scorecardresearchRR Kabel lists at 14% premium to IPO price: Is it the right time to buy

RR Kabel lists at 14% premium to IPO price: Is it the right time to buy the stock?

Updated: 20 Sep 2023, 02:19 PM IST

RR Kabel lists at 1,180, a 14% premium to the IPO price of 1,035. Stock hits intra-day high of 1,199. Prabhudas Lilladher initiates coverage with a ‘buy’ call and target price of 1,407.

RR Kabel lists at  <span class='webrupee'>₹</span>1,180, a 14% premium to IPO price of  <span class='webrupee'>₹</span>1,035.

RR Kabel lists at 1,180, a 14% premium to IPO price of 1,035.

RR Kabel made a strong debut on the bourses today, September 20, 2023. The stock listed at 1,180 on the NSE, a 14 percent premium to the issue price of 1,035. Meanwhile, on the BSE, it listed at 1,179, a 13.9 percent premium.

During the day, the stock hit its intra-day high of 1,199, up as much as 15.8 percent from its issue price.

The double-digit premium on debut comes on the back of its strong growth potential, diversified product portfolio, industry tailwinds and robust business model.

"RR Kabel Limited, a well-established wire and cable manufacturer with a strong brand and quality products, made its stock market debut today. It listed at 1,180 per share, 14 percent higher than its IPO price of 1,035, becoming the first IPO to list under the T+3 cycle. Despite the high valuation and the fact that most of the issue was an offer for sale, the IPO was well-received by investors, with a subscription of 18.69 times. The stock witnessed a decent listing today. Now our suggestion to investors is to exit the position after booking listing gain, however, those who want to hold it should maintain a stop loss at 1,065," advised Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

Incorporated in 1995, RR Kabel is one of the leading companies in the Indian consumer electrical industry (comprising wires and cables and fast-moving electrical goods), with an operating history of over 20 years in India.

The listed industry peers of the company include Havells India Ltd, Polycab India Ltd, KEI Industries Ltd, Finolex Cables Ltd, V-Guard Industries Ltd, Crompton Greaves Consumer Electricals Ltd, and Bajaj Electricals Ltd.

Meanwhile, Prabhudas Lilladher has become the first brokerage house to initiate coverage on this newly listed stock with a ‘buy’ call and a target price of 1,407, indicating an upside of 36 percent from its IPO price of 1,035.

The brokerage believes RR Kabel is a play on several opportunities in the W&C segment given 1) a strong brand with a diverse product portfolio 2) well-structured capacity expansion plans, 3) an increasing dealers/distribution network, and 4) a distribution-led export business. Although the company has grown its FMEG portfolio inorganically, yet it expects to minimise losses in coming years by transitioning towards premium markets, it further noted.

It estimates Revenue/EBITDA/PAT CAGR of 20.7 percent/38.8 percent/44.3 percent over FY23-26 led by improving business mix, operating leverage & cost optimisation, investments in brand building and increasing distribution reach.

However, volatility in raw material prices, fluctuation in currency exchange rate, and concentration risk in the export market due to its heavy reliance on a small number of distributors for its overseas markets are some key concerns, stated PL.

Some interesting facts about the firm

  • RR Kabel is 5th largest player in India’s wires and cables market with a 5 percent value market share in FY23. The company has a 7 percent value market share in the branded W&C market as of FY23 compared to 5 percent in FY15.
  • It has the highest revenue contribution from the B2C sales channel in W&C business with 74 percent of revenue.
  • RR Kabel is a leading exporter of wires and cables from India in terms of value, representing a 9 percent market share of the export market from India.
  • As of FY23, revenue contribution from the FMEG segment stood at 11 percent with fans accounting for 48 percent, appliances 12 percent and the rest lighting & switches.
  • RR Kabel has one of the largest networks of electricians, covering 298,084 electricians across India and has increased its retailer outlets by 4.4x from 24,347 in FY20 to 114,851 in Q1FY23.
  • The company has 35 international product certifications, which is one of the highest in numbers in the Indian consumer electrical industry.

About the IPO

The 1,964-crore IPO of the consumer electrical firm was open for subscription between September 13 and Sept 15 at a price band in the range of 983-1,035 per share.

The issue consisted of a fresh issue worth 180 crore and an offer for sale (OFS) of 1.72 crore shares by promoters as well as investor TPG Asia. The net proceeds from the fresh issue would be utilised towards repayment or prepayment, in full or in part, of borrowings availed by the company from banks and financial institutions and general corporate purposes.

The issue was overall subscribed to 18.69 times. The allocation for qualified institutional bidders (QIBs) was booked 52.26 times, while the portion for non-institutional investors fetched 13.23 times bids. The portion reserved for retail investors was booked 2.13 times at the end of the third day of bidding.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.

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First Published: 20 Sep 2023, 02:19 PM IST