What you must know about the AG Universal IPO

AG Universal Ltd, is an SME IPO on the NSE which is opening for subscription on 11th April 2023. The company, AG Universal Ltd, was incorporated in 2008 and is currently a leading supplier of industrial MS Tubes, GI Pipes and Hollow Sections. It has a wide portfolio of products that include stainless steel pipes, mild steel pipes, ERW Black Pipes, TMT Bars, wire rods, CR Coils and HR Coils. The last two refer to cold rolled coils and hot rolled coils.

AG Universal was originally established under the name of Akshata Polymers and it operated in the petroleum polymers business. It has a dealership agreement with Reliance Industries Ltd for its petroleum products and has other reputed clients in its roster like Surya Roshni Ltd, Jindal Supreme India Ltd, Swastik Pipes Ltd, Ravindra Tubes Ltd, SKS Ispat, etc. AG Universal will be using the proceeds of the fresh issue for working capital purposes.

Key terms of the SME IPO of AG Universal Ltd

Here are some of the highlights of the Quality Foils India IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 11th April 2023 and closes for subscription on 13th April 2023; both days inclusive.
   

• The company has a face value of Rs. 10 per share and the issue price for the fresh issue portion has a fixed price of Rs60 per share.
   

• The company will issue a total of 14.54 lakh shares at the price of Rs60 per share aggregating to a total fund raising of Rs. 8.72 crore.
   

• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors.
   

• The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of Rs. 120,000 (2,000 x Rs. 60 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO.
   

• HNI / NII investors can invest a minimum of 2 lots comprising of 4,000 shares and having a minimum lot value of Rs. 240,000. There is no upper limit on what the HNI / NII investors can apply for. There is no QIB reservation in the SME IPO.
   

• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 74,000 shares. Share India Securities Ltd will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   

• The company has been promoted by Ms Bharti Gupta and Mr Amit Gupta and the promoter stake in the company stands currently at 95.53%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately.

While Share India Services Ltd will also be the lead manager to the issue, Skyline Financial Services Private Limited will be the registrar to the issue.

Key dates to be aware of in the AG Universal Ltd IPO (SME)

The SME IPO of Quality Foils (India) IPO opens on Monday, April 11th, 2023 and closes on Wednesday March 13th, 2023. The AG Universal Ltd IPO bid date is from April 11th, 2023 10.00 AM to April 13th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the April 13th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of AG Universal Ltd

The table below captures the key financials of AG Universal Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

While the sales growth has been impressive the profit margins have been fairly low and that could be a challenge for the company. However, the company has an established model with a matured market. However, investors must remember that this is a traditionally low margin business. That could be an overhang on valuations.

For FY22, the company had an EPS of Rs. 19.18, so the current market price of Rs. 60, is a little over 3 times P/E ratio for the IPO. That is reasonable pricing considering the tepid net margins for the business. It does leave room for upsides but this IPO must be taken up by investors with an appetite for risk.