Paradeep Phosphates’ initial public offering (IPO) opens for subscription today (May 17) and closes on Thursday (May 19). The price band of the Rs 1,501 crore IPO has been fixed at Rs 39-42 per equity share with a face value of Rs 10. The shares will be listed on BSE as well as NSE. Shares of Paradip Phosphates were at a premium of Rs 3 in the gray market on Tuesday, 10% of the issue price. Prior to the IPO, several brokerages gave the issue a subscription rating due to its fair valuation compared to its peers.
Pardeep Phosphates, India’s second-largest non-urea fertilizer and di-ammonium phosphates (DAP) private sector manufacturer, on Friday raised just over Rs 450 crore from anchor investors. The company has allotted a total of 10.7 crore equity shares at Rs 42 per anchor investor, with a total transaction volume of Rs 450.52 crore. Investors include Goldman Sachs, BNP Paribas Arbitrage, Kuber India Fund, Capitol Mauritius Investment and Society General Anchor.
The government will close its full partnership
The Government of India will offload its entire 19.55% stake in the company. Currently, gambler Maroc Phosphates Pvt Ltd (ZMPPL) holds 80.45% and the Government of India owns the remaining 19.55% stake in the company. Offer for sale (Rs 500 crore) ZMPPL has 6 million equity shares and the President of India, working through the Ministry of Chemicals and Fertilizers, has up to 11.2 crore equity shares.
Pardeep Phosphates IPO Details
Issue size: 1501.7 crore
Fresh issue size: 1,004 crore
Offer size for sale: 498 crores
Price band: From Rs 39 to Rs 42 per equity share
Contact: 10 / share
Number of pre-issue shares: 57.5 crore
New issue: 23.9 crore
Offer for sale: 11.9 crore
Number of shares after issue: 81.4 crore
Bid Lot Size: 350 equity shares and then multiple of 350 equity shares
Category: Part (with anchor): 50%
Non-Institutional Reserved: 15%
Retail Investors Part: 35%
The new issue revenue (Rs 1,000 crore) will be used in part for acquisition of fertilizer production facilities in Goa and repayment of loans and financing for general corporate purposes.
Should You Subscribe to Paradeep Phosphates IPO?
Arihant Capital: Subscribe in the long run
Paradeep Phosphates is the second largest private sector non-urea fertilizer manufacturer in India and the second largest private sector D-ammonium phosphate manufacturer. It has a huge network of dealers and distributors for marketing and distribution of its products. The company has a huge economy to compete in the industry. “In the price band above Rs 42, the company price is Rs 3.9 for FY21 EPS of 11x P / E Multiple. The company is a major player in the fertilizer sector and is expanding its capabilities and backward integration activities. Also, it has raw material security through promoters. Based on the business model, the demand for its products and the fundamentals of the company, we recommend that long-term investors subscribe to Paradeep Phosphates Ltd’s initial public offering. “
Choice Broking: Subscribe
According to the brokerage firm, Pardeep Phosphates is in a good position to capture the dynamics of the favorable Indian fertilizer sector, supported by convenient government regulations. It is driving the efficiency of raw materials through backward integration of facilities and effective sourcing. The company has a safe and certified production facility, infrastructure and unused land for expansion. The strategic location of the manufacturing facility and the huge material storage, handling and port facilities are other positive aspects for the firm. It has a strong parent, experienced management team and prominent shareholders. “In the high priced band of Rs. Considering the above observations, we assign a “subscribe” rating to the issue, “Choice Broking said in its note.
Angel One: Neutral
The issue includes both offers for sale and new issues. When the Government of India will sell the entire 20% holding of the company’s gambler Marok Phosphates Pvt. Ltd. It will also sell some of its holdings in an offer for sale. “In terms of valuation, the stock will trade at 15.3xFY2021 EPS (at the top end of the issue price band) at the P / E quality of the issue post, which is consistent with other players such as Chambal Fertilizer and Deepak Fertilizer even though they may not be. Strictly compare. We recommend a neutral rating on the issue, considering that the recent rise in raw material prices could put the company under pressure to keep up with its peers in terms of value and potential costs. “
Kotak Securities: Not rated
The brokerage noted that Paradeep Phosphates is in a good position to capture the dynamics of the favorable Indian fertilizer industry supported by favorable government regulations. As of March 31, 2022, (i) the total annual granular capacity of DAP and NPK production centers was approximately 1.50 million MT; (ii) The total annual installed capacity of the sulfuric acid production plant was about 1.30 million metric tons; And (iii) the total annual installed capacity of the phosphoric acid production plant was 0.30 million metric tons, in addition, the plant has three operational concentrators to concentrate weak phosphoric acid into strong phosphoric acid. According to Kotak Securities, PPL has an established track record of delivering strong financial performance.
BP Equities: Membership for the long term
With the company installing an evaporator to increase the internal production of strong phosphoric acid and increase the phosphoric acid production capacity to 1500 TPD, the amount of backlog consolidation will be further improved, which will lead to improvement in contribution margins. At the top end of the price band, the issue price is 7x P / E based on FY22 annual earnings, which we believe is reasonably priced, ”the brokerage said in its report. Therefore, it recommends a ‘subscribe’ rating in the long run.
Geojit Financial Services: Subscribe
In the price band above Rs 42, PPL 7.1x (FY22 annual) is available at P / E which is attractive on short to medium term basis. PPL is well-positioned to drive the efficiency of raw materials through the dynamics of the favorable Indian fertilizer industry backed by favorable government regulations, retroactive integration and efficient sourcing of facilities and the establishment of a brand name supported by an extensive sales and distribution network. Considering PPL’s expansion plans, deepening its presence in the western and southern regions of India, we set a ‘subscribe’ rating for the issue on a short to medium basis. “
(Recommendations for this story are made by relevant research analysts and brokerage firms. Financial Express Online bears no liability for their investment advice. Capital market investments are subject to rules and regulations. Please consult your investment advisor before investing.)