The initial public offer (IPO) of wires and cable maker RR Kabel, which opened for subscription on Wednesday and closes on Friday, looks to raise Rs 1,964 crore via the initial stake sale.
Analysts advised investors to subscribe to the issue as the company is well placed within the industry and has the scope to improve margins and healthy cash flow growth going ahead.
“We recommend subscribing to the IPO, given cable and wire industry demand tailwinds and a healthy OCF growth over FY23-26F,” said Incred Equities.
RR Kabel is India’s fastest-growing consumer electric company over FY21-FY23 and the fifth largest in the wires and cable space with a branded value market share of 7% at FY23-end.
Its revenue, EBITDA and PAT grew at a CAGR of 31%, 16% and 16%, respectively over FY20-23. Analysts estimate the same to grow at a CAGR of 16%, 33% and 36%, respectively over FY23-26.
“RR Kabel has all the key growth levers in place: strong industry tailwinds, a solid brand name, and an extensive product portfolio and distribution network,” said Equirus Securities, while assigning a subscribe rating.
The IPO comprises a fresh issue size of Rs 180 crore, which has been reduced from Rs 225 crore earlier. The issue also includes an offer for sale (OFS) segment of up to 1.72 crore equity shares.
The company has fixed a price band of 938-1035 per share, where investors can bid for 14 shares in one lot. About 50% of the offer is set aside for qualified institutional buyers, 15% is reserved for non-institutional investors and 35% for retail investors.
Under the OFS, TPG Asia VII SF Pte Ltd, a US-based private equity firm, which holds a 20.99% stake in RR Kabel, will be selling some of its stake in the company. Other OFS selling shareholders include promoters Mahendrakumar, Hemant Mahendrakumar, Sumeet Mahendrakumar and Kabel Buildcon.
RR Kabel proposes to utilise the net proceeds towards the funding of repayment or prepayment, in full or in part, of borrowings availed by the company from banks and financial institutions estimated to be Rs 170 crore.
For the three months ended June 2023, the company clocked revenue of Rs 1,613 crore and a profit of Rs 74.3 crore.
Axis Capital, HSBC Securities and Capital Markets (India), Citigroup Global Markets India and JM Financial are the book-running lead managers to the issue.