Rashi Peripherals
IPO Size: Rs. 600 cr, entirely Fresh Issue
- Rs. 326 cr debt repayment, of Rs. 1,275 cr gross debt
- Rs. 220 cr for working cap
Price band: Rs. 295-311 per share
M cap: Rs. 2,049 cr, implying 29% dilution
- Rs. 150 cr pre-IPO placement undertaken on 17.1.24 at Rs. 311 per share
IPO Date: Wed 7th Feb to Fri 9th Feb 2024, Listing Wed 14th Feb 2023
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
B2B Electronics Distributer
Rashi Peripherals distributes electronic products, such as laptop, desktop, CPU, routers, motherboard, graphic cards, hard drive, pen driver, keyboard, mouse, monitor, UPS etc. through 50 branches and 63 warehouses covering 680 locations and serving 8,407 customers in India.
Slim Margins
Business being wholesale in nature, margins are slim - gross margin just 5%, net 1-1.5%. Covid saw unprecedented demand for products distributed by the company, expanding net margin to almost 2%. But post covid, net margin normalized to 1.3% in FY23, as also, in H1FY24, on topline of Rs. 9,454 cr and Rs. 5,469 cr respectively. H1FY24 PAT stood at Rs. 76 cr, leading to an EPS of Rs. 18.2.
H2 lower than H1
H2FY23 revenue stood at Rs. 4,430 cr, 12% lower sequentially, from Rs. 5,024 cr in H1FY23. On the other hand, sole listed peer Redington reported 21% topline growth in H2FY23 over H1FY23.
Due to lower topline, Rashi’ H2FY23 PAT was also lower at Rs. 56 cr, as against Rs. 67 cr in H1FY23. Thus, H2FY24 topline may be lower sequentially, if business involves seasonality.
Fully Priced IPO
Post repayment from IPO proceeds, company’s net debt will continue to remain high at about Rs. 900 cr, leading to net debt to equity ratio of 0.7:1. While lower interest cost will aid bottomline, 29% equity dilution is quite heavy, leading to FY25E EPS closer to Rs. 30.50, against H1FY24 EPS of Rs.18.2, and at the same level, as FY23’s EPS of Rs. 30.
This translates into a one year forward PE multiple of 10x, against 12x for larger peer Redington. But Redington scores over Rashi on all counts:
- 8x topline at Rs. 87,000 cr on similar margin
- lower net debt to equity ratio of 0.3:1
- better working capital management of 26 days, against 53 days for Rashi
- higher RoE of 22% vis-à-vis Rashi’s 19%.
This makes IPO of Rashi Peripherals fully priced.
7th Feb 2024 at 06:46 am
5th Feb 2024 at 09:11 pm