The initial public offer (IPO) of energy efficiency solutions company Rishabh Instruments opened for subscription today, August 30. The three-day bidding process will conclude on September 1.

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The price band for the maiden public issue has been fixed at Rs 418-441 per share, and investors can bid for a minimum of 34 shares in one lot and in multiples thereafter.

Shares of Rishabh Instruments are commanding a premium of Rs 85 in the grey market today. However, it is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

Should you apply?

Analysts mostly have a 'Subscribe' rating to the IPO given the company is backed by strong manufacturing capabilities, a diverse product portfolio and solid financials.

SBI Securities: Subscribe

"At upper price band, the company is valued at 33.7 times FY23 PE (price-earnings) multiple and 3.5 times FY23 P/BV (price-to-book value) on post-issue capital. The company doesn’t have any listed peers in India. Taking into consideration weak cash flows and low return ratios, the valuations are slightly stretched," according to SBI Securities.

"However, being a unique business, the business may command a scarcity premium and long-term investors are recommended to subscribe to

the issue," the brokerage said, adding that listing gains are likely to remain tepid.

Hensex Securities: Subscribe for long-term

"Rishabh Instruments stands as a global leader in manufacturing and supplier of analogue panel meters and low voltage current transformers. We recommend a 'Subscribe' to the issue from the view of listing gains as well as for the long term," said Hensex Securities.

Mehta Equities: Subscribe with risk

Given the company's export oriented business, which is almost 66 percent of revenue and its strong brand in niche products segment demand, Mehta Equities recommends risk taking investors to 'Subscribe with risk' to the IPO.

The brokerage believes the issue gives investors an opportunity to invest in a company, which is a global leader in manufacturing of energy efficiency products in electrical and electronic segments with uses across diverse industries.

"With a history of multiple inorganic growth, we consider Rishabh would continue to pursue its business growth through such strategy to expand its footprint in other developed economies. We also like the way the company has diversified its product portfolio along with the wide customer base, which would help them to enhance customer services, retention and cross-selling," it said.

Sushil Finance: Invest for medium to long term

The company is technologically advanced and comes up with nearly 6-12 new products every year with widespread operations across 100 countries. At the same time risks like manufacturing dependencies, overseas operations, etc. has to be kept in mind, said Sushil Finance in its IPO note.

"Keeping in mind the favourable and unfavourable factors and also a higher valuation, high risk investors investors may look at medium to long term investment in the company," it said.

Anand Rathi: Subscribe for long-term

"At the upper price band, the company is valuing at P/E (price-earnings) of 34.3 times FY23 earnings with a market cap of Rs 16,740 million (Rs 1,674 crore) post issue of equity shares and return on net worth of 11.67 percent," Anand Rathi said.

The brokerage said that the IPO is fairly priced and has advised investors to 'Subscribe' to the issue for a long term.

The IPO comprises a fresh equity issue of Rs 75 crore and an offer for sale (OFS) of 94.28 lakh shares. Considering the upper end of the price band, the firm is set to raise Rs 491 crore through the IPO, valuing it at Rs 1,600 crore.

Promoters Asha Narendra Goliya, Rishabh Narendra Goliya, and Narendra Rishabh Goliya (HUF) will be selling 24.17 lakh shares via OFS, while investor SACEF Holdings II will be offloading its entire shareholding of 70.10 lakh shares or 19.33 percent stake via OFS.

This means the IPO will give an exit to the SACEF, the subsidiary of South Asia Clean Energy Fund, an India-focused clean energy private equity fund, which acquired a stake in the company in September 2013.

The net proceeds from the fresh issuance worth Rs 59.50 crore will be used towards financing the cost towards the expansion of the Nashik manufacturing facility and general corporate purposes.

The OFS money will go to selling shareholders and the company will not get any money from the OFS.

The company has set aside 50 percent of the issue size for qualified institutional buyers, 15 percent for high net-worth individuals and the rest 35 percent for retail investors.

A day before the issue opening, the company raised Rs 147.2 crore from anchor investors at the upper price band. Marquee funds, including HDFC MF, Nippon MF, Quant MF and Tata MF among others participated.

DAM Capital Advisors Ltd, Motilal Oswal Investment Advisors and Mirae Asset Capital Markets (India) are the book-running lead managers to the issue, while Kfin Technologies has been appointed as the registrar.

The IPO allotment will likely be finalised on September 6, and the credit of shares will be on September 8. Shares of the company will be listed on the exchanges, with September 11 as the tentative date.

Financials

Rishabh Instruments posted a healthy topline growth with revenue from operations growing 21.1 percent year-on-year to Rs 569.5 crore for the year ended March FY23, but net profit came in almost flat at Rs 49.69 crore against Rs 49.65 crore during the same period, impacted by a weak operating margin, given the high input cost and employee expenses.

The company is a global engineering solution provider operating in large addressable markets and can benefit from industrialisation trends.

It supplies a wide range of electrical measurement and process optimisation equipment, and is engaged in designing, developing, manufacturing and sale of devices under its brand across several sectors.

First Published:Aug 30, 2023 10:49 AM IST