Exxaro Tiles IPO opens tomorrow; should you subscribe?

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Analysts on Dalal Street are cautious about the initial public offer (IPO) of Exxaro Tiles which is going to open for subscription on August 4. The leading manufacturer of vitrified tiles has fixed a price band of Rs 118-120 a share for its initial share sale. The-three day public offer will conclude on August 6.

The IPO of up to 1,342,4000 equity shares comprises a fresh issue of up to 1,11,86,000 equity shares and an offer-for-sale of up to 22,38,000 equity shares by Dixitkumar Patel. At the upper end of the price band, the IPO will fetch Rs 161.08 crore. Proceeds from the fresh issue would be utilised towards repaying or prepaying of borrowings, fund its working capital requirements besides utilising it for general corporate purposes. The equity shares will be listed on NSE and BSE.

Here’s what market watchers have to say about Exxaro Tiles IPO:

Marwadi Shares and Finance

Considering the FY21 adjusted earnings per share of Rs 3.40 on the post-issue basis, the company is going to list at a P/E of 35.27 with a market cap of Rs 536.90 crore, while its peers namely Kajaria Ceramics, Asian Granito and Somany Ceramics are trading at a P/E of 51.37, 10.55 and 43.15 respectively. Marwadi Shares and Finance assign a “Subscribe (With Caution)” rating to this IPO as the company has a wide product portfolio of tiles with a high scope of growth in this segment and is available at a reasonable valuation. However, higher working capital requirement with volatile cashflows keeps us cautious at the same time from a longer-term perspective.

Dilip Davda, chittorgarh.com

Primary market watcher Dilip Davda of chittorgarh.com said that the company is in the highly competitive field having fragmented (big and small) players. Based on super earnings of FY21, the issue is at a P/E of over 35 and is fully priced. Being IPO under Rs 250 crore, it will list in T2T with lower circuit limits and this may restrict speculative moves. Hence cash surplus or risk seekers may consider investing in this high risk-low return issue.