About the company
Incorporated in 2002, Ratnaveer Precision Engineering Limited is a stainless steel (SS) product manufacturer focused on producing finished sheets, washers, solar roofing hooks, pipes, and tubes.
The company manufactures SS finishing sheets, SS washers, and SS solar mounting hooks in Unit I and SS pipes & tubes in Unit II. Unit III and Unit IV are dedicated to the backward integration process. It is one of the few companies that has a backward integration model in which the company also fulfills some of its supply chain management requirements like manufacturing raw materials in this case.
Procurement of Raw material - Bifurcation (%)
| Particulars | FY23 | FY22 | FY21 |
|---|---|---|---|
| Backward integration | 11.03 | 10.05 | 7.85 |
| External sources | 88.97 | 89.95 | 92.15 |
Unit III is the melting unit where the company melts steel scrap and turns it into steel ingots and Unit IV is the rolling unit where flat ingots are further processed to turn them into SS sheets which are the raw material for SS washers.
Its products find application across various industries including automotive, solar power, wind energy, power plants, oil & gas, pharmaceuticals, sanitary & plumbing, instrumentation, electromechanics, architecture, building & construction, electrical appliances, transportation, kitchen appliances, chimney liners, etc. and are used in both commercial and residential sector and sold within India and overseas.
Revenue from operations - Geography-wise (%)
| Particulars | FY23 | FY22 | FY21 |
|---|---|---|---|
| India | 80.8 | 80.4 | 84.6 |
| Rest of the world | 19.2 | 19.6 | 15.4 |
Revenue from operations - Domestic region-wise (%)
| Particulars | FY23 | FY22 | FY21 |
|---|---|---|---|
| West | 69.16 | 68.36 | 71.53 |
| North | 11.63 | 12.06 | 13.09 |
| South | Negligible | Negligible | Negligible |
| East | Nil | NIl | Nil |
About the industry:
Stainless steel is a value-added product with high corrosion-resistant properties. Higher levels of chromium and additions of other alloy elements enhance the corrosion resistance. Compared to traditional steel, stainless steel has a higher resistance to corrosion, a superior aesthetic finish, and a higher life span. These features have helped in increasing the popularity of stainless steel across the world.
As per the D&B report, Globally, cold rolled flat products are the largest produced stainless-steel product in the world, followed by hot rolled coils, and steel wire rods & bars. According to the International Stainless-Steel Forum, cold-rolled flat products account for approximately 47% of the total stainless-steel trade in the world. Hot coils, Semis-flat, semis-long, Hot Bar/Wire rod, Cold Bar/Wire, Hot Plate, and sheet are other SS intermediary products traded globally.
Based on the content of alloying elements stainless steel is segregated into three: 200 series, 300 series, and 400 series.
Series 300 stainless steel, which is an austenitic stainless steel with chromium-nickel alloy dominates with nearly 55% of domestic SS production. Excellent corrosion resistance, high wear & tear resistance, and higher strength at high temperatures are some of the attributes that have made this series popular among all SS variants. 300 series is further subdivided into multiple segments, based on the content of alloying metal.
Global Production and Consumption Pattern:
Global stainless-steel melt shop production decreased by 5.2% to 55.2 Mn Tonnes in 2022 compared to ~58.3 Mn Tonnes in 2021. In 2022, China with nearly 58% share in global SS production observed a moderate 2% decline in 2022 against an 8.2% YoY increase in the previous year.
Talking about India’s position in the global stainless-steel market, India with an average 7% share in global SS steel output (during 2016-20), remained the second largest stainless-steel producer behind China till 2020.
According to the International Stainless-Steel Forum, cold-rolled flat products account for approximately 47% of the total stainless-steel trade in the world. Hot coils, Semis-lat, semis-long, Hot Bar/Wire rod, Cold Bar/Wire, Hot Plate & Sheet are other SS intermediary product.
Global consumption of stainless steel reached approximately 55.3 million tons per annum in 2022, a decrease of nearly 5.2% over the previous year. This comes after a 2.2% decline in consumption from 2021, on account of Covid-19-related disruption, Ukraine, and rising energy pricing.
Indian Stainless-Steel Industry:
Since 2000, steel production in the country has seen a phenomenal increase as the sector witnessed high investments in capacity addition as well as technology up-gradation. In 2018, India surpassed Japan to become the second-largest steel producer in the world, after China.
According to the World Steel Association (WSA), India produced 125.3 Mn tons of crude steel in CY 2022 and accounted for a 7% share of global crude steel production. According to WSA’s June 2023 update, India produced approximately 67.9 Mn tons of steel during the January – June 2023 period, which was nearly 7.4% higher than the same period the previous year. Unless there are no major disruptions, the Indian steel industry will end the year with approximately 136 Mn tons of crude steel.
On the consumption side, India is also the second largest consumer of finished steel. The emergence of a middle-class consumer segment has altered the consumption landscape in India.
Production and Consumption Scenario
The Indian stainless-steel sector, the second largest producer (in 2022) and consumer in the world has a total manufacturing installed capacity of more than 6.5 Mn tons of stainless steel annually. The past 4 years’ data reveals that the country’s stainless steel production in FY19 touched a level of 5.10 million tonnes.
Despite being one of the largest producers as well as consumers of stainless steel, the per capita stainless steel consumption in India remains low. India’s per capita stainless steel consumption has increased from 1.2 Kg in 2010 to 2.5 Kg in 2019, however, its consumption is comparatively lower compared to the world average of 6 Kg per capita. This low consumption pattern is an indication of the inherent opportunities existing in the sector.
SS Sheet Metal Components:
A few common types of sheet metal components include:
- Sealing Caps Core Plugs & Welch plugs: Manufactured out of Mild Steel, Stainless Steel, and Brass material being used in the Engine and transmission blocks. These components are available in both Cylindrical and Conical types.
- Clamps, Clips & Brackets: These are being used in Automotive, Tractor, Earthmoving equipment, and Farm equipment as per customers’ requirements
- Push Nuts, U-clip Nuts, Self-threading Nuts: These components are made out of medium carbon and high carbon steel with hardening & tempering, and Electroplating with the Hydrogen De Embrittlement process.
- Constant Pressure Hose Clamps: These are manufactured out of high carbon steel and carbon alloy steel for the fuel and liquid rubber pipes/hoses in the Engines and other applications
Global Consumption Pattern:
Globally, the consumption of sheet metal components is approximately 1,580 thousand tons per annum in 2022, while annual production is approximately 1,750 thousand tons per annum. Consumption has picked up in 2022, growing by 3% from 2021 after a 10% decline in the previous year due to the Covid-19-induced disruptions.
In terms of sales value, global sales of SS metal components touched USD 13.4 Bn in 2022, the strongest growth in the past four years. Sales value has even surpassed the 2019 figure, indicating the strong rebound in demand post the COVID-19 disruptions.
Domestic Consumption Pattern:
The annual volume of SS sheet metal components consumed in India is approximately 124 thousand tons in 2022, which is worth USD 787 Mn.
The demand landscape has improved in 2022 due to increasing manufacturing units and the focus of the Indian government to invest more in infrastructure activities in 2022 which were halted due Covid-19 pandemic.
In response the consumption volume has picked up, increasing by nearly 5.6% over the previous year. Despite this growth, annual consumption volume is yet to reach the post-COVID-19 levels. Meanwhile, domestic production of SS sheet metal components is estimated to be 147 thousand tons in 2022, while the value of production stood at USD 900 Mn.
Demand is highest in the Western region, predominantly due to the presence of a fledgling industrial sector in Maharashtra & Gujarat. In addition, a stable construction sector has also aided the western region. Backed by strong demand from these two customer segments, the Western region is estimated to have accounted for 31% of total SS sheet metal component consumption in India. The Northern and Southern regions formed the second and third largest geographical markets, accounting for approximately 28.5% and 22.2% of total consumption volume respectively. The remaining consumption was accounted by the Eastern region, making it the smallest market.
Issue size:
The Rs. 165.03 crore public offer of Ratnaveer Precision Engineering Limited comprises a fresh equity issue worth 135.24 crore and OFS worth 29.79 crores.
Objects of the issue and proceeds utilization:
| Purpose | Proceeds (₹ crores) |
|---|---|
| Funding working capital requirements of the company | 85 |
| General corporate purposes | Balance |
Financial information and other valuation metrics
| Financial Year | Total Assets (₹ crores) | Total Revenue (₹ crores) | Profit After Tax (₹ crores) | EPS | EBITDA (₹ crores) |
|---|---|---|---|---|---|
| March 31, 2021 | 255.92 | 364.05 | 5.46 | 1.59 | 24.32 |
| March 31, 2022 | 308.63 | 428.47 | 9.47 | 2.75 | 29.05 |
| March 31, 2023 | 389.04 | 481.15 | 25.04 | 7.26 | 47.02 |
Risk factors to consider:
Concentration of raw material with few suppliers: Nearly 86% of the company’s raw material is procured from its top 10 suppliers and as they do not have long-term agreements with their suppliers for raw materials, any inability to procure the desired quality, or quantity of raw materials in a timely manner and at reasonable costs, or at all, may have a negative impact on the business, results of operations, financial condition and cash flows.
Dependance on volatility of the steel industry: The pricing in the steel industry is subject to market demand, volatility, and economic conditions. Fluctuations in steel prices may have a material adverse impact on the business, results of operations, prospects, and financial conditions.
Dependance on a few customers for a major part of the revenues: Top 10 customers comprise 49.62% of the company’s revenue. As the company does not enter into long-term arrangements with its customers, any failure to continue the existing arrangements could adversely affect the business and results of operations.
IPO Schedule
| Issue Period | 4th September to 6th September 2023 |
|---|---|
| Price band | ₹ 93 - 98 |
| Minimum Bid quantity | 150 & Multiples thereof |
| Deadline for accepting UPI mandate | Until 5 PM on the issue closing day |
| Finalization of Allotment | 11th September 2023 |
| Initiation of Refunds | 12th September 2023 |
| Credit of Shares | 13th September 2023 |
| Date of Listing | 14th September 2023 |
| Mandate end date | 21st September 2023 |
| Anchor Investors Lock-In End Date | 6th October 2023 |
How to apply to the Ratnaveer Precision Engineering Limited IPO?
You can apply for the Ratnaveer Precision Engineering Limited IPO using any supported UPI app by following two steps:
- Enter your bid on Kite
- Accept the UPI mandate on your phone
On acceptance of the mandate, the bid amount will get blocked in your bank account. Click here to learn more.
How to check the allotment status for Ratnaveer Precision Engineering Limited IPO?
You can check the allotment status for the Ratnaveer Precision Engineering Limited IPO on the website of the Registrar and Transfer agent. Alternatively, you can also check the allotment status on the NSE website.