Royalarc Electrodes, a company engaged in manufacturing welding consumables such as welding electrodes, flux cored wire, and MIG/TIG wires, is set to launch its IPO. The company supplies these products across various sectors like railways, roadways, refineries, thermal power stations, and more. The IPO will open for subscription on February 14, 2025, and will close on February 18, 2025.

Key IPO Details

The IPO consists of two components: a fresh issue of 18.00 lakh shares worth ₹21.6 Crores and an offer for sale of 12.00 lakh shares worth ₹14.4 Crores. The price band has been set between ₹114 to ₹120 per equity share, and the lot size is 1,200 shares. For retail investors, the minimum investment required is ₹1,44,000, and for HNIs, it is ₹2,88,000 for 2 lots.

The market capitalization of Royalarc Electrodes, at an IPO price of ₹120 per share, will be approximately ₹133.20 Crores. The shares will be listed on the NSE SME on or around February 24, 2025. Investors can expect the allotment to be finalized on February 20, 2025.

Financial Performance and Valuation

Royalarc Electrodes has seen steady growth in its financial performance over the past few years. The revenue for FY 2024 reached ₹4,605.70 Lakh, with a profit after tax of ₹317.50 Lakh. The company is led by Bipin Sanghvi, who brings over 35 years of experience in the business. The company’s key performance indicators for FY24 include a pre-issue P/E ratio of 9.36x and a post-issue P/E ratio of 11.17x, significantly lower than the industry average of 30x.

IPO Subscription and Grey Market Premium

The Grey Market Premium (GMP) for Royalarc Electrodes IPO is expected to be ₹0, which indicates low demand in the unorganized market. As of the first day of the subscription period, the IPO has been subscribed 0.05 times. The anchor investors have already committed ₹10.08 Crores, allocating 8,40,000 equity shares at the upper price band of ₹120.

Royalarc Electrodes IPO Objectives

The net proceeds from the IPO will be used for three major purposes:

1. Expansion of manufacturing facilities in Gujarat, with ₹4.88 Crores earmarked for this purpose.
2. Funding working capital requirements with ₹14.00 Crores allocated to this.
3. General corporate purposes, contributing to the company’s overall growth and operational efficiency.

IPO Review

While the company shows strong financial indicators, including a ROCE of 37.73% and ROE of 32.85%, the IPO's GMP of ₹0 suggests caution. Considering the company’s steady performance, investors are advised to be careful about investing purely for listing gains, and focus on the long-term prospects instead.

The Upcoming IPOs in this week and coming weeks are Royalarc Electrodes Limited, Tejas Cargo India Limited, Quality Power Electrical Equipments.

The Current active IPO are  L.K. Mehta, Shanmuga Hospital, PS Raj Steels, Voler Car, Maxvolt Energy, Hexaware Technologies.

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