'Subscribe' to Electrosteel Steel IPO: Arihant

MUMBAI: Arihant Capital Market has recommended investors to 'Subscribe' to initial public offering of Electrosteel Steel.

The company has entered capital market by issuing shares of face value Rs 10 each in the price band of Rs 10-11 to raise funds to part finance the construction of the integrated steel and DI pipe plant in Jharkhand and to pay margin money towards bank guarantee.

“The company at present does not have any operational capacities as it is still in development phase. At upper end of price band the stock is trading at EV/tonne of Rs 33,430/tonne, while its peers with operational capacities and ongoing capacity expansion projects typically trades at Rs27000/tonne at lower end for mid and small size companies and Rs60000/tonne at upper end of EV/tonne for larger size companies.

Also on P/B(x) basis the stock is available at P/B(x) of 1.1x, which is at discount to its peers. We believe ESL is set to benefit from robust steel consumption in India. Integrated nature of business coupled with strong management should benefit company in the future.

However, on account of long gestation period required for steel projects we recommend a SUBSCRIBE to IPO of Electrosteel Steel Limited with a long term investment view,” the note said.

As per the NSE website, as on September 23, till 12 pm, the issue was subscribed 0.49 per cent.

The issue closes Friday.