Abha Power and Steel hit 5% lower circuit after making tepid debut at 9% premium on NSE SME

Abha Power and Steel Ltd made a muted trading debut on the stock exchange on Wednesday, December 4. The stock listed at an over 9% premium on the NSE Emerge platform.

Shares of Abha Power and Steel stock opened the session at ₹81.90, up 9.2% compared to its initial public offering (IPO) price of ₹75. However, within minutes of the opening of trade, the share price dropped 5% to hit the day’s low of ₹77.8 apiece.

As the minimum bid quantity to apply for the Abha Power and Steel IPO was 1,600 shares, bidders who were allotted shares of the company in the primary issue were sitting on a profit of ₹11,040 (₹6.9 x 1,600) as soon as the stock started trading in the exchange market.

The ₹38.54-crore Abha Power IPO had not seen an overwhelming demand when it opened for subscription from November 27 to November 29. The issue was oversubscribed 18 times during the three-day bidding period. The retail category was overbought by almost 25 times, while the non-institutional investors’ (NII) category was overbid by 10.07 times.

The Abha Power and Steel IPO was a fixed-price issue. It was a combination of fresh issuance of 41.39 lakh shares, aggregating to ₹31.04 crore, and an offer-for-sale (OFS) of 10 lakh shares, aggregating to ₹7.5 crore. The shares were offered at a price of ₹75 per share in a lot size of 1,600 units.

Abha Power planned to use the net proceeds from the fresh issue portion to fund the capital expenditures for modernising and upgrading the manufacturing facilities in Bilaspur, Chhattisgarh, to expand its product portfolio. A portion of the funds was also planned to be used to fund the company's working capital requirements and for general corporate purposes.

Horizon Management Pvt. Ltd was the book-running lead manager of the issue, while Skyline Financial Services Pvt. Ltd was the registrar. The market maker for the IPO was Giriraj Stock Broking.

Founded in 2004, Abha Power and Steel casts and manufactures iron and steel products. The company offers a wide variety of products, including mild steel, manganese steel, stainless steel, and low—and high-alloy castings.

Abha Power caters to diverse industries such as Indian Railways, steel, cement, heavy engineering, mining and power. It has customers both in India and in over six other countries – UAE, Qatar, Germany, Canada, Italy, Netherlands and Nepal.

The company operates two foundries, SG iron foundry and steel foundry, at its manufacturing facility in Bilaspur, which is spread across an area of around 7.32 acres.

For the financial year 2023-24, Abha Power and Steel’s revenue decreased 6% to ₹51.8 crore compared to ₹55.1 crore in 2022-23. Profit after tax (PAT), meanwhile, rose by 170% to ₹3.78 crore compared to ₹1.4 crore between FY24 and FY23.