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Salient features of the FPO:

• Hyderabad based steel product manufacturer, Hariom Pipe Industries Ltd. (HPIL), is coming up with an IPO to raise Rs. 130cr, which opens on 30th Mar. and closes on 5th Apr. 2022. The price band is Rs. 144 - 153 per share.

• The IPO only comprises of fresh issue of shares. From the net proceeds, Rs. 50cr will be utilized to fund the capital expenditure; Rs. 40cr will be used to fund the working capital requirement of the company. Residual funds will be used for general corporate purposes.

• In Dec. 2020, the company converted certain preference shares/loans into equity shares at a price of Rs. 36 per share. Moreover, in Mar. - May 2021, HPIL allotted certain equity shares on preferential basis to a group of individual investors at a price of Rs. 36 per share.

Key competitive strengths:

• Integrated nature of operations

• Environment friendly manufacturing process

• Strategic location of manufacturing units

• Cost advantage in manufacturing products

• Competitive pricing of products

• Experienced & qualified team

Risk and concerns:

• General economic slowdown

• Unfavorable government policies and regulations

• Volatility in the key raw material prices

• Difficulty in improving the plant utilization levels

• Unfavorable revenue-mix

• Business seasonality

• Difficulty in managing the debt levels

• Competition

Below are the key highlights of the company:

• HPIL is an integrated manufacturer of mild steel (MS) pipes, scaffolding, HR strips, MS billets and sponge iron. Its MS pipes are sold under the brand name “Hariom Pipes”. The company manufactures MS Pipes and scaffoldings of over 150 different specifications which directly or indirectly caters to the needs of sectors such as housing, infrastructure, agriculture, automotive, power, cement, mining, solar power, engineering etc.

• It uses iron ore to produce sponge iron, which is then processed across various stages to manufacture final products, thereby making the manufacturing backward integrated. HPIL’s integrated plant at Mahabubnagar district (Unit-I) in Telangana manufactures finished steel products from iron scrap and sponge iron, while its other plant at Anantapur district (Unit-II) in Andhra Pradesh exclusively manufactures sponge iron (which in turn is mainly produced from iron ore sourced from Bellary, which is one of the hubs in South India for iron ore production).

• The iron ore required to produce sponge iron at Unit-II is mostly procured through the online bidding process. Most of the sponge iron produced at the Unit-II is transported to the Unit-I and used as a raw material for manufacturing MS billets, HR strips, MS pipes and scaffolding. According to the management, this integration of both the manufacturing units has led to efficient logistics & inventory management, procurement, energy savings and quality control. All these cumulatively resulted in better profitability for the company.

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