Business of the Company
Ramsarup Industrial Corporation was established in 1966 as a partnership concern. In 1973 Ramsarup Engineering Industries Limited was incorporated.
Ramsarup Industries is in the business of producing steel wires and TMT bars in the country. The customers for its steel wires include Power Grid Corporation of India Ltd., L & T, Kalpataru Transmission and Power Ltd, KEC Ltd. and Apar Industries are among the better known ones. Similarly for the TMT bars leading customers are L & T, Gammon India, Reliance Energy and HCC. Ramsarup Industries is also setting up a structural mill to produce medium structurals like angles, channels and beams.
As evident the customers of the company are in the power, housing and infrastructure sector. These are the sectors that are gaining currency in the present scenario and getting an impetus from the government as well with the understanding that these are the primary sectors without which the country cannot grow at a healthy GDP rate for a sustained period of time.
Financials
The revenues of the company has grown from 231 crores in 2002 to 877.5 crores in the last fiscal. In toe with this the profits have grown from 2.42 crores to 13.68 crores in the said period. The EPS for the last three years has been 2.54, 6.47 and 14.83.
The issue has been priced at Rs. 60 which translates into P/E multiple of 4.05 based on the EPS of last year and a P/E of 6 with the average EPS of the last 3 years.
The issue involves an offer of 1,18,57,500 shares out of which the promoters will participate for 68,57,500 equity shares and 40 lakhs is the net offer to the public.
Objects of the Issue
The basic purpose of the issue is to raise funds to carry out an expansion and modernization plan of the company’s manufacturing facility of TMT bars at Shyamnagar. The second plan is to set up a structural mill with an installed capacity of 135000 tpa at Shyamnagar as discussed earlier.
Raw Material
The main raw material for producing TMT bars is M.S. Billets which the company procures from Rashtriya Ispat Nigam Ltd, SAIL, TISCO and others and the company feels that there is an abundant supply of this raw material and has signed MOUs with various suppliers for getting rebates and discounts.
Debt Default Risk
State Electricity Boards constitute a significant part of the outstanding debt of the company. The SEB’s are known to have a bad fiscal condition and any default may cause serious damage to the financial well being of the company.
Conclusion
On the whole the IPO looks decently priced as the company has been in existence for quite some time and the price that is being asked is not exorbitant at 6 times average earnings. The IPO comes out at such a time when the markets are at all time highs and a correction seems on the cards soon so that market risk still exists.
The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.
