Long-term investors can subscribe to Electrosteel Steels IPO: SPA Capital

MUMBAI: SPA Capital has recommended investors with long-term horizon to ‘Subscribe’ to Electrosteel Steels IPO. As compared to its peers, the issue is reasonably valued, the note says.

“At the upper band of Rs 11, the stock is available at a P/BV of 1.2x based on post issue BVPS of Rs 9.4. As compared to its peers P/BV of 2.0x and 2.5x, ESL is reasonably valued, however, any delays in the commissioning of plant’s operations may affect ESL’s performance. Hence, investors with a long term horizon can ‘Subscribe’ to the issue,” the IPO note said.

Electrosteel Steels, promoted by Electrosteel Castings, is to set up a 2.2MTPA integrated steel and ductile iron plant in Jharkhand. ESL is setting up the proposed plant in Bokaro District of Jharkhand. The proposed plant will be based on Blast Furnace (BF) - Basic Oxygen Furnace (BOF) - Billet Caster and Hot Rolling Route.

The company plans to use the proceeds to part finance the integrated steel and DI plant and pay margin money towards bank guarantees. The issue closes Friday.

ESL plans to raise up to Rs 226–248 crore via an IPO at the lower and upper price band of Rs 10–11 respectively.