Bansal Wire IPO opens for subscription: 10 key risk factors investors must know before investing

Bansal Wire IPO: Stainless steel wire manufacturing company Bansal Wire Industries launched its initial public offering (IPO) on Wednesday to raise ₹745 crore from primary market. Bansal Wire IPO has received strong demand from investors as the issue got fully subscribed on the first day itself.

Bansal Wire IPO opened for subscription on Wednesday, July 3, and will close on Friday, July 5. The IPO allotment is expected to be finalised on July 8 and the IPO listing date is July 10. The equity shares of Bansal Wire Industries will be listed on both the stock exchanges - BSE and NSE.

Bansal Wire IPO price band is set at ₹243 to ₹256 per share. The IPO lot size is 58 shares.

The company has already raised over ₹223 crore from anchor investors on July 2, ahead of the opening of its IPO. It allocated 87,30,468 equity shares to anchor investors at a price of ₹256 per share.

SBI Capital Markets and Dam Capital Advisors Ltd are the book running lead managers of the Bansal Wire IPO, while Kfin Technologies is the IPO registrar.

Before investing in Bansal Wire IPO, investors must understand the company’s business, financial performance, key risks and many other factors. Here we take a look at the 10 key risks for the Bansal Wire Industries as mentioned in the Red-Herring Prospectus (RHP).

Bansal Wire IPO: Key risk factors

1] Bansal Wire Industries heavily relies on its top 10 suppliers for raw materials. Any shortages, delay or disruption in the supply of the raw materials it uses in the manufacturing process may have a material adverse effect on its business operations and financial condition.

2] The company faces substantial working capital requirements and may need additional financing, impacting financial stability.

3] The costs of the raw materials that the company uses in its manufacturing process are subject to volatility. Increases or fluctuations in raw material prices is a key risk factor.

4| The company had low EBITDA and PAT margins in the last three Fiscals.

5] Negative cash flows in prior periods and potential future negative cash flows pose financial challenges.

6| Its performance is closely tied to the steel wires market and any adverse market conditions could adversely affect financial health.

7] Legal proceedings involving the company, its promoters, directors, subsidiaries, and group companies could impact business and operations adversely.

8] Expansion plans into new geographical regions pose risks of significant liability and potential loss of investment.

9] Use of unsecured borrowings which can be recalled by lenders at any time also poses financial risk.

10] The company’s inability to maintain their distribution network in India and attract additional dealers may have a material adverse effect on their results of operations and financial condition.

Bansal Wire IPO Review

Analysts are positive on Bansal Wire IPO and have advised subscribing to the issue with a long-term perspective.

“The company's P/E ratio is 50.8 times based on its FY24 earnings, with a market capitalization of ₹40,078.3 million after the issuance of equity shares and a market cap-to-sales ratio of 1.62 times its FY24 earnings. The Company and its subsidiary, Bansal Steel & Power Limited, offer one of India’s most extensive steel wire product portfolios, with over 3,000 SKUs across high carbon steel, mild steel (low carbon), and stainless-steel wires. The Company offers around 2,000 SKUs, while the subsidiary provides approximately 1,500 SKUs. Looking at these factors we recommend a “Subscribe – Long Term” rating to the IPO,” brokerage firm Anand Rathi said in a note.

Meanwhile, considering both the company's strengths and potential risks, Swastika Investmart Ltd recommended investors only with a high-risk tolerance to subscribe to the issue.

Bansal Wire IPO GMP

Bansal Wire IPO GMP today, or grey market premium today, is ₹60 per share, according to stock market analysts. This indicates that the equity shares of Bansal Wire Industries were trading at ₹316 apiece in the grey market, a premium of 23.44% to the IPO price of ₹256 per share.