The Abha Power and Steel IPO is set to open on November 27, 2024, and close on November 29, 2024, with a fixed price issue totaling ₹38.54 Crores. This IPO consists of a Fresh Issue of 41.39 lakh shares worth ₹31.04 Crores and an Offer for Sale (OFS) of 10.00 lakh shares valued at ₹7.5 Crores. The allotment process will conclude on December 2, 2024, with shares listed on the NSE SME exchange, anticipated for December 4, 2024. Investors can apply in multiples of 1,600 shares, with a minimum investment of ₹1,20,000 for retail investors and ₹2,40,000 for HNIs.

Abha Power and Steel: Company Overview

With a solid track record of over 20 years, Abha Power and Steel has established itself as a key player in supplying standard and customized products to various industries such as Indian Railways, cement, steel, heavy engineering, mining, and power. The company's global footprint spans six countries, including the UAE, Qatar, Germany, Canada, Italy, and Nepal. Known for its focus on quality, safety, value, and price competitiveness, Abha Power and Steel has fostered long-term relationships with domestic and international clients.

Financial Performance and Key Metrics

Abha Power and Steel has shown promising financial growth over the past few years. For the Fiscal Year 2024, the company posted revenues of ₹5,182.68 Lakhs, an increase from ₹5,511.82 Lakhs in 2023 and ₹5,498.40 Lakhs in 2022. EBITDA for FY24 stood at ₹822.18 Lakhs, showcasing a significant improvement over the previous two years, while Profit after Tax (PAT) reached ₹378.19 Lakhs in FY24, a marked recovery from the negative PAT of ₹-71.53 Lakhs in FY22.

The company's Pre-Issue EPS stands at ₹2.62, with a Post-Issue EPS of ₹2.03. The Pre-Issue P/E ratio is 28.63x, while the Post-Issue P/E ratio rises to 36.86x, which is slightly higher than the industry’s average P/E ratio of 26.65x. Additionally, the company's Return on Capital Employed (ROCE) for FY24 is 23.64%, and its Return on Equity (RoE) stands at 24.17%, indicating strong profitability.

IPO Pricing and Grey Market Premium

The IPO price is set at ₹75 per equity share, giving the company a market capitalization of approximately ₹100.86 Crores at the IPO price. Despite the company’s strong financials, the Grey Market Premium (GMP) for the IPO is currently ₹0, reflecting concerns over the company’s current performance and market conditions. As the GMP indicates no immediate listing gains, prospective investors should approach the IPO with caution.

The Upcoming IPOs in this week and coming weeks are Ganesh Infraworld, Suraksha Diagnostic, Property Share REIT, Rosmerta Digital, Avanse Financial and Nisus Finance.

The Current active IPO is Agarwal Toughened, Apex Ecotech, Abha Power and Steel and Rajputana Biodiesel.

IPO Objectives and Use of Proceeds

The proceeds from the Fresh Issue will be directed towards capital expenditure to modernize and upgrade the manufacturing facilities in Bilaspur, Chhattisgarh—to diversify their product range and improve production capacity. Additionally, funds will be allocated for working capital requirements and general corporate purposes.

• ₹1,638.93 Lakhs for modernization and upgradation of manufacturing facilities.
• ₹300.00 Lakhs for working capital.
• ₹745.06 Lakhs for general corporate purposes.

IPO Review and Investment Recommendation

While Abha Power and Steel has shown solid financial growth, the IPO valuation appears high given its post-issue P/E ratio of 36.86x compared to the industry average. Furthermore, the GMP of ₹0 suggests that there may be little to no listing gains in the short term. Therefore, we recommend investors to avoid the Abha Power and Steel IPO if looking for quick gains or long-term investment.

Prospective investors are advised to exercise caution due to the company's high valuation and lack of immediate market excitement as reflected by the Grey Market Premium. However, those with a long-term view and belief in the company's growth strategy might still find this IPO a worthwhile consideration for portfolio diversification.

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