notable grey market activity or listing premium.

Conclusion: Avoid for Listing Gains

While Abha Power and Steel Limited has a solid track record and a growing customer base across industries like steel and heavy engineering, investors should avoid this IPO for listing gains or long-term investment. The valuation appears fully priced, and given the zero grey market premium and moderate performance metrics, this IPO is not expected to deliver strong returns on listing or in the future.

For real-time updates on Abha Power and Steel IPO subscription and allotment status, check out the official NSE SME portal.

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