Royalarc Electrodes IPO: Detailed Overview

Royalarc Electrodes Limited is involved in the manufacturing of welding consumables such as welding electrodes, flux-cored wire, and MIG/TIG wires. These products are essential in welding tanks, boilers, heavy structures, beams, pipes, pressure vessels, and more. Industries served include railways, refineries, shipyards, sugar industries, telecom, and thermal power stations.

The company is raising ₹36.00 crores through a book-built issue with an 18.00 lakh shares offering. Of this, ₹21.6 crores will come from a fresh issue, and ₹14.4 crores from an Offer for Sale (OFS) of 12.00 lakh shares. The IPO subscription opens from February 14, 2025, and closes on February 18, 2025. The allotment date is set for February 20, 2025, and the shares are expected to be listed on NSE SME on February 24, 2025.

IPO Key Details

• Price Band: ₹114 to ₹120 per share.
• Market Capitalisation: ₹133.20 crores at the upper price band.
• Lot Size: 1,200 shares (₹1,44,000 for retail investors).
• High-Net-Worth Individuals (HNIs): Minimum investment is ₹2,88,000 for 2,400 shares.

The promoters—Bipin Sanghvi, Hardik Sanghvi, Swagat Sanghvi, and Tarulata Sanghvi—bring over 35 years of combined experience in the welding consumable industry.

Financial Performance

• Revenue from Operations for the fiscal years ending in 2024, 2023, and 2022 were ₹4,605.70 lakh, ₹10,099.25 lakh, and ₹6,482.23 lakh, respectively.
• EBITDA figures were ₹568.56 lakh (FY24), ₹1,816.61 lakh (FY23), and ₹555.77 lakh (FY22).
• Profit After Tax (PAT) stood at ₹317.50 lakh (FY24), ₹1,192.63 lakh (FY23), and ₹212.13 lakh (FY22).

Key Metrics

• Pre-issue EPS: ₹12.82
• Post-issue EPS: ₹10.74
• Pre-issue P/E Ratio: 9.36x
• Post-issue P/E Ratio: 11.17x (compared to industry P/E of 30x)
• ROCE (FY24): 37.73%
• ROE (FY24): 32.85%
• RoNW (FY24): 28.21%

These financial figures suggest that the company has a steady growth trajectory but is priced relatively reasonably compared to its industry peers.

IPO Objectives

The net proceeds from the Royalarc Electrodes IPO will be used for:

1. Expansion of the manufacturing facility in Gujarat (₹4.89 crore).
2. Working capital requirements (₹14 crore).
3. General corporate purposes.

Royalarc Electrodes IPO Subscription and Grey Market Premium (GMP)

As of February 18, 2025, the IPO was subscribed 1.13 times, indicating moderate interest in the offering. However, the Grey Market Premium (GMP) remains at ₹0, suggesting no speculative gains before listing. This indicates that there may be limited short-term listing gains, and the market sentiment remains neutral.

IPO Allotment Process

The allotment for the Royalarc Electrodes IPO is expected to be finalized by February 20, 2025. Investors can check their allotment status on the registrar’s website using their application number, PAN, or DP Client ID.

Anchor Investors and Share Allocation

Royalarc Electrodes raised ₹10.08 crore from anchor investors at ₹120 per share, allocating 8,40,000 shares in total.

Investor Guidance

• Retail Investors need to consider the minimum investment of ₹1,44,000 for 1,200 shares.
• The Grey Market Premium of ₹0 indicates no immediate listing gains.
• Fairly priced IPO based on the company's financials and steady growth.

The Upcoming IPOs in this week and coming weeks are Swasth Foodtech, Beezaasan Explotech, HP Telecom India.

The Current active IPO are Royalarc Electrodes, Tejas Cargo India, Quality Power Electrical Equipments.

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