Bansal Wire IPO Second Day Of Bidding Today: Buy or Not?

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6 months ago

Bansal Wire IPO Second Day Of Bidding Today: Buy or Not?

Bansal Wire Industries Ltd’s initial public offering (IPO) got off to a strong start yesterday, July 3, 2024, with significant demand from retail and non-institutional investors. By the end of day one, the IPO subscription status had increased 1.76 times, indicating strong demand and setting a positive tone for the coming days of the subscription period.

Day One’s Performance

On the first day of bidding, Bansal Wire Industries’ IPO received a lot of attention, particularly from retail and non-institutional investors. According to BSE data, the retail investor quota was subscribed to 2.47 times, while the non-institutional investor (NII) component was subscribed to 2.44 times. This good start demonstrates confidence in the company’s prospects and market position.

Company Background

Bansal Wire Industries Ltd. is a major participant in the steel wire production business, noted for its high-quality products and broad market reach. The company focuses on high carbon steel wire, mild steel wire (low carbon steel wire), and stainless steel wire. With a sizable market share and a reputation for excellence, Bansal Wire Industries has established itself as a leading supplier in both domestic and international markets.

IPO Details

Bansal Wire Industries‘ public offering allocated 50% of its shares to qualified institutional buyers (QIBs), 35% to retail investors, and 15% to non-institutional investors (NIIs). Bansal Wire Industries received almost ₹223 crore from significant investors the day before its IPO, boosting confidence in the company.

Market capitalization and Financial Metrics

Bansal Wire Industries’ post-IPO market capitalization is anticipated to be ₹40,078.3 million. The company’s market cap-to-sales ratio is 1.62 times its FY24 profits, while its price-to-earnings (P/E) ratio is 50.8 times FY24 earnings. These measurements indicate the company’s financial strength and market valuation.

Product Portfolio

Bansal Wire Industries has one of the most extensive product portfolios in India’s steel wire market, with over 3,000 Stock Keeping Units (SKUs) of high carbon steel, mild steel, and stainless steel wires. Its subsidiary, Bansal Steel & Power Limited, adds 1,500 SKUs, expanding the company’s offerings and increasing its market position.

Strategic Expansion

Looking ahead, Bansal Wire Industries intends to expand its market position by launching a new category of specialty wires through its planned Dadri factory. This planned expansion is intended to boost the company’s growth and market share in the upcoming fiscal year.

Investment recommendations

According to Anand Rathi Research, Bansal Wire Industries is an attractive investment opportunity. With a strong market presence, a varied product range, and planned expansion plans, the company is well positioned for long-term success. Based on these positive considerations, the brokerage has advised that the IPO be rated “Subscribe – Long Term”.

Customer Retention and Sales Distribution

Bansal Wire Industries has maintained a constant client retention rate over the last three fiscal years, with 64.74% in FY22, 66.06% in FY23, and 68.49% in FY24. The company sells about 86% of its products locally, with the remaining 14% exported, mostly to the US and European markets, which account for more than 70% of its export earnings.

Financial Performance

Over the fiscal years 22-24, the company had a 5.9% compound annual growth rate (CAGR) in revenue. In FY24, Bansal Wire Industries reported an EBITDA margin of 6.04% and a Profit After Tax (PAT) margin of 3.19%. These financial metrics highlight the company’s profitability and operational efficiencies.

Valuation Metrics

Bansal Wire Industries is proposing a P/E multiple of 41.4x based on FY24 diluted earnings per share (EPS) of ₹6.18, which is on the higher end of the price band. The industry average is 32.72x, implying a premium valuation. Furthermore, the price-to-book value (P/BV) ratio for FY24 is 7.72x. Despite its high value, the company’s strong fundamentals make it a good long-term investment.

IPO Subscription Strategy

Investors should assess the company’s strong market position, consistent financial performance, and strategic expansion plans before subscribing to the IPO. While the high valuation carries some risk, Bansal Wire Industries’ potential for long-term growth makes it an appealing investment prospect.

GMP and Expected Listing Price

Currently, the Grey Market Premium (GMP) for Bansal Wire Industries’ IPO is +60. The shares are trading at a ₹60 premium in the grey market, indicating high investor interest. According to the GMP, the estimated listing price is ₹316 per share, 23.44% more than the IPO price of ₹256. The GMP represents investor confidence and possible benefits after listing.

Book Running Lead Managers

The book running lead managers for the Bansal Wire IPO are SBI Capital Markets Limited and Dam Capital Advisors Ltd (formerly Idfc Securities Ltd). Kfin Technologies Limited is the registrar for the issue. These institutions play critical roles in managing and ensuring the IPO process.

Conclusion

On the first day of the Bansal Wire Industries IPO, retail and non-institutional investors subscribed in large numbers. Bansal Wire Industries is poised for future growth thanks to its strong financial metrics, varied product line, and strategic expansion plans. Positive analyst reviews and solid GMP support the IPO’s chances, making it an appealing investment opportunity.