RR Kabel IPO: An Overview

The TGP Capital-backed wires and cables manufacturer, RR Kabel Ltd, is commencing its IPO subscription today. The company plans to sell its shares at a fixed price band of Rs 983-1035 per share, with a lot size of 14 equity shares and multiples thereof. The bidding period spans three days, concluding on Friday. RR Kabel, established in 1995, offers consumer electrical products for residential, commercial, industrial, and infrastructure purposes in two major segments: wires and cables, including house wires, industrial wires, power cables, and special cables, as well as FMEG (Fans, Lighting, Switches, and Appliances).

Industry Peers

RR Kabel’s industry peers, as per the RHP (Red Herring Prospectus), 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.

Price Band and Lot Size

The IPO price band for RR Kabel is set between Rs 983 and Rs 1,035 per equity share with a face value of Rs 5 each. The lot size for RR Kabel IPO is 14 equity shares, with subsequent multiples of 14 equity shares.

Anchor Investors

RR Kabel IPO’s allocation to anchor investors is scheduled for today, Tuesday, September 12.

IPO Details

At the upper end of the price band, RR Kabel IPO aims to raise Rs 1,964.01 crore. The IPO consists of a fresh issue of equity shares worth Rs 180 crore and an offer for sale (OFS) of 1.72 crore equity shares worth Rs 1,784 crore by the promoters and investors. In the OFS, TPG Asia VII SF Pte Ltd will offload 1.29 crore equity shares, while public shareholder Ram Ratna Wires will sell its entire shareholding of 13.64 lakh shares. Other selling shareholders in the OFS include promoters Mahendrakumar Kabra, Hemant Kabra, Sumeet Kabra, and Kabel Buildcon Solutions, a part of the promoter group.

Use of Proceeds

RR Kabel intends to utilize the fresh issue proceeds primarily for repaying debt amounting to Rs 136 crore and for general corporate purposes.

Allotment and Listing Date

The basis of allotment of RR Kabel IPO shares will be finalized on Thursday, September 21. The company will initiate refunds on Friday, September 22, and shares will be credited to the demat accounts of allottees on Monday, September 25. RR Kabel IPO shares are expected to be listed on BSE and NSE on Tuesday, September 26.

Book Running Lead Managers and Registrar

The book running lead managers (BRLM) for the offer are Axis Capital Ltd, Citigroup Global Markets India Private Ltd, HSBC Securities and Capital Markets (India) Private Ltd, and JM Financial Ltd. Link Intime India Private Ltd is the offer’s registrar.

Reservation Details

RR Kabel IPO has reserved not more than 50% of the shares in the public issue for Qualified Institutional Buyers (QIB), not less than 15% for Non-Institutional Investors (NII), and not less than 35% of the offer is reserved for Retail Investors.

Grey Market Premium

As of today, RR Kabel IPO’s grey market premium (GMP) is 218, similar to the previous trading session. This indicates that RR Kabel IPO shares are trading at a premium of Rs 218 in the grey market on Tuesday. Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of RR Kabel IPO shares is Rs 1,253 apiece, which is 21.06% higher than the IPO price of Rs 1,035. The “grey market premium” reflects investors’ willingness to pay more than the issue price.

Expert Opinions

When it comes to investing in RR Kabel IPO, experts have differing opinions:

Reliance Securities: “The structural growth drivers for the consumer electrical business continue to remain strong. RR Kabel has a diverse suite of products; it has scaled the business in B2C in WandC, expanding the FMEG segment using its extensive global and domestic network. We believe the premiumization path could potentially result in structural margin expansion, and B2C sales are likely to remain strong in the coming years. The recent correction in input prices and the strong surge in multiple demand drivers augur well for the company.” Reliance Securities has a ‘subscribe’ rating for the issue.

Choice Broking: “With solid brand recognition, a diversified product profile, scale of operations, certified manufacturing facilities, and a wide and large distribution network, RKL is well positioned to capture the growth in the domestic consumer electrical market. Profitability margins and return ratios are likely to improve going forward, mainly in anticipation of lower raw material prices and improved business dynamics. At a higher price band, RKL is demanding a TTM P/E multiple of 47.4 times, which is at a discount to the peer average. However, the issue seems to be fully priced considering its subdued profitability and return ratios.” Choice Broking has a ‘subscribe with caution’ rating for the issue.

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