IPO listed on 14 Feb'24
Rashi Peripherals Ltd
Minimum Investment
₹ 14,928 / 48 shares
Grey market premium
₹ 79 (25% premium)
Issue price
₹ 311
Listing price
₹ 340
Listing day %
3%
Listing on
Feb 14, 2024
Our Verdict:
Neutral
- While the IPO might initially appear appealing due to the firm’s market dominance and impressive growth in revenue, investors should approach with caution due to significant financial and operational concerns. The decline in profitability, evidenced by falling EBITDA and net profit margins, alongside a decrease in return ratios, signals weakening financial health.
- Additionally, the firm’s heavy reliance on a few global technology suppliers and its consistent negative cash flows raise substantial risks to its operational stability and growth prospects. High working capital needs and substantial contingent liabilities further exacerbate these risks.
- Although the IPO seems reasonably priced at a PE multiple of 11x, the investment's risk may outweigh the potential returns. The grey market premium for the IPO, however, suggests a premium listing on the bourses.
- Keeping these factors in mind, risk-tolerant investors may consider subscribing for listing gains. But for long-term investors, it would be prudent to wait and assess the firm’s financial performance in the ensuing quarters before making any investment commitments.
About the company
Founded in
15 Mar'89
Managing director
Kapal Suresh Pansari
- Rashi Peripherals Ltd (RPL) ranks as the fourth-largest distributor of information and communications technology (ICT) products and services in India. In the past two years, it has established itself as a premier B2B technology supplier, offering an extensive and well-rounded range of products and solutions spanning from modest value items like storage devices to sophisticated equipment necessary for creating supercomputers and servers.
- RPL operates mainly across two business segments: (i) Personal Computing, Enterprise & Cloud Solutions (PES) — covering personal computing devices, enterprise solutions, embedded designs/products, and cloud computing — and (ii) Lifestyle and IT Essentials (LIT), which involves the distribution of various products.
STRENGTHS
- Market Dominance: RPL holds a significant presence in the Indian market, with notable market shares across various product categories including 47% in graphics cards, 45% in processors, 42% in pen drives, 33% in routers, 29% in hard drives, 27% in monitors, 21% in keyboards and mouse, 13% in UPS, and 10% in laptops, desktops and switches for FY23.
- Extensive Distribution Network: RPL boasts one of the broadest networks for distributing ICT products across the country, with operations spanning 50 cities through sales and service centres and warehouses. This network extends to 680 locations across 28 States and Union Territories in India, serving an ecosystem of 8,407 customers as of September 30, 2023.
- Strategic Partnerships with Global Technology Leaders: As of September 30, 2023, RPL serves as the national distribution partner for 52 leading global technology brands, distributing products for renowned companies such as ASUS, Dell, HP India Sales, Lenovo India, Logitech Asia Pacific Limited, NVIDIA Corporation, and Intel Americas, among others.
RISK FACTORS
- Decrease in Profitability: There was a decline in EBITDA from Rs 305.2 crore in FY22 to Rs 267.6 crore in FY23. Consequently, net profit experienced a significant decrease from Rs 182.5 crore to Rs 123.3 crore over the same period.
- Reduction in Margins: Over the years, there's been a consistent decrease in EBITDA margin, dropping from 3.63% in FY21 to 3.28% in FY22, and further down to 2.83% in FY23. Net profit margin also decreased, from 2.3% in FY21 to 1.96% in FY22, and further to 1.3% in FY23.
- Decline in Return Ratios: There was a significant fall in both Return on Equity and Return on Capital Employed, from 37.56% and 20.13% in FY22 respectively, to 19.33% and 14.21% in FY23.
- Reliance on Suppliers: RPL heavily relies on a selection of global technology brands for its product distribution. Revenue from the top eight global technology brands constituted over 82% of operational revenue. Any disruption in supply from these brands could significantly affect the firm’s business, profit margins, and reputation.
- Cash Flow Concerns: RPL has reported negative cash flows from its operations in the six months up to September 2023, continuing a trend seen over the past three financial years. Persistent negative cash flows or substantial short-term financial challenges could critically affect the firm’s operational capability and expansion strategies.
- Potential Liabilities: Contingent liabilities stood at Rs 592.76 crore as of September 30, 2023. Should a considerable portion of these liabilities materialise, it could negatively impact the firm’s business, financial stability, and operational outcomes.
- High Working Capital Requirements: As of September 2023, the firm needed Rs 2,053 crore for its working capital. Failure to secure or sustain adequate cash flows, credit, or other financial resources to fulfil these needs on time could harm the company’s operational and financial health.
Issue details
Issue type
Mainstream
Issue size
₹ 600 crore
Fresh Issue
₹ 600 crore
OFS
₹ -
Price range
₹ 295 - 311
Lot size
48 shares
Issue Objective
The firm intends to utilise the proceeds from the net issue towards:
- Repayment and/ or pre-payment of certain borrowings;
- Funding working capital requirements; and
- General corporate purposes.
Dates
Bidding open
7 Feb'24
Bidding close
9 Feb'24
Allotment date
12 Feb'24
Refund date
13 Feb'24
Listing
14 Feb'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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