P S Raj Steels Ltd. (PRSL), a fast-growing stainless-steel pipes and tubes manufacturer, is set to make its debut on the stock market with a INR 28.28 crore initial public offering (IPO). The company, known for its extensive product range of over 250 standard sizes, also provides customized solutions, making it one of India’s most versatile stainless-steel manufacturers.
Apart from manufacturing, PRSL also engages in trading stainless-steel coils, strips, sheets, plates, and bars, with nearly 25-30% of its revenue coming from this segment. Its products cater to industries such as railways, furniture, food processing, sugar mills, and industrial fabrication, among others.
IPO Details and Utilization of Funds
The IPO, with a price band of INR 132-140 per share, has opened for subscription on February 12, 2025, and closes on February 14, 2025. Investors can bid for a minimum of 1,000 shares and in multiples thereafter. Post-IPO, the company’s shares will list on NSE SME Emerge, and the IPO will account for 26.80% of the post-issue paid-up capital.
PRSL plans to utilize INR 26.50 crore from the IPO proceeds for working capital and the remaining funds for general corporate purposes. The issue is managed by Khambatta Securities Ltd., with Bigshare Services Pvt. Ltd. as the registrar and Nikunj Stock Brokers Ltd. as the market maker.
The company has reserved 20,000 shares for employees and 101,000 shares for the market maker. Of the remaining portion, at least 35% is earmarked for retail investors, 15% for high-net-worth individuals (HNIs), and up to 50% for qualified institutional buyers (QIBs).
Financial Performance: Strong Growth but Sustainability Concerns
PRSL has demonstrated strong revenue and profit growth over recent years:
- FY22: INR 179.89 crore revenue | INR 3.57 crore net profit
- FY23: INR 225.44 crore revenue | INR 3.65 crore net profit
- FY24: INR 297.76 crore revenue | INR 6.36 crore net profit
- H1 FY25: INR 139.12 crore revenue | INR 3.87 crore net profit
The company’s net profit margins have improved, from 1.62% in FY23 to 2.78% in H1 FY25. However, the sudden jump in profits from FY24 raises questions about sustainability, especially in a sector prone to price fluctuations.
The IPO is priced at a P/E of 13.65 (FY25E) and 16.59 (FY24). While this valuation seems reasonable, compared to peers like Venus Pipes (P/E 28.8) and Suraj Ltd. (P/E 34.0), PRSL’s long-term growth trajectory and pricing power remain critical factors to watch.
Market Position and Growth Potential
With 114 employees and 11 contract workers, PRSL remains a relatively small player in India’s stainless-steel industry. However, its strong market presence, diversified product portfolio, and growing financial performance position it as an emerging contender in the segment.
That said, small post-IPO equity (INR 7.54 crore) indicates a longer gestation period before potential uplisting on the main exchange. The company has issued bonus shares at an 8:1 ratio in April 2024, and its promoters hold shares at an average acquisition cost ranging from INR 10.91 to INR 12.72 per share.
Investment Outlook: A Moderate Long-Term Bet?
While PRSL has shown consistent growth and operates in an essential industry, its profitability jump in FY24 requires deeper analysis. Given its fully valued IPO pricing, small equity base, and exposure to cyclical steel demand, investors should consider a long-term approach before committing funds.
For those with a moderate risk appetite, PRSL’s IPO could be an opportunity to enter an expanding market at a reasonable valuation. However, cautious investors may want to track its post-listing performance before making a decision.
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