The ₹491 crore initial public offering (IPO) of energy efficiency solutions provider Rishabh Instruments opened for bidding on Wednesday, August 30. The issue, which has a price range of ₹418-441 per share, will close for subscription on Friday, September 1.
About the issue: The IPO comprises of a fresh issue worth ₹75 crore and an offer-for-sale (OFS) by existing promoters and investors of 94,28,178 equity shares aggregating up to ₹415.78 crore.
Promoters Asha Narendra Goliya, Rishabh Narendra Goliya, and Narendra Rishabh Goliya (HUF) will sell 24.17 lakh shares via OFS, while investor SACEF Holdings II will also offload its entire 70.10 lakh shares or 19.33 percent stake via the OFS. The IPO will provide 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.
Subscription status: The issue received a decent response from investors. At 1:35 pm on its first day of bidding, the IPO was subscribed 34 percent against its offer. It has received bids for 26.81 lakh shares against 77.90 lakh shares on offer. The category for retail investors was bid the most, 51 percent, followed by that of non-institutional investors (NII), which was subscribed to 41 percent. However, the qualified institutional buyers (QIBs) portion has not received any bids till now.
GMP: Shares of Rishabh Instruments are commanding a premium of ₹85 in the grey market today, indicating a decent listing.
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.
Lot size: Investors can bid for a minimum of 34 shares in one lot and in multiples thereafter. At the upper price band, one lot of shares would cost ₹14,994.
Objective: The net proceeds from the fresh equity sale will be utilised towards financing the cost of the expansion of Nashik manufacturing facility, and general corporate purposes. Meanwhile, the company will not get any money from the OFS, which will go to the selling shareholders.
Reservation: The company has reserved 50 percent of the net offer for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 percent of the shares. Retail investors will get the remaining 35 percent of the net offering.
Anchor investors: Ahead of the IPO, Rishabh Instruments raised ₹147.2 crore via 16 anchor investors by allocating 33,38,656 equity shares at a price of ₹441 apiece, said the company. HDFC Mutual Fund, Nippon Life, Sundaram Mutual Fund, Bandhan Mutual Fund, Aditya Birla Sun Life Insurance, Quant Mutual Fund, Tata Multicap Fund, and 3P India Equity Fund I participated in the anchor book.
About the firm: Incorporated in 1982, Rishabh Instruments is a global energy efficiency solution company focused on electrical automation, metering and measurement, precision engineered products, etc. with diverse applications across industries including power, automotive and industrial sectors. It is engaged in the business of manufacturing, design, and development of test and measuring instruments and industrial control products. The company provides cost-effective solutions to measure, control, record, analyse, and optimise energy and processes through an array of products. The company has manufacturing units and more than 270 dealers across the globe, reaching more than 70 countries and over 150 dealers across India covering every state.
Financials: For the year ended on March 31, 2023, the company reported a net profit of ₹49.69 crore versus ₹49.65 crore in FY22. Meanwhile, its revenue from operations grew 21.1 percent year-on-year to ₹569.5 crore for the year ended March FY23 as against ₹479.92 crore in the previous financial year.
Book running managers: Dam Capital Advisors, Motilal Oswal Investment Advisors and Mirae Asset Capital Markets (India) are the lead managers of the issue, while Kfin Technologies has been appointed as the registrar to the issue. Shares of the company will be listed on both BSE and NSE.
Important dates: 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.
Brokerage views
Most brokerages recommend subscribing to the issue citing fair valuations, niche products, strong global presence, healthy return ratios and robust balance sheet. Let's see what they have to say.
Anand Rathi: Subscribe for long-term
The company is a global engineering solution provider operating in large addressable markets and can benefit from industrialisation trends. At the upper price band company is valuing at a P/E of 34.3x FY23 earnings with a market cap of ₹16,740 million post-issue of equity shares and a return on net worth of 11.67 percent. We believe that the issue is fairly priced and recommend a “Subscribe – Long Term” rating for the IPO
SBI Securities: Subscribe
At the 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. However, being a unique business, the business may command a scarcity premium, and long-term investors are recommended to subscribe to the issue, however, 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 analog 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.
