Abha Power and Steel Limited is all set to launch its IPO, offering a fixed price issue worth ₹38.54 Crores. The IPO consists of a fresh issue of 41.39 lakh shares valued at ₹31.04 Crores and an Offer for Sale (OFS) of 10.00 lakh shares, totaling ₹7.5 Crores. Abha Power and Steel is a key player in manufacturing products for a range of industries, including Indian Railways, steel, cement, heavy engineering, mining, and power. With over 20 years of experience, the company has built a strong reputation by focusing on quality, safety, value, and price competitiveness, and has managed to form long-term relationships with customers in India and international markets, including UAE, Qatar, Germany, Canada, Italy, Netherlands, and Nepal.

The subscription period for the IPO starts on November 27, 2024, and ends on November 29, 2024. The price per share is set at ₹75, with a market capitalization of ₹100.86 Crores at this price. The lot size for the IPO is 1,600 shares, with the minimum investment for retail investors set at ₹1,20,000. For High-Net-Worth Individuals (HNIs), the minimum investment is 2 lots (3,200 shares), amounting to ₹2,40,000.

As of November 29, 2024, the IPO had been subscribed 16.66 times, indicating a solid demand for the issue. The allotment process will be finalized by December 2, 2024, with the shares expected to list on the NSE SME on December 4, 2024.

Financial Performance and Market Insights

Abha Power and Steel has shown a stable financial performance over the years. In the 2024 fiscal year, the company reported revenues of ₹5,182.68 Lakhs, slightly down from ₹5,511.82 Lakhs in FY2023 and ₹5,498.40 Lakhs in FY2022. The company’s EBITDA improved to ₹822.18 Lakhs in FY2024, compared to ₹375.79 Lakhs in FY2023 and ₹211.11 Lakhs in FY2022, showing better operational efficiency.

In terms of Profit After Tax (PAT), the company reported ₹378.19 Lakhs in FY2024 and FY2023, recovering from a loss of ₹71.53 Lakhs in FY2022. This steady recovery indicates improving financial health, positioning the company well for future growth.

For the Abha Power and Steel IPO, the pre-issue EPS is ₹2.62, which will decrease to ₹2.03 post-issue. The pre-issue P/E ratio is 28.63x, while the post-issue P/E ratio rises to 36.86x, which is higher than the industry P/E ratio of 26.65x, suggesting the IPO is fully priced. The company’s Return on Capital Employed (ROCE) is 23.64%, and its Return on Equity (RoE) stands at 24.17% for FY24, indicating healthy profitability, but also highlighting that the valuation may be relatively expensive compared to its industry peers.

Grey Market Premium (GMP) and IPO Review

The Grey Market Premium (GMP) for the Abha Power and Steel IPO is currently reported to be ₹0, indicating a neutral sentiment in the grey market. This means that, based on the financial performance and valuation of the IPO, there are no immediate expectations of listing gains in the short term. As grey market trading is unregulated and speculative, it does not provide a reliable indication of the actual market performance of the shares post-listing.

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Investment Recommendation

Given the financial performance and the valuation metrics of the company, including the relatively high P/E ratio, the Abha Power and Steel IPO appears to be fully priced. With no significant listing gains anticipated from the GMP, we recommend investors to avoid the Abha Power and Steel IPO for short-term listing gains or long-term investment purposes. The valuation might not provide immediate upside potential, especially compared to other available opportunities in the market.

Abha Power and Steel IPO Allotment Process and Instructions

To check the status of your Abha Power and Steel IPO allotment, follow these steps once the allotment is finalized on December 2, 2024:

1. Visit the registrar’s website.
2. Select Abha Power and Steel Limited IPO from the dropdown list.
3. Enter your application number, PAN, or DP Client ID.
4. Submit the details to view your allotment status.

Use of IPO Proceeds

The proceeds from the fresh issue will be allocated towards:

1. ₹1,638.93 Lakhs for capital expenditure to modernize and upgrade manufacturing facilities in Bilaspur, Chhattisgarh to expand the company’s product portfolio.
2. ₹300.00 Lakhs for working capital requirements.
3. ₹745.06 Lakhs for general corporate purposes.

Conclusion

The Abha Power and Steel IPO offers investors an opportunity to participate in a well-established company in the steel and power industries. However, the fully priced valuation and neutral GMP make it less appealing for listing gains or long-term investment. Investors should exercise caution and consider alternative options unless they are comfortable with the pricing and the company’s future prospects.

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