Scoda Tubes IPO sees 3.4x subscription. But is it justified?

It's not every day a stainless steel pipe manufacturer grabs headlines. But Scoda Tubes is doing just that. Its Rs 220 crore IPO has sparked strong demand across investor segments, getting oversubscribed 3.43 times by Day 2.

What's adding fuel to the fire? A healthy Rs 24 grey market premium (GMP), suggesting a potential 17 per cent listing pop over the issue price of Rs 140. Not bad for a mid-sized player from Gujarat.

The IPO numbers

At Rs 140, the IPO values the company at 30.4x earnings. While not cheap, it is not frothy either, given recent profit growth.

What will Scoda Tubes do with the proceeds from the IPO?

The funds will be used to:

• Expand capacity for seamless and welded pipes
  
• Meet working capital needs
  
• Handle general corporate expenses

What does Scoda Tubes do?

Headquartered in Mehsana, Gujarat, Scoda Tubes manufactures stainless steel seamless and welded pipes. These are used in everything from oil & gas and pharma to power and transport. Basically, wherever durable, corrosion-resistant steel piping is needed, Scoda has a role to play.

It also exports to global markets, riding on quality certifications and a diversified client base.

Financials: A sharp turnaround

Scoda's numbers are no slouch.

From FY22 to FY24:

• Revenue grew at 44 per cent CAGR
  
• Net profit jumped 235 per cent CAGR
  
• ROE averaged 21 per cent
  
• ROCE came in at 13 per cent

Should investors bite?

Scoda isn't a flashy tech IPO, but it has a few things going for it: Strong profit growth, diversified end markets, export exposure and now, public interest.

That said, the Rs 24 GMP, while encouraging, isn't a sure thing. Grey market trends change quickly, and post-listing reality may differ.

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Disclaimer: This is not a stock recommendation. This story was created with the assistance of artificial intelligence and is intended for informational purposes only. Please take it with a pinch of salt and do your own research or consult a financial advisor before making investment decisions.