Sambhv Steel Tubes is coming with an IPO to raise ₹540 crore and the issue is open to subscription till Friday, June 27. The Raipur, Chhattisgarh-based company, with operations since 2018, manufactures steel pipes and hollow tubes. The company is backward integrated and being in a mineral-rich State has sufficient access to raw materials. The IPO prices the company at 44.5 times annualised 9MFY25 earnings, which compares well with APL Apollo tube’s trailing PE ratio of 66 times — a much larger peer in steel tubes manufacturing.

Long-term investors with a high risk appetite can subscribe to the issue. The company should expect a gradual increase in product mix to value-added sales, and also presents a scope for future growth. The IPO proceeds consist of a fresh issue of ₹440 crore, out of which ₹390 crore will be used to clear long-term debt. The valuation at 44.5 times annualised 9MFY25 earnings would likely decline to around 25-30 times if debt is cleared with IPO proceeds, as per management plans.

Backward integrated model

The company manufactures sponge iron from iron ore and coking coal, which are vastly available in the region. From sponge iron, the company manufactures slabs and from there on hot rolled coils. Most manufacturers of steel have HR coils as the finished product, from where the tube manufacturers take over. But at Sambhv, the HR coils are turned into Electric Resistance Welded - ERW steel pipes and tubes and this has added to sales from FY23. In Nov-2025, the company reported sales from GP pipes (pre-galvanised pipes) and cold rolled stainless steel manufacturing as well, which are downstream from ERW pipes.

Product mix to drive growth

The company’s sales in FY22 were led by sponge iron, slabs and HR coils, which accounted for 100 per cent of sales. In 9MFY25, the three early-stage steel products accounted for 19 per cent of sales, while value-added ERW steel pipes accounted for 79 per cent with an installed capacity of 350,000 tonnes per annum (TPA). While sponge iron is close to half of ERW realisations, slabs and HR coils are around 20 and 10 per cent lower. The product mix should further move to a value-added mix, driving realisations.

As mentioned, GP Pipes with 100,000 TPA installed capacity and cold rolled stainless steel (58,000 TPA) mills have also been added. These downstream products have realisations which are close to 100-150 per cent and 20 per cent more than ERW pipes, respectively. The revenue contribution from these recent additions has started with 2 per cent in 9MFY25 and FY26 should witness optimal capacity utilisation of 60-70 per cent, driving overall realisations higher. The company is also eyeing a greenfield expansion around Raipur and is in the early phase of development.

Financials and valuation

The company reported revenue growth of 25 per cent CAGR between FY22-24 despite weak steel prices owing to increasing capacity and improved product mix. The EBITDA margins, though, have been impacted by steel prices and contracted from 15 per cent in FY22 to 10.5 per cent in 9MFY25. The imposition of import duty has arrested steel prices decline and should be reflected in future earnings along with the push from improved product mix.

The company is currently highly levered with net debt to EBITDA of 4.3 times as of December 2024. The fresh issue proceeds will be used to clear most of the long-term debt and will aid in significantly lowering the finance costs, as per the management.

Published on June 26, 2025