RR Kabel shares list at 14% premium over IPO price

RR Kabel, a wire and cable manufacturer, made its stock market debut on Wednesday, with its share price listing at a premium of 14% over IPO price, despite weak broader market. This has become the first company in the Indian stock markets to make a T+2 listing - the second working day after the closing of the issue on September 15.

RR Kabel shares opened 14% higher at ₹1,180 on the NSE as compared to the issue price of ₹1,035 per share. On the BSE, the stock made debut at ₹1,179, in an otherwise bearish broader market.

Post listing, RR Kabel share price gained as much as 15.75% to ₹1,198.05 on the BSE, while it hit a low of ₹1,137.60 in the first hour of trade so far. The market capitalisation stood at ₹12,985 crore at the time of reporting.

The equity shares of RR Kabel have been listed on the exchange in the list of ''B'' group securities. The companies that fall under this category are considered to have normal trading volumes and come under a normal rolling settlement system.

Anubhuti Mishra, Equity Research Analyst at Swastika Investmart, says, “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,” he says.

Analyst at Prabhudas Lilladher has initiate coverage on RR Kabel with a ‘BUY’ rating and target price of ₹1,407, valuing at 35x FY25 earnings. “We believe RR Kabel is a play on several opportunities in the W&C segment given strong brand with diverse product portfolio; well-structured capacity expansion plans; increasing dealers /distribution network; and distribution led export business.”

“Although the company has grown its FMEG portfolio inorganically, yet it expects to minimize losses in coming years by transitioning towards premium markets. In FMEG, too, the company has enhanced its brand presence, positioning and manufacturing capabilities to minimise losses,” the brokerage says in a note.

The ₹1,964 crore IPO of initial public offering (IPO) of consumer electrical product maker was subscribed 18.69 times overall, led by qualified institutional buyers (QIBs) as the portion reserved for them was booked 52.26 times. The NII quota was subscribed 13.23 times, while the retail segment was booked 2.13 times.

The global private equity firm TPG-backed company had fixed its price band at ₹983-1,035 per equity share of face value of ₹5 each. The lot size was 14 equity shares and in multiples of 14 shares thereafter, which means the minimum investment amount for retail investors was ₹14,490.

As per the document filed with SEBI, the IPO comprised a fresh issue of equity shares worth ₹180 crore and an offer for sale (OFS) of 1.72 crore equity shares worth ₹1,784 crore by the promoters and existing shareholders.

The OFS was TPG Asia VII SF Pte Ltd offloading 1.29 crore equity shares, while public shareholder Ram Ratna Wires sold its entire shareholding of 13.64 lakh shares in the company. Among others, promoters Mahendrakumar Rameshwarlal Kabra, Hemant Mahendrakumar Kabra, and Sumeet Mahendrakumar Kabra, as well as Kabel Buildcon Solutions, a part of the promoter group, also partially diluted their stake in the company via OFS.

RR Kabel intends to use funds raised through the public issue of equity shares mainly for repaying debt up to ₹136 crore, and to meet general corporate purposes.

Axis Capital, HSBC Securities and Capital Markets (India), Citigroup Global Markets India, and JM Financial are the merchant bankers to the issue. Link Intime India is the IPO registrar.

Formed in 1995, RR Kabel provides consumer electrical products used for residential, commercial, industrial, and infrastructure purposes. It operates in two broad segments - wires & cables and FMEG (fast moving electrical goods), including fans, lights, switches, and appliances.

For the quarter ended June 2023, RR Kabel posted a net profit of ₹74.34 crore as compared to ₹18.14 crore in the same period last year. The profit for the financial year 2022-23 stood at ₹189.87 crore. The revenue from operations was ₹1,597.3 crore at the end of the June quarter of FY24 as against ₹1,235.9 crore in the year ago period. For FY23, the company clocked a revenue of ₹5,599.2 crore. 

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