Rama Steel freezes at 10% upper limit as stock turns ex-date for 4:1 bonus

Shares of Rama Steel Tubes were locked at the 10 per cent upper circuit at Rs 38.15 on the BSE at 09:39 AM, as the stock turned ex-date for bonus issue in the ratio of 4:1 i.e. 4 bonus shares for every 1 share held on the record date.

The board of directors of the company had fixed Friday, January 6, 2023, as the record date, for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus shares.

A combined 222,000 shares changed hands and there are pending buy orders for 2.36 million shares on the NSE and BSE, the exchanges data shows.

The stock of iron & steel products company traded at its record high level. In past one week, it has rallied 15 per cent after the company recorded highest sales volume of 53,216.16 ton in the December quarter (Q3FY23). In comparison, the S&P BSE Sensex was down nearly 1 per cent during the week.

Meanwhile, the company has earlier approved sub-division of equity shares of the company from face value of Rs 5 each to face value Re 1 each w.e.f August 25, 2022.

In the past three months, the stock has rallied 74 per cent, as against 4 per cent rise in the S&P BSE Sensex. Moreover, in the past six months, it has zoomed 142 per cent, as against 12.5 per cent gain in the benchmark index.

On October 12, 2022, the company's board allotted 1.625 million convertible warrants at an issue price of Rs 112.50 each (including premium of Rs 111.50) to investor Shankar Sharma on preferential basis upon receipt of 25 per cent of issue price from allottee.

Rama Steel Tubes is primarily involved in the manufacturing and trade of steel tubes & pipes & galvanised iron pipes in India as well as in the world. The company focuses on business growth opportunities from government programmes like housing for all, affordable housing, smart cities, the national highway development programme, the Swachh Bharat mission, NAL Se JAL, the Jal Shakti Scheme, the RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana), the DDUGJY (Deen Dayal Upadhyaya Gram Jyoti Yojana), etc.

Additionally, the company is in the process of entering certain specialised markets, such as the provider of steel pipes and tubes to city gas distribution and solar energy power plants.

Rama Steel Tubes has a varied product mix, which includes a wide range of pipes and tubes (such as black pipes, galvanised pipes, telecommunication transmission tower and substation structure) along with cold rolled coils and sheets, and structural engineering products. The sales volume has also significantly increased in the current year owing to ramp-up of capacities.

On January 4, 2023, ICRA assigned ICRA BBB ratings to Rama Steel Tubes’ instruments with stable outlook.

“ICRA’s ratings action favourably factors in Rama Steel Tubes’ experienced management and its long track record of operations in the steel pipes industry. The ratings also consider its diversified and strategically located manufacturing facilities, resulting in savings of logistics costs and healthy relationships with key customers, marked by diversified distribution channels,” rating agency said in rationale.

While assigning the ratings, ICRA also takes cognisance of the ongoing capacity expansion plans at an estimated outlay of around Rs. 130-150 crore over the next three years, which will increase the company’s total capacity by ~1,50,000 mtpa. The ratings also factor in the adequate capital structure supported by healthy equity infusion, which is expected to support the company’s capex plans, though project execution risks remain in terms of any time and cost over-run. Post the expansion, the company will benefit from increased scale and other operational synergies, which are expected to strengthen its overall operating profile, ICRA said.