Royalarc Electrodes is an Indian manufacturing company specializing in welding consumables such as welding electrodes, flux cored wire, and MIG/TIG wires. These products find applications in heavy industries such as railways, refineries, shipyards, and power stations. The company is launching an IPO of ₹36.00 crores, comprising a fresh issue of ₹21.6 crores (18.00 lakh shares) and an offer for sale of ₹14.4 crores (12.00 lakh shares).

IPO Key Details

• Price Band: ₹114 to ₹120 per share
• Market Capitalization: ₹133.20 crores at the upper price band
• Lot Size: 1,200 shares
• Minimum Investment for Retail: ₹1,44,000
• Minimum Investment for HNIs: ₹2,88,000 (2 lots)
• Subscription Period: February 14, 2025, to February 18, 2025
• Listing Date: Expected on February 24, 2025 (tentative)
• Registrar: KFIN Technologies Limited
• Lead Manager: FEDEX Securities Private Limited

Grey Market Premium (GMP)

The Grey Market Premium for the Royalarc Electrodes IPO is currently ₹0, reflecting no expected listing gain based on current market trends and financial performance. It's important to note that the GMP is speculative, and real price discovery only occurs after listing on the exchange.

IPO Subscription Status

As of 1:00 PM on February 17, 2025, the IPO has been subscribed 0.29 times, indicating limited demand as the subscription period continues. Investors should keep an eye on the subscription trend as the closing date approaches.

Anchor Investors and IPO Funding

Royalarc Electrodes has raised ₹10.08 crores from anchor investors at ₹120 per share. The company allocated 8.4 lakh shares to anchor investors, which is a positive sign, though the IPO’s overall subscription status will indicate broader market interest.

Objectives of the IPO

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

1. Expansion of Manufacturing Facility: ₹4.88 crores will be allocated towards expanding the manufacturing facility in Gujarat.
2. Working Capital: ₹14.00 crores will be used for working capital requirements.
3. General Corporate Purposes: Funds will also be used for corporate purposes.

Financial Performance Overview

Royalarc Electrodes has shown steady growth in revenue and profits over the years. For the period ending September 30, 2024, the company's revenues stood at ₹4,605.70 lakh, with a profit after tax of ₹317.50 lakh. The financial highlights for the last three fiscal years include:

• FY2024 Revenue: ₹10,099.25 lakh
• FY2024 EBITDA: ₹1,816.61 lakh
• FY2024 Profit after Tax: ₹1,192.63 lakh
• Pre-issue EPS: ₹12.82
• Post-issue EPS: ₹10.74

Key performance indicators:

• Pre-issue P/E Ratio: 9.36x
• Post-issue P/E Ratio: 11.17x
• Industry P/E Ratio: 30x

These figures suggest that the IPO is fairly priced, as the company's P/E ratio is well below the industry average, indicating that the stock may be undervalued compared to its peers.

IPO Review and Recommendation

Despite the company's steady growth and its pricing below the industry average, the Grey Market Premium indicates a lack of market enthusiasm for the IPO. Given the limited demand seen in the subscription process and the lack of listing gain expectation based on GMP, investors may consider avoiding the Royalarc Electrodes IPO for listing gains.

However, long-term investors might consider holding the stock if they are confident in the company's future growth, especially considering the company's strong presence in the welding consumables sector, which has applications across various industrial sectors like railways, refineries, and power plants.

Conclusion

In conclusion, the Royalarc Electrodes IPO presents an interesting opportunity, but given the current market conditions, investors are advised to proceed cautiously and evaluate whether they are looking for long-term growth or short-term listing gains.

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, L.K. Mehta, Shanmuga Hospital.

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