Polycab IPO recommendations dotted with subscribe calls


Last updated on January 12, 2020

Mumbai-based wire and cable manufacturer Polycab has launched its maiden public offer in the price range of INR533-538 per share. Promoted by Inder Jaisinghani, Ajay Jaisinghani, Ramesh Jaisinghani and Girdhari Jaisinghani, the company has a market share of approximately 18% of the organized wires and cables industry in India. Owing to attractive valuations, the IPO has received positive ratings from analysts at brokerage houses. Here is a ready reckoner of Polycab IPO recommendations:

First off, Angel Broking has put a subscribe recommendation on Polycab IPO citing several positive factors. “In terms of valuations, the pre-issue P/E works out to 16.7x its FY2019 annualized earnings (at the upper end of the issue price band), which is slightly lower compared to its peers like Finolex Cables (20.7x) & Kei Industries (20.x). Further, Polycab’s market leadership position in wires & cables segment, diversified product portfolio, strong distribution network & brand recall and proven financial track record are the key positives. Given the above favorable factors, we recommend Subscribe to issue,” the brokerage house said in its review note for the IPO.

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ICICIdirect also sounded a positive note about the prospects and valuations of the company. “At the IPO price band of INR533-538, the stock is available at a price to earnings multiple of 22x FY18 EPS. We believe the issue is available at attractive valuation, considering its leadership position in the wire & cable industry, low debt/equity (~0.3x) and attractive return ratios (RoCE ~21%, RoE ~16%). We recommend SUBSCRIBE to the issue at the offer price,” noted analysts Sanjay Manyal and Hitesh Taunk.

“Given the brand position, financials and business prospects, we suggest investors can subscribe to the issue,” said Mrinalini Chetty of Centrum Wealth while adding that a strong brand portfolio and distribution network could bode well for Polycab’s new product launches and expansion of FMEG business.

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Choice Broking cited strong distribution network and manufacturing facilities with high degree of backward integration as key strengths for the company. “Coming to the valuation, based on the higher price band, PIL is demanding a P/E valuation of 14.6x (to its TTM EPS of Rs. 36.8), which is at a discount to its peer average of 20.1x. Based on FY19E and FY20E EPS, the stock is valued at P/E multiple of 17.2x and 13.8x, respectively, which again is available at discount to peer average. Thus, considering the above observations we feel that the issue is reasonably priced, thereby providing a “SUBSCRIBE” rating,” said the brokerage house in its IPO note.

Anand Rathi also joined the brokerage houses in issuing positive Polycab IPO recommendations and stated that Polycab has a healthy product mix catering to a diverse customer base. The company has significant opportunity to grow further on favorable macro traits including Government’s focus on electrification, infrastructure and housing and improving lifestyle along with consumer spending. “Considering several positive factors such as a market leadership position, diverse portfolio, strong distribution network and favorable macro scenario, we recommend subscribe to this IPO,” opined analyst Anindita Chaudhury.

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Motilal Oswal’s IPO note was also bullish, stating that the company’s healthy financials. “At the upper price band, Polycab is valued at 16.8x P/E on FY19 annualized basis, compared to KEI Industries 18.4x P/E (MOSL estimates) and Finolex Cables 17.2x P/E FY19E (Bloomberg estimates). Given the strong industry growth trends, leadership position, healthy financials and comfortable valuations, we are positive on the IPO. Hence recommend SUBSCRIBE,” noted the IPO recommendation.


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