Rashi Peripherals IPO to open today: Should you subscribe to the Madhusudan Kela-backed issue?

The initial public offering (IPO) of Rashi Peripherals will open for subscription today. The tech-products distributor is offering its shares in the price band of Rs 295-311 apiece. Interested investors can apply for a minimum of 48 shares and its multiples thereafter. The issue can be subscribed till Friday, February 9, 2023. Rashi Peripherals was incorporated in 1989 and it distributes global technology brands in India. The company specialises in products related to ICT or Information and communication technology. Its offerings include value-added services such as pre-sales, technical support, marketing services, credit solutions and warranty management services. The company is looking to raise a total of Rs 600 crore via IPO, which is entirely a fresh share sale. Ahead of its IPO, the company undertook a pre-IPO placement of Rs 150 crore in consultation with BRLMs of the issue. It allotted a total of 48,23,151 equity shares at an issue price of Rs 311 apiece to Volrado Venture Partners Fund III and Madhuri Madusudan Kela. The net proceeds from the issue will be utilised towards prepayment or scheduled repayment of all or a portion of certain outstanding borrowings availed by the company; funding working capital requirements of the company; and general corporate purposes. Rashi Peripherals has mopped up Rs 180 crore via anchor allotment. It has allocated 57,87,780 equity shares at an issue price of 311 apiece to investors such as Ashoka India Equity Investment Trust, Whiteoak Capital, ICICI Prudential Mutual Fund, Volrado Venture Partners Fund and Bandhan Mutual Fund. ASUS Global, Dell International Services India, HP India Sales, Lenovo India, Logitech Asia Pacific, NVIDIA Corporation, Intel Americas, Western Digital (UK), Schneider Electric IT Business India, Eaton Power Quality, ECS Industrial Computer, Belkin Asia Pacific, TPV Technology India, LG Electronics India and Toshiba Electronic  are Rashi Peripheral's key clientele. Rashi Peripherals reported a net profit of Rs 72.02 crore with a revenue of Rs 5,473.72 crore for the period ended in September 30, 2023. Its net profit came in at Rs 123.34 crore and revenue at Rs 9,468.95 crore for the financial year ended on March 31, 2023. Rashi Peripherals has reserved 50 per cent of the net offer for qualified institutional investors (QIBs), while non-institutional investors (NIIs) will have 15 per cent of shares reserved for them. Retail investors will have 35 per cent of the net issue reserved for them. JM Financial and ICICI Securities are the book running lead managers of the Rashi Peripherals IPO, while Link Intime India is the registrar for the issue. Shares of the company are proposed to be listed at both BSE and NSE with Wednesday, February 14 as the tentative date of listing. Here's what a host of brokerage firms say about the IPO Rashi Peripherals IPO:Anand Rathi Research Rating: Subscribe for long-term At the upper price band, the company is valued at P/E of 16.6 times with a market cap of Rs 2,049.48 crore post issue of equity shares. Anand Rathi said valuations of the company are fairly priced and recommend a 'subscribe for long term' rating to the IPO," it added.Choice Broking Rating: Subscribe Rashi intends to continue with a considerable market share as one of its strategies for product category expansion, said Choice Broking's IPO note. "Utilisation of IPO proceeds would lower the financial liabilities, whereas availability of working capital would boost the business expansion capabilities in the medium-term. Thus, considering the above factors, we assign a 'subscribe' rating for the issue," it added.Swastika Investmart Rating: Subscribe Swastika Investmart said  some key risks require careful consideration. Rashi Peripherals' dependence on third-party vendors and channel partners exposes it to external factors beyond its direct control, it said.

“Its relatively low gross margins compared to industry peers warrant scrutiny. The company's future growth potential and the positive industry outlook are encouraging," it said with the 'subscribe' tag.Indsec Research Rating: Subscribe Indsec Research said the ICT industry is expected to have  double digit growth on account of increasing usage of technology, increasing digital penetration in Tier-II, Tier-III cities and support from government.

‘Overall the company has a good financial track record and robust distribution  network. Government's push towards digitization and favorable industry factors makes this IPO an attractive proposition," it said with a 'subscribe' tag.StoxBox by BP Equities Rating: Subscribe StoxBox expects that the company will benefit from such a demand scenario in the long term. On the financial performance front, its revenue and Ebitda grew at a CAGR of 26.3 per cent and 10.1 per cent, respectively during the FY 2021-23 period. The company’s net profit dropped to Rs 123.3 crore in FY23 from Rs 1,364 crore in FY21, it said. "On the  upper price band, the issue is valued at a P/E of 10.5 times based on FY2023 earnings which we  feel is fairly valued compared to its peers. Given a highly competitive environment and thin  margins of the business, we recommend investors to 'subscribe' to the issue for listing  gains," StoxBox added.Sushil Finance Rating: Subscribe for long-term The company’s topline was consistent from FY21-23 while its bottom line was affected in FY23. Its debt-to-equity ratio and inventory turnover ratio is a concern, said Sushil Finance. "Increasing competition in the  information and communications technology products distribution industry may create certain  pressures that may adversely affect the business," it said. “The company is asking for a PE multiple of 10.54 times on the upper end of the price band and using  diluted EPS for FY23 and a PE of 8.53 times annualising diluted EPS for H1FY24. The industry average is 9.92 times. The issue seems fully priced. Looking at all the factors, risks, opportunities and valuation, investors may apply for the issue with a long term view,” said Sushil Finance.  

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