IPO Size: Rs.220 cr, Entirely Fresh Issue

• For working capital Rs. 110 cr and to part-fund capex (Rs. 77 cr of Rs. 105 cr)

Price band: Rs. 130-140 per share

• Rs. 55 cr raised via pre-IPO placement at Rs. 125 per share in Oct 2024 to Malabar and Carnelian Fund

M cap: Rs. 839 cr, implying 26% dilution

IPO Date: Wed 28^th May to Fri 30^th May 2025, Listing Wed 4^th Jun 2025

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Stainless Steel Tube and Pipe Maker

Scoda Tubes is a Gujarat-based B2B manufacturer of seamless tubes and pipes, of stainless steel, used in engineering, industrial, oil and gas, chemicals, power, manufacturing and automotive sectors. As of 31.12.24, company has an annual installed capacity of 20,000 MT of mother hollow, 10,068 MT of seamless products and 1,020 MT of welded products.

Massive Capacity Expansion Underway

As utilisation of seamless capacity has crossed 79% in 9MFY25, coupled with surplus capacity at backward-integrated mother hollow, Scoda Tubes is undertaking a massive capital expenditure of Rs. 105 cr, to double seamless capacity to 20,068 MT and increase welded capacity by 13x to 13,150 MT, by March 2026. Of this, Rs. 28 cr has already been invested from pre-IPO proceeds, and balance to be funded via IPO proceeds. Thus, revenue outlook from FY27E is extremely positive

Policy Support

India’s 2022 decision to impose anti-dumping duty on stainless steel seamless tubes and pipes imports from China for 5 years, acted as a tailwind for the company. Besides, Sep 2024’s ~30% import duty has kept a check on predatory pricing, supporting growth in domestic steel tubes and pipes industry.

Healthy Growth and Margins

After undertaking backward integration of 20,000 MTPA mother hollow capacity in May 2022, with a capex of nearly Rs. 60 cr, company’s growth and margins evolved rapidly. FY22 revenue of Rs. 194 cr jumped to Rs. 305 cr in FY23, Rs. 400 cr in FY24 and to Rs. 361 cr in 9MFY25.

Despite a working capital heavy business (inventory and debtors together are nearly 6 months outstanding), margins are healthy - 32% gross, 17% EBITDA and 7% PAT. 

EBITDA margin sky-rocketed from 6% in FY22 to 12% in FY23 and to 17% in 9MFY25. 9MFY25 PAT of Rs. 25 cr has surpassed FY24’s Rs. 18 cr, leading to an EPS of Rs. 6.   

Investor-Friendly Pricing

On FY26E EPS of about Rs.7.4, IPO is priced at a PE multiple of 19x, which is lower than peer Venus Pipes’ 29x, although Venus has double the topline with ~9.6% net margin. Despite the IPO price of Rs. 140 per share, which is 12% higher than pre-IPO price of Rs. 125 nearly 7 months ago, the growth outlook makes IPO appear fair.

With seamless products likely to remain the majority revenue-contributor even post expansion, Scoda’s margin outlook is extremely positive, as seamless products enjoy 17-18% EBITDA margin, 400-500 bps higher than welded EBITDA margin of 12-13%. Post IPO, promoter holding of 90% will shrink to 66%.