Prakash Steelage IPO Review

Investors could consider giving the Prakash Steelage IPO a miss considering the company's limited product profile and susceptibility to pressure on realisations due to volatile stainless steel prices. The issue is priced between Rs 100 and Rs 110, which translates into a post-issue P/E of 9.8 to 10.8 times 2009-10 earnings compared to seven times earnings for the more diversified, less-leveraged and larger Ratnamani Metals. Investors may find better hedged bets in the sector in the form of diversified pipe producers that have a wider product line to tide over blips in demand and superior margins.

Prakash Steelage IPO Analysis

Prakash Steelage was incorporated by Prakash C Kanugo, a first generation entrepreneur, as a private company in 1991 in Mumbai mainly for trading in stainless steel sheets, coils and plates. In 1997 it was converted into a public limited company following the setting up in 1996 its first plant in the Union Territory of Dadra and Nagar Haveli, with a capacity of 4000 MT per annum, for manufacturing of welded & seamless stainless steel pipes, tubes and U-tubes. In 2007 the company started its second unit at Umbergaon, Gujarat, with a capacity of 8200 MT with total capacity reaching to 12,200 MT.