Sambhv Steel Tubes
IPO Size: Rs.540 cr
- Fresh Issue of Rs. 440 cr, to repay Rs. 390 cr debt of Rs. 610 cr net debt
- Offer for sale (OFS) of Rs. 100 cr by promoter (71.9% stake to drop to 54.7%)
Price band: Rs. 77-82 per share
M cap: Rs. 2,416 cr, implying 22% dilution
IPO Date: Wed 25th Jun to Fri 27th Jun 2025, Listing Wed 2nd Jul 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
ERW Steel Pipes and Tubes Maker
Sambhv Steel Tubes is a 7 year old Raipur, Chhattisgarh-based backward integrated manufacturer of electric resistance welded (ERW) steel pipes and tubes. Company enjoyed 2% volume market share, in 13 million MTPA domestic ERW steel pipe industry, having one plant of 2.5 lakh MTPA capacity, as of 31.3.24.
Capacity increased in Q3FY25
In Q3FY25, it has expanded ERW pipes capacity to 3.5 lakh MTPA and added a new plant in Chhattisgarh for 1.6 lakh MTPA of galvanized pipes (GP) and stainless-steel coils (SS coils). This finished goods capacity has doubled to 5.1 lakh MTPA, as of 31.12.24.
This expansion was funded through a mix of equity (Rs. 150 cr private placement in Oct 2023, at Rs. 37.50 per share) and debt, which is now sought to be retired via IPO proceeds, to shrink debt-equity ratio to 0.2:1 and debt-to-EBITDA <1x, post IPO.
Higher Margin than Peers
FY24 revenue stood at Rs. 1,286 cr, with ERW pipes and tubes accounting for 73% of revenue. EBITDA was at Rs. 163 cr, with 12.7% EBITDA margin and EBITDA per ton of Rs. 7,160. While EBITDA per ton has decreased from Rs. 7,900 in FY22, it remains much higher than the largest peer APL Apollo’s Rs. 4,550 per ton (10x capacity) and JTL Industries’ Rs. 4,500 per ton, due to Sambhv’s backward integration.
9MFY25 revenue stood at Rs. 1,016 cr, with share of finished products (ERW pipes and SS coils) rising to 81% of revenue mix. Yet EBITDA margin contracted to 10.7%, with EBITDA per ton of Rs. 5,350, due to industry-wide decline in realization. Higher depreciation and finance expenses contracted PAT to Rs. 41 cr in 9MFY25, from Rs. 82 cr in FY24. Yet, net margin of 4.0% in 9MFY25 is healthier than APL’s 3.1%.
Attractive Pricing
Improved utilization of expanded capacity and finance cost savings, due to debt repayment is expected to boost FY26E bottomline to about Rs. 120 cr, and net margin to ~6%. This discounts the m cap of Rs. 2,416 cr and enterprise value (EV) of Rs.2,636 cr by a PE multiple of 20x and EV/EBITDA multiple of 10.5x, on current year estimates. For Sambhv’s superior margin, declining debt, this valuation is attractive in relation to peers:
- Cash-rich APL Apollo, with 28% ERW market share, Rs. 20,000 cr topline but lower margins of 6% EBITDA and 4% net, is trading at a PE of 60x
- JTL Industries, with 2x capacity of Sambhv, 8% EBITDA margin, but debt free, is ruling at a higher PE of 25x
- Hariom Pipes, having similar capacity as Sambhv, but a debt equity of 0.6:1 and debt-to-EBITDA of 2x, is trading at a PE of 20x
Volatile commodity prices remain a key external risk factor. But conducive policy support, via 12% safeguard duty on certain flat steel imports wef April 2025, acts as a tailwind for the steel and steel products industry.
26th Jun 2025 at 09:14 am