Bansal Wire IPO Fully Subscribed on Day 1: 10 Key Risks Every Investor Must Know

Bansal Wire Industries, a company that manufactures stainless steel wire, launched its IPO on Wednesday to raise ₹745 crore. The IPO received strong demand and was fully subscribed on the first day.

IPO Details

The IPO opened on Wednesday, July 3, and will close on Friday, July 5. The IPO allotment will be finalised on July 8, with the shares expected to list on July 10 on both BSE and NSE. The price band for the IPO is set at ₹243 to ₹256 per share, and the lot size is 58 shares.

Anchor Investors

Ahead of the IPO, the company raised over ₹223 crore from anchor investors on July 2 by allocating 87,30,468 shares at ₹256 per share.

Key Risks

Before investing, it’s important to understand the company’s business and risks. Here are 10 key risks from Bansal Wire’s Red-Herring Prospectus (RHP):

1. Supplier Dependence: The company relies heavily on its top 10 suppliers for raw materials. Any delays or disruptions in supply can negatively impact operations and finances.
2. Working Capital: The company has significant working capital needs and may require additional financing, which can affect financial stability.
3. Raw Material Costs: The prices of raw materials are volatile. Fluctuations can pose a risk to the company’s financial health.
4. Profit Margins: The company had low EBITDA and PAT margins in the last three fiscal years.
5. Negative Cash Flows: Past negative cash flows and potential future negative cash flows are a financial challenge.
6. Market Conditions: The company’s performance is closely tied to the steel wires market. Any downturn in this market can impact financial health.
7. Legal Issues: Ongoing legal proceedings involving the company, its promoters, directors, subsidiaries, and group companies could negatively affect operations.
8. Expansion Risks: Expansion into new regions carries risks of significant liability and potential loss of investment.
9. Unsecured Borrowings: The use of unsecured loans, which lenders can recall at any time, poses a financial risk.
10. Distribution Network: Inability to maintain or expand their distribution network in India could negatively impact operations and financial condition.

Analyst Recommendations

Analysts are positive about Bansal Wire’s IPO for long-term investment. Anand Rathi recommends subscribing with a long-term view, noting the company’s extensive product portfolio and market potential. Swastika Investmart advises that only high-risk-tolerant investors should subscribe.

Grey Market Premium

The grey market premium (GMP) for Bansal Wire’s IPO is ₹60 per share, suggesting that the shares were trading at ₹316 apiece in the grey market, a 23.44% premium over the IPO price of ₹256 per share.