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Venus Pipes and Tubes IPO  Fundamental Analysis
  • Incorporated in the year 2015, Venus Pipes and Tubes (“the Issuer”) is a growing stainless steel pipe and tubes manufacturer and exporter in India having over six years of experience in manufacturing stainless steel tubular products. The products are supplied under the brand name “Venus” to diverse sectors including chemicals, engineering, fertilizers, pharmaceuticals, power, food processing, paper, and oil and gas.
  • Product Categories: seamless tubes/pipes and welded tubes/pipes, which include 5 products (i) stainless steel high precision & heat exchanger tubes; (ii) stainless steel hydraulic & instrumentation tubes; (iii) stainless steel seamless pipes; (iv) stainless steel welded pipes; and (v) stainless steel box pipes (“Products”).
  • The Issuer has one manufacturing plant located at Bhuj-Bhachau highway, Dhaneti (Kutch, Gujarat) with a total installed capacity of 10,800 MT per annum as of Feb 2022. The Issuer has a warehouse facility at the manufacturing plant and Ahmedabad to ensure the stability of operations.
  • The raw material required includes SS coils and hollow pipes which are procured from domestic suppliers such as steel manufacturers, stockists, and traders; international suppliers from China, Indonesia, Malaysia, and Singapore; and high sea purchases. The cost of materials consumed accounted for 82.09% (9MFY22), 84.53% (FY21) 88.29% (FY20) and 85.58% (FY19) respectively.
  • Products are sold both in the domestic as well as international markets. In the domestic market, products are sold to customers as well as traders/stockists while in the international market products are supplied through traders/stockists and authorized distributors that engage on an exclusive basis and certain marketing representatives.
  • Export sales started in the year 2017 and as of February 28, 2022 exports have been made to 20 countries including Brazil, UK, Israel, and countries in the European Union, etc. Exports contributed 9.54% (9MFY22), 4.78% (FY21), 3.38% (FY20) and 11.28% (FY19), respectively of revenue from operations.

Financial Review

Venus posted total revenues of Rs 278.28 crore for 9MFY22 and posted PAT of Rs 23.60 crore for 9MFY22. The total revenues increased by 74% to Rs 312.03 crore in FY21 from Rs 179.32 crore in FY20 due to a robust increase in the sale of products offered. Welded pipes contributed 58.51% while 30.50% was contributed by the seamless pipes category. Profitability margins are strong and show an increasing trend over the last three fiscals as can be seen from the table.

Return on net worth was 19.59% as of 9 months ended FY22.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars 9MFY22 FY2021 FY2020 FY2019
Total Revenue 278.28 312.03 179.32 120.51
PAT 23.60 23.63 4.13 3.75
EBITDA 37.02 37.48 13.15 10.05
Total Assets 246.28 137.54 107.19 79.12
EBITDA Margin 13.30% 12.01% 7.33% 8.34%
Net Margin 8.48% 7.57% 2.30% 3.11%

Valuation and peer comparison

The Issue is priced at 15.77x its annualized earnings of Rs 20.67 per share calculated at the upper price band of Rs 326 per share. P/BV is 4.12x at NAV of Rs 79.15 per share for 9M ended FY22. The peer average P/E is 25.60x which indicates that the Issue is attractively priced.

Jindal Saw and Ratnamani Metal and tubes are shown as the peers of the Issuer as per the RHP. Ratnamani Metals & Tubes Limited, Jindal SAW, Maharashtra Seamless Limited, Man Industries, and Welspun Corp are some major players in the Indian steel pipe & tube segment. These companies have a wide product portfolio, offering SAW, ERW, seamless, and stainless steel (SS) pipes &tubes. Among these, Ratnamani and Jindal SAW have an established SS pipes & tubes business, placing them as market leaders in this segment.

Peer comparative data can be seen in the peer comparison table.

Table 2 - Listed Peer Comparison
Particulars Jindal Saw Ratnamani Metal &Tubes Venus Pipes
Face Value/share 2 2 10
Total Income for FY21 (Cr) 10872.00 2341.50 312.00
EPS (FY21) 10.02 59.07 18.04
NAV per share 218.39 425.35 30.48
Return on net worth 4.69% 13.90% NA
P/E (FY21) 9.69 41.51 NA
Market Price (As on 9th May 2022) 87.50 2238.55 NA

Issue Details

Venus IPO opens on 11thMay- 13th May 2022 with a price band of Rs 310-326 per share. Retail quota is 35% and investors can apply with minimum bid of 46 shares (Rs 14,496). Maximum lot size is 598 shares (Rs 1,94,948).The issue is entirely fresh issue and proceeds would be used towards financing capacity expansion and backward integration of hollow pipes (Rs 107.95 crore) working capital purposes (Rs 25 crore). The Issue is expected to list on 24th May 2022.

Conclusion and Investment Strategy

From demand perspective, India’s growth scenario for steel pipes and tube including Stainless steel (SS) pipes and tubes remains intact backed by substantial government expenditure planned in major end user industries under National Infrastructure Pipeline and recently announced PM Gati Shakti project. This would propel the demand of steel in various sectors thereby enhancing steel usage and growth of the SS pipes & Tubes. It is estimated that the domestic SS pipes & tube industry would grow at CAGR of 8.5%.

Venus pipes and tubes have had a robust growth in their topline and profitability margins over the last three fiscals. The issuer plans to grow through capacity expansion and backward integration to become self- reliant in raw material. Valuations also appear attractive when compared to peers. Hence, one might apply for the Issue.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 19th Apr 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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