Abha Power IPO Listing: Stock lists at 9% premium on NSE SME

Abha Power IPO Listing

Abha Power IPO Listing: ₹75 Shares Enter at 9% Premium, Then Profit Booking Leads to Decline

The highly anticipated Initial Public Offering (IPO) of Abha Power and Steel, a company specializing in manufacturing iron and steel products, made its debut on the NSE SME platform today.

The IPO raised ₹38.54 crore, attracting significant interest from investors, particularly from the retail segment.

Although the shares listed at a premium of 9% above their issue price, the initial enthusiasm soon gave way to profit booking, causing the stock to fall back before stabilizing at a modest gain by the close of the trading session.

IPO Overview

Abha Power and Steel’s IPO was open for subscription from November 27 to November 29, 2024. The IPO consisted of a fresh issue of shares worth ₹31.04 crore and an offer for sale (OFS) of 10 lakh shares, each with a face value of ₹10.

The funds raised through the fresh issue were earmarked for expanding the company’s manufacturing facilities, improving its working capital, and supporting general corporate purposes.

The OFS portion, on the other hand, allowed existing shareholders to sell part of their stakes, with the proceeds going directly to them.

The IPO was priced at ₹75 per share, with a total subscription of 18 times, highlighting strong investor demand.

The retail portion was oversubscribed by nearly 25 times, signaling confidence in the company’s potential, particularly from small investors.

As the market opened for the listing today, the shares of Abha Power debuted at ₹81.90, representing a 9% premium over the issue price of ₹75, thus giving early investors a healthy listing gain of 9.20%.

Initial Listing and Volatility

While the initial listing was upbeat, with the stock opening at ₹81.90, the excitement quickly gave way to profit-taking.

Investors who had subscribed to the IPO at ₹75 were eager to lock in gains, leading to selling pressure that pushed the stock downwards.

After briefly touching ₹81.90 again during early trading, the stock reversed course, slipping and hitting the lower circuit limit of ₹77.80.

By the close of the first trading day, the stock settled at ₹77.80, marking a modest 3.73% gain from its issue price of ₹75.

This decline came despite the strong initial performance, showing the volatility often seen with SME listings.

This fluctuation is not unusual for companies debuting on the SME platform, as market sentiment, investor enthusiasm, and the general economic environment can influence price movement dramatically on the first day.

IPO Subscription Details

The Abha Power IPO saw a remarkable response, with the overall subscription rate reaching 18 times the number of shares on offer.

This strong demand was fueled largely by retail investors, with the retail portion being subscribed 24.93 times.

This overwhelming interest reflects the confidence that investors have in the company’s future prospects and its ability to scale its operations effectively.

The ₹38.54 crore raised through the IPO will allow the company to address several key areas of its business.

A portion of the funds will be used to upgrade and expand its manufacturing facilities, which is crucial for meeting growing demand and enhancing production capacity.

Additionally, a significant part of the funds will be allocated toward fulfilling the company’s working capital needs, ensuring smoother operational cash flow.

Finally, the funds will also be used for general corporate purposes, including strengthening its market presence and continuing to build relationships with key industry players.

Company Profile and Operations

Founded in 2004, Abha Power and Steel is a significant player in the Indian iron and steel manufacturing sector.

The company produces a wide variety of products, including mild steel, manganese steel, stainless steel, and both low and high-alloy castings.

These products cater to several key industries such as steel, power, cement, and railways. Abha Power operates two foundries—SG Iron Foundry and Steel Foundry—in Bilaspur, Chhattisgarh, which serve as the backbone of its manufacturing operations.

The company’s diverse product portfolio includes SGCI (Spheroidal Graphite Cast Iron), adapters, valve castings, and other specialized items for the railway sector.

Abha Power’s commitment to quality and innovation has helped it carve out a niche in these industries, which are crucial for infrastructure development in India. Its products are essential for the functioning of critical sectors, including transportation and energy.

Abha Power’s ability to serve a broad spectrum of industries, including sectors with high entry barriers such as railways and power, gives it a competitive edge in the market.

The company’s strong focus on product innovation and customer satisfaction has allowed it to build long-term relationships with some of the most prominent players in these sectors.

Financial Performance

Abha Power and Steel has shown notable improvement in its financial performance in recent years, transitioning from a loss-making entity to one with consistent profitability.

In FY 2022, the company reported a net loss of ₹71.53 crore. However, it turned a corner in FY 2023, posting a modest net profit of ₹1.40 crore.

The company continued its upward trajectory in FY 2024, reporting a net profit of ₹3.78 crore. This demonstrates the company’s ability to adapt and manage its finances more efficiently, with the turnaround primarily driven by better cost management and improving market conditions.

Despite the improvement in profits, Abha Power’s revenue has shown a slight downward trend. In FY 2022, the company recorded a revenue of ₹54.98 crore, which marginally increased to ₹55.11 crore in FY 2023. However, revenue dipped to ₹51.83 crore in FY 2024.

This decline is somewhat concerning but is expected to be temporary as the company works on scaling up its operations and improving its product offerings.

In the current financial year, Abha Power has posted a net profit of ₹3.62 crore with a revenue of ₹37.55 crore for the period from April to October 2024.

The company’s ability to maintain profitability despite fluctuations in revenue suggests a strong operational base and the potential for future growth, especially with the funds raised from the IPO earmarked for expansion.

Final Remarks

Abha Power and Steel’s IPO debut marks an important milestone for the company as it continues its journey of growth and development in the iron and steel sector.

While the listing today showed a positive opening, the stock experienced some volatility, with profit booking leading to a modest gain of 3.73% by the end of the first trading day.

The IPO’s success, underscored by strong demand from retail investors, reflects confidence in the company’s future growth potential.

With plans to upgrade manufacturing facilities and meet working capital needs, Abha Power is positioning itself to capitalize on growing demand in critical sectors such as steel, power, and railways.

While the company’s financial performance has improved significantly, ongoing revenue challenges and market conditions will be key factors to monitor in the coming quarters.

Nevertheless, Abha Power remains a company to watch as it navigates its post-IPO journey and continues its focus on innovation, operational efficiency, and expanding its market reach.