Royalarc Electrodes IPO: Review, Valuation, Date & GMP

Royalarc Electrodes IPO-Complete Overview

Royalarc Electrodes IPO under the SME IPO category is a book build issue of Rs.36 Cr (30 lac Shares) by Royalarc Electrodes Limited, which was incorporated in 1996. The company is involved in manufacturing welding consumables, e.g., welding electrodes, flux cored wire, MIG, or TIG wires. 

It consumes welding consumables across industries such as the railways, roadways, airports, refineries, shipyards, mining, sugar, telecom, thermal stations, and PEB sectors for welded tanks, boilers, heavy structures, beams, pipes, cylinders, pressure vessels, etc.

It has other activities in the trading of wheels, electro-slag, welding flux-cored wire, electro-slag strip cladding, saw flux, and TIG/MIG wires that complement and are incidental to the welding business.

Also, the company processes under facilities sprawling 2,69,198 sq. ft. in Zaroli, Umbergaon, Gujarat products using copper-coated wire, MS strips, MS wire, SS strips, SS wire, nickel wire, and ferroalloy powder.

Standardized and custom-made, these products are supplied into the country and exported to more than 20 countries as well. The products carry certification by the American Bureau of Shipping, Indian Boilers Regulation, and Bureau of Indian Standard and are inspected by NABL-accredited laboratories.

Products:

• Flux-Cored Wire: This type of wire is used for repairs, wear protection, and joining since it has very high deposition rates.

• The production of various welding electrodes, including mild steels, low hydrogen, stainless steels, hard-facing, cutting, and non-ferrous kinds, is included in this category.

• The company produces flux-cored wire, MIG/TIG wire, electrodes, and other welding supplies.
  
  

Royalarc Electrodes Limited IPO Overview

This new SME IPO comprises a combination fresh issue of 18 lac Shares (Rs.21.60 Cr) and an offer for sale of 12 lac Shares (Rs.14.40 Cr). The Royalarc Electrodes Limited IPO date is from 14 Feb to 18 Feb 2025.

This upcoming IPO is set to open on 14 Feb 2025. The Royalarc Electrodes IPO Price is Rs.114 to Rs.120 per Share. The listing date is 21 Feb 2025 at NSE and SME.

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Company Financial

(Amount in Cr)

 

Cash Flows

The cash flows for various activities are mentioned below:

(Amount in lac)

 

Product-wise Revenue Breakdown 

(Amount in lac)

(Source: RHP)

 

The Objective of The Issue

• To arrange capital for the expansion of the production plant at Village Zaroli, Umbergaon Valsad, Gujarat, India.

• Financing capital expenditures for the acquisition of extra medical equipment.

• General corporate purposes.

 

Peers of Royalarc Electrodes Ltd. 

 

Evaluation

The IPO price is Rs.114 to Rs.120 for each Share.

Evaluation of P/E Ratio

Considering the FY ended 31 Mar 2024 with an EPS of Rs.12.82 from the last year, the resulting P/E ratio is 9.36x.

Considering the weighted EPS of Rs.10.22 for the last three years, the P/E ratio is 11.74x.

Comparative Analysis With Listed Peers

The average P/E Ratio of the industry is 31.41x.

In simple words, the P/E ratio of this IPO (9.36x), compared with the industry’s average P/E of 31.41x, has an undervaluation (on a P/E ratio basis only). Hence the price of the Share seems fully priced for the investors when considered based on the average P/E ratio of the industry.

 

IPO's Strengths

• Geographic dispersion across Bharat and overseas.

• Long-term relationships with customers in various geographies and sectors.

• Consistent financial performance.

• An experienced promoter and strong management team.

 

IPO’s Weaknesses

• Much of the company’s revenue, comes mainly from within India. Any unexpected shifts in India’s market could pose a risk to business operations and the company’s financial standing.

• The company runs a single manufacturing unit which exposes it to any regional disturbances like civil issues, natural calamities and other disruptions in the supply chain tend to halt production and hurt profits.

• The company operates in a recession-prone trade. It can affect revenue and profit aspects through forces like inflation, changing foreign exchange rates, or general recession.

• The company does not involve accountability in proper monitoring of the use of proceeds from the initial public offer, which indicates that proceeds may not have been used for the intended purposes and thus would not be achieving any objectives set.

 

 

Royalarc Electrodes IPO GMP 

Royalarc Electrodes IPO GMP has not started yet as of 12 Feb 2025.

IPO Timetable (Tentative)

The IPO date is 14 Feb with tentative allotment on 19 Feb, refund initiation on 20 Feb, and listing on 21 Feb 2025.

 

Royalarc Electrodes IPO Details 

The IPO, with a Face Value of Rs.10 per share, offers a total issue size of 30,00,000 Shares (Rs.36 Cr).

 

Royalarc Electrodes IPO Lot Details 

The Royalarc Electrodes IPO allows retail investors to invest in a minimum and maximum of 1 Lot (1200 Shares) amounting to Rs.1,44,000 and in multiples thereof, while for HNI investors, the minimum Lot is 2 (2400 Shares) amounting to Rs.2,88,000.

 

IPO Reservation (% of Net Issue)