Through its journey of 30 years, R R Kabel Limited has become one of India’s leading manufacturers and distributors in the electrical sector.
The TPG Capital-backed cable and wire-making firm filed its Draft Red Herring Prospectus with the Securities and Exchange Board in May 2023. On receiving the green signal from the latter, the company looks forward to issuing their Initial Public Offering.
If you are interested in this company, read till the end to know everything about R R Kabel Limited and its upcoming IPO.
Also Read: How does an IPO work?
Table of Content
About R R Kabel
Incorporated in 1995, R R Kabel is one of the leading conglomerates in India in the electrical sector. With a 33% CAGR between the fiscal year of 2020 and 2022, it has gained recognition as one of the fastest-growing companies in the electrical sector.
Under the R R Kabel brand, the company sells wires, cables and various consumer electrical products. This includes fans, lights, switches and electrical appliances. RR Kabel Limited is famous for its “Luminous Fans and Lights” and “RR” brand under which it sells fans, lights and electrical products.
R R Kabel has received several awards for their consistent serving in this industry. These include the ABP News Brand Excellence Awards and Best Brand in Building Materials and Fittings category among many more.
The company is the 5th largest business in the wires and cables industry in India with an approximately 5% market share till March 31, 2022. As of March 31, 2023, R R Kabel held the highest number of distributers meeting the requirements of their large consumer base in the electrical industry. The number of their retail outlets grew from 24347 in 2020 to 58872 in 2022.
Furthermore, R R Kabel also has the largest network of electricians. 147810 electricians are working under this firm all across India as of March 31, 2022.
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About R R Kabel IPO and Objectives
R R Kabel has filed their DRHP with SEBI to raise funds for their brand with IPO. According to this document, the company is planning to raise a sum of Rs. 225 crore from a fresh issue of shares. The company plans to use the funds raised with the upcoming IPO issue to prepay or repay its debts partially or completely.
In addition, the company will launch an Offer for Sale (OFS) of 17,23,6,808 equity shares to raise approximately Rs. 1.72 crore. Some of the prominent promoters and shareholders planning to offload their holdings are Ram Ratan Wires Ltd, Sumeet Mahendrakumar Kabra, Mahendrakumar Rameshwarlal Kabra, Kabel Buildcon Solution Private Ltd and Hemant Mahendrakumar Kabra.
The private equity firm TPG Asia VII SF Pvt Ltd holds a 20.99% stake in RR Kabel Ltd. It also plans to sell some of its shares to retail investors in the upcoming IPO.
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R R Kabel IPO Details
The DRHP of R R. Kabel IPO states that, Citigroup Global Markets India Pvt Ltd, Axis Capital Ltd, JM Financial Ltd, HSBC Securities and Capital Markets (India) Pvt Ltd are Book Running Lead Managers. The registrar for this IPO is Link Intime India Pvt Ltd. The face value of equity shares is Rs. 5/share.
The company is yet to declare the tentative opening and closing date and time of R R Kabel’s IPO shares. When it finally decides to launch its IPO, we will get to know the number of shares for fresh issue, investor allocation, price range and other details.
Strengths
To make an informed decision about whether to invest or not in R R Kabel IPO shares, you must also know their strength and risks. The points below highlight the strengths of R R Kabel that make the company worth investing in:
- An extensive global and domestic distribution network
- Booming B2C business in the wires and cables industry
- Great brand recognition among consumers
- Diverse product line backed by a professional research and development team with global accreditation and certification.
- Excellent brand positioning efforts in the FMEG segment
- Run and managed by an experienced professional management team
Outlook and Valuation
Check the total income and net profit details of R R Kabel. It will help you decide whether to subscribe to their IPO or not:
- Total income / net profit in FY23 – Rs. 5633.64 crore / Rs. 189.87 crore
- Total income / net profit in FY22 – Rs. 4432.22 crore / Rs. 213.94 crore
- Total income / net profit in FY21 – Rs. 2745.94 crore / Rs. 135.40 crore
The first quarter of FY24 ended on June 30, 2023. R R Kabel recorded a net profit of Rs. 74.35 crore on total revenue of Rs. 1613.60 crore during this period.
Moreover, R R Kabel had reported an average RoNW (return on net worth) of 14.78% and an average EPS (earnings per share) of Rs. 16.97 (fully diluted) for the previous three fiscal years.
The issue price is set at a P/BV (price to book value) of 6.97. It’s based on the post-IPO NAV (net asset value) of Rs. 148.44 per share (at the upper cap) and at a P/BV of 7.69 based on the NAV of Rs. 134.57 as of June 30, 2023.
The asking price has a P/E (price to earnings) of 39.26. This will be applicable if the FY24 annualised earnings are allocated to the diluted paid-up equity capital acquired after the IPO.
R R Kabel Limited has performed well financially over the previous three financial years. It holds the potential of performing even better in the near future. As a result, investing in its IPO may be a lucrative investment option, especially for the long run.
Risks
Along with the above strengths, you must make note of the risks involved with the business of R R Kabel. Here are some of the risk factors that act as hindrances in the path of this company’s growth:
- Any failure to maintain stability across their distribution channels, networks, distributors, dealers and retailers can result in inconsistencies in their operation.
- Any adverse change in the performance of the wire and cable market can impact their business, cash flow, financial condition, operation and prospects.
- Availability of counterfeit products can drop the reputation of this company and diminish its competitive edge.
Also Read: IPO investment strategy: Tips for investing in an IPO
Conclusion
As an interested retail investor, consider studying the DRHP thoroughly to have a comprehensive idea about R R Kabel Limited. This will give you an insight into whether the company’s goals align with your investment plans. With this knowledge, you can make a clear fact-based decision about whether or not to invest in R R Kabel Limited IPO.
