IPO Note : Sambhv Steel Tubes Ltd by Geojit Financial Services Ltd
Backward integrated player to benefit from infra push
Sambhv Steel Tubes Ltd (SSTL), incorporated in 2017, manufactures Electric Resistance Welded (ERW) steel pipes and structural tubes. With a facility in Sarora, Chhattisgarh, the company ranks among the top in installed capacity and is one of only two Indian firms using narrow-width HR coils for ERW production. Sambhv also operates in the stainless steel coils space, serving diverse sectors like infrastructure, agriculture, automotive, and energy. Its annual sales volume stood at 198,956 metric tonnes as of December 31, 2024.
* India’s steel pipe demand is expected to grow at an 8–9% CAGR from FY25 to FY29, reaching 18.5–20.5 MTPA by FY29, driven by rising infrastructure, construction, and industrial activity despite a high base.
* SSTL’s revenue grew at a 25% CAGR between FY22 and FY24, reaching Rs.1,285.8cr in FY24, driven by deeper distribution penetration and its strategic entry into the ERW steel pipes segment.
* In FY24, the company achieved an EBITDA margin of 12.4%, a PAT margin of 6.4%, and a return on equity (RoE) of 18.8%, underscoring its strong operational efficiency and profitability.
* In FY25, the company commissioned a new manufacturing facility (Kuthrel Facility) with an installed capacity of 158,000 Metric tons per annum (MTPA) which is expected to double the revenue in the next 2 to 3 years.
* SSTL plans to establish a greenfield facility in Kesda, Chhattisgarh, with an estimated capacity of ~1.20 Million metric tonnes per annum (MMTPA), further boosting its production capabilities. Phase 1 is slated for commissioning by FY27.
* Post-IPO, a debt repayment of Rs.390cr is expected to halve finance costs. The net debt-to-equity ratio, currently at 1.3x, is projected to decline to 0.3x, significantly enhancing the company’s financial strength and operational flexibility.
* At the upper price band of Rs.82, SSTL is valued at a P/E ratio of 44.5x (FY25E annualised), which appears reasonably priced relative to its peers. SSTL is strategically positioned to capitalize on India’s infrastructure boom, driven by initiatives such as the Jal Jeevan Mission and Amrit Bharat scheme. As a backward-integrated player with consistent financial growth, efficient strategic sourcing, and ongoing expansion plans, the company is well-poised for longterm value creation—supporting a 'Subscribe' recommendation for investors.
Purpose of IPO
The issue consists of fresh issue of Rs.440cr and an OFS of Rs.100cr. The net proceeds from IPO will be utilised for repayment/ prepayment, outstanding borrowings availed by the company (Rs.390cr) and general corporate purposes.
Key Risks
* Concentration of revenue in north and west India.
* The steel pipes industry is cyclical and sensitive to infrastructure spending and commodity price fluctuations.
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