Should You Buy on Day 2 of the Paradeep Phosphates Initial Public Offering?

  • May 19, 2022, 12:12 p.m.

The initial public offering of Paradeep Phosphates, India’s second-largest manufacturer of non-urea fertilisers and di-ammonium phosphates (DAP) in the private sector, is open for subscription now. Paradeep Phosphates opened its initial public offering (IPO) on May 17 and will close on May 19. As per the information available on the BSE website, Paradeep Phosphates has fixed the price band of its public offer at Rs 39 to Rs 42 per equity share. The company aims to mop up Rs 1,501 crore from a combination of a fresh issue of equity shares aggregating up to Rs 1,004 crore and an offer-for-sale (OFS) of 118,507,493 equity shares of Rs 10 each, aggregating to Rs 497.73 crore. The OFS comprises 6.02 million shares by Zuari Maroc Phosphates Pvt Ltd (ZMPPL), a joint venture of Zuari Agro Chemicals and OCP Group SA, and up to 112.49 million shares by the government. ZMPPL has an 80.45 per cent stake, while the government holds around 19.55 per cent in the company.

Paradeep Phosphates IPO: Subscription Status

As of 10:30 am, retail investors have bid for 64 per cent of the shares set aside for them as against 13.15 crore, while the non-institutional investors’ portion was subscribed at 7 per cent on the launch of the Paradeep Phosphates IPO. Qualified institutional buyers have subscribed for 4,900 shares of the issue against their quota of 8.07 crore shares.

Around 50 per cent of the net offer will be reserved for QIBs, another 35 per cent for retail investors, and the remaining 15 percent for non-institutional investors.

Paradeep Phosphates IPO: GMP Today

According to grey market observers, Paradeep Phosphates IPO GMP (grey market premium) today is Rs 3, which is unchanged from yesterday’s grey market premium. Observers went on to add that Paradeep Phosphates IPO GMP has remained steady at Rs 3 for the last three days. They said that Paradeep Phosphates IPO grey market price may change as there is a trend reversal in the secondary market.

However, stock market experts suggested to investors that GMP is an unofficial data source that is non-regulated. Those who follow GMP are advised to go through the financials of the company as well, because the balance sheet of the company will give a better picture of the company’s fundamentals.

Financials

Paradeep Phosphates reported a profit of Rs 362.781 crore in the nine months ended December 2021, with revenue from operations during the same period rising significantly to Rs 5,183.94 crore. Axis Capital, ICICI Securities, JM Financial, and SBI Capital Markets are the book-running lead managers for the issue.

Incorporated in December 1981, Paradeep Phosphates is primarily engaged in manufacturing, trading, distribution, and sales of a variety of complex fertilisers such as DAP, three grades of nitrogen-phosphorus-potassium (NPK), namely NPK-10, NPK-12, and NP-20, zypmite, phospho-gypsum, and hydroflorosilicic acid (HFSA).

Should you subscribe?

According to the brokerage firm Choice Broking, Paradeep Phosphates is well-positioned to capture the favorable Indian fertilizer sector dynamics supported by conducive government regulations. It is driving raw material efficiency through backward integration of facilities and effective sourcing. The company has a secure and certified manufacturing facility, infrastructure, and unutilized land available for expansion. The strategic location of the manufacturing facility and sizable material storage, handling, and port facilities are other positives for the firm. It also has a strong parentage, an experienced management team, and prominent shareholders. "At a higher price band of Rs 42, PPL is demanding an FY21 EV/Sales multiple of 0.7x, which is at a significant discount to the peer average of 1.1x. "Considering the above observations, we assign a "SUBSCRIBE" rating for the issue," it said in its note.

In an IPO note, Geojit said: "At the upper price band of Rs.42, PPL is available at a P/E of 7.1x (FY22 annualized), which is attractive on a short-to-medium term basis." PPL is well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations, driving raw material efficiency through backward integration of facilities and effective sourcing, and an established brand name backed by an extensive sales and distribution network. Considering PPL’s expansion plans, deepening its presence in the western and southern regions of India, we assign a ‘Subscribe’ rating to the issue on a short-to-medium basis."

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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