Mumbai-based polymer Prince Pipes and Fittings is aiming to raise Rs 500 crore via its initial public offering, which is open for subscription from December 18 to December 20. Most Brokerages believe that investors can subscribe to the IPO for listing gains, citing strong earnings growth and brand reputation.
Prince Pipes and Fittings IPO, which has a price range of Rs 177 to Rs 178 per share, comprises of a fresh issue of shares worth Rs 250 crore and an offer for sale of the same amount.
The company plans to use the proceeds from the IPO to pare certain outstanding loans, to finance the project cost towards the establishment of a new manufacturing facility and upgrade existing equipment at the manufacturing facilities.
Strong brand reputation, a diversified product portfolio, strategically located manufacturing facilities and consistent earnings growth are among the positive strengths brokerages pointed out supporting Prince Pipes and Fittings.
Meanwhile, pledged shares by promoters, outstanding litigations, credit and non-payment risk of distributors and closely tied demand for products are among the key risks cited by the brokerages.
Motilal Oswal said investors can subscribe the IPO from a listing gains perspective. "While there are concerns on Promoter’s pledge and related party transactions, valuations seems reasonable vis-à-vis peers, given its financials and return ratios," said the brokerage.
IDBI Capital said the IPO is fairly valued at 23x PE on FY19 EPS of Rs7.6. “We recommend ‘subscribe’ to this issue, considering healthy sales growth driven by higher volume and improvement in net profitability driven by lower interest outgo, which strengthens its near term growth prospects,” the brokerage said.
Sharekhan said, “It has a strong earnings growth profile and the balance sheet is reasonably healthy with debt/equity as of June 2019 at 0.6x. Prince has healthy return ratios (RoE & RoCE of 20.5% and 22.6% as on FY2019) which is comparable to its listed peers.” At the upper price band of Rs 178, the stock is available at a P/E of 23.5x of FY19 EPS.
Ventura has recommended 'subscribe' for listing gains. “Its pan India presence along with the regional brands is a significant advantage. Going forward, we expect Revenue, EBITDA, PAT to grow at a CAGR of 5%, 14% and 18% to Rs 1,967 crore, Rs 242 crore and Rs 117 crore. respectively.”HDFC Securities said, "PPFL will continue to actively manage its product mix at each of its plants to ensure it is maximizing its profit margins. Any downturn in the macroeconomic environment in India could adversely affect the business, financial condition and results of operations."