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Vraj Iron and Steel, a Chhattisgarh-based manufacturer of Sponge Iron, M S Billets, and TMT bars, made its debut on the stock exchanges on Wednesday, marking a significant milestone for the company. The shares opened with a resounding 16% premium over the initial public offering (IPO) price, listing at Rs 240 on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
This impressive listing surge is a testament to the strong investor confidence in Vraj Iron's future prospects. The IPO itself had witnessed an extraordinary subscription of 126.36 times, indicating a high level of interest from investors. Analysts believe that this strong subscription, coupled with the robust listing, reflects the market's positive sentiment towards the company's financial health and growth potential.
Vraj Iron's financial performance has been consistently positive in recent years, demonstrating its ability to generate healthy returns. This track record of profitability is a key factor contributing to the investor confidence. Shivani Nyati, Head of Wealth at Swastika Investmart, highlighted the company's strong financial standing, stating that Vraj Iron has a proven track record of profitability over the past three years.
However, investors should also be aware of certain risks associated with the company. One notable concern is the concentration of Vraj Iron's manufacturing facilities in a single region, specifically in Chhattisgarh. This concentration could make the company vulnerable to regional economic fluctuations and disruptions. Another risk is the lack of long-term customer contracts, which could expose the company to fluctuating demand and pricing in the market.
Despite these risks, Vraj Iron's strong financial performance and the positive market response to its IPO suggest that the company is well-positioned for future growth. The company plans to utilize the net proceeds from the IPO to fund its capital expenditure requirements, particularly for the expansion of its Bilaspur Plant. This expansion project is estimated to cost Rs 164.50 crore, and the remaining proceeds will be used for general corporate purposes.
Vraj Iron has already secured a Rs 70 crore loan from HDFC Bank, which will be repaid from the IPO proceeds. The company has also deployed Rs 32 crore from internal accruals towards the expansion project and plans to deploy an additional Rs 3 crore from internal accruals. The company's strategy of utilizing the IPO proceeds and internal funds for expansion reflects its commitment to growth and expansion in the iron and steel industry.
Source: Vraj Iron and Steel shares list at 16% premium over IPO price