Rex Pipes NSE SME IPO review (May apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on July 24, 2021

•    RPCIL is engaged in the manufacturing and marketing of flexible pipes and related accessories.
•    The company is also doing bus body building jobs.
•    It has posted inconsistency in financial performance with super results in a pre-IPO year.
•    The issue appears fully priced based on the financial data.

PREFACE:
The company filed its first draft offer documents with the regulator in April 2018, which was later on withdrawn.  Thereafter, it refiled a fresh set of draft offer documents in June 2021. Surprisingly this information was not available on the website of the Lead Manager (LM). Even as of July 24, 2021, at 10.20 am, LM's website had no draft offer documents or the final prospectus uploaded, this is really shocking. However, after checking with them, the information given is that draft documents uploading is voluntary and the final document upload is to be done just three days before the opening of the IPO.

As per general practice followed, once the statutory IPO ad gets released in the dailies, relevant information and documents are available on the concerned platform on the same day or latest by the following day. In this case, the IPO ad was released on July 22, 2021, and till 10.40 am of July 24, 2021, no information was traceable on any concerned platform. This indicates something is wrong somewhere.

Since the last IPO of Focus Business Solutions, Annexure A is missing in offer documents on track records of the Lead Manager.

ABOUT COMPANY:
Rex Pipes and Cables Industries Ltd. (RPCIL) is engaged in the Trading and production/Manufacturing product range encompassing uPVC pipes, HDPE pipe, Cables, fittings and an abundance of accessories under the brand name 'REX'. The brand 'REX' is the hallmark of showcasing the entire product range. It has just taken a little over two decades for The Rex Group of Industries to emerge as one of India's leading manufacturers in the field of PVC Pipes & Fittings and PVC insulated electrical wires.

The company produces excellent Three Core flat cables, Single Core Flexible Home wire, Poly Wrapped Winding wire along with UPVC, HDPE and sprinklers with unique skills, continuous technological upgrading machines, professional management testing and persistent dedication without compromising on quality.

RPCIL has emerged as a national entity as a complete innovation for its own type of manufactured products. It offers a wide range of PVC pipes, HDPE pipes, Cables classified in a systematic manner to ensure easy and accurate selection, with the simultaneous advantage of providing the most cost-effective solutions for customers. RPCIL has established itself as an innovative leader and quality manufacturer by continuously upgrading its technology, modernizing manufacturing facilities and maintaining the highest standards of quality and services.

Under the engineering division, RPCIL is also doing bus bodybuilding activities. The Rex Coaches, a 'Power House of Bus Body Design' and driven by a 'Passion for Innovation' with Mass manufacturing capabilities catering to the various Indian OEMs, STUs, Fleet Operators and Educational Institutions.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital requirements (Rs. 4.50 cr.) and general corpus fund needs (Rs. 1.44 cr.), RPCIL is coming out with a maiden IPO of 2400000 equity shares of Rs. 10 each at a fixed price of Rs. 26 per share to mobilize Rs. 6.24 cr. The issue opens for subscription on July 28, 2021, and will close on August 02, 2021. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the NSE SME Emerge platform. Issue constitutes 27.91% of the post issue paid-up equity capital of the company. RPCIL will spend around Rs. 0.30 cr. for this IPO process.

The issue is solely lead managed by Navigant Corporate Advisors Ltd., and KFin Technologies Pvt. Ltd. is the registrar to the issue.  New Berry Capitals Pvt. Ltd. is the market maker for this issue.

RPCIL has so far issued entire equity at par and has also issued bonus shares in the ratio of 3 for 2 in January 2018. The average cost of acquisition of shares by the promoters is Rs. 5.28 and Rs. 6.69 per share.

Post issue, company's current paid-up equity capital of Rs. 6.20 cr. will stand enhanced to Rs. 8.60 cr. Based on the issue price, RPCIL is looking for a market cap of Rs. 22.36 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, RPCIL has posted turnover/net profits of Rs. 35.16 cr. / Rs. 1.27 cr. (FY18), Rs. 37.75 cr. / Rs. 1.31 cr. (FY19) and Rs. 32.07 cr. / Rs. 0.77 cr. (FY20). For the first ten months of FY21, it has reported a net profit of Rs. 1.01 cr. on a turnover of Rs. 44.39 cr. For FY20, it suffered a setback. Higher top and bottom lines for the pre-IPO period raise concern.

For the last three fiscals, the company has posted an average EPS of 1.67 and an average RoNW of 10.8%. The issue is priced at a P/BV of 1.41 based on its NAV of Rs. 18.42 as of January 31, 2021, and at a P/BV of 1.27 based on its post-issue NAV of Rs. 20.54.

If we consider FY21 earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 18.43 thus making it a fully priced offer.

COMPARISON WITH LISTED PEERS:
As per the offer documents filed, RPCIL has shown Finolex Cables and Birla Cables as its listed peers. They are currently trading at a P/E of 28.49 and 39.78 (as of July 23, 2021). However, they are not truly comparable on an apple to apple basis.

DIVIDEND POLICY:
The company has not paid any dividends since its inception. However, it will follow a prudent dividend policy based on its financial performance and future prospects.

MERCHANT BANKER'S PERFORMANCE:
The offer document is missing 'Annexure-A' that relates to the lead manager's (LM's) track record (refer to page 214 of the offer document).

This is the 20th mandate from its stable in the last five fiscals including the ongoing one. Out of the last 10 listings, 1 opened at discount, 2 at par and the rest with premiums ranging from 0.125% to 54.47% on the day of listing. (as per track record docs on LM's website)

Rex Pipes and Cables IPO FAQs