A fertilizer company has filed its draft papers with the SEBI to come up with its IPO. The company is Paradeep Phosphates Limited. So let us discuss in detail the company’s business fundamentals in detail.
About the company
Paradeep Phosphates Limited is the third largest private sector manufacturer of non-urea fertilizers in India and second largest in terms of Di-Ammonium Phosphate volume sales as of March 2021. The company is primarily engaged in manufacturing, trading, distribution, and sales of a variety of complex fertilizers such as DAP and others.
The company’s fertilizers are marketed under some of the key brand names in the market ‘Jai Kisaan-Navratna’ and ‘Navratna.’ The company was incorporated in 1981. The company has a strong presence in the eastern part of India. It distributes products across 17 states in India through its network of 11 regional marketing offices and 1324 stock points as of March 2021.
The company’s network includes 4529 dealers and over 60,257 retailers, catering to over five million farmers in India as of March 2021. The company sources its raw materials from countries such as Morocco, Jordan, Qatar, and Saudi Arabia. All of the company’s products are manufactured in Paradeep, Odisha.
Paradeep Phosphates Limited Details
Following are the details of the company’s IPO:
- The company is not yet out with its IPO subscription dates.
- The company is not yet out with its IPO issue price range.
- The company will list its shares on the NSE and the BSE.
Objectives of the IPO
Following are the objectives of the company’s IPO:
- The company’s IPO issue is a combination of a fresh issue of shares and an offer for sale. The company will receive up to ₹1255 crores as gross proceeds from the fresh issue part.
- The company will use a part of the net proceeds from the fresh issue to partly finance the acquisition of the Goa facility.
- The company will also use a part of the net proceeds towards repayment/prepayment of borrowings.
- The company will also use a part of the proceeds towards general corporate purposes.
Further, the company wants to enhance its corporate image and credibility by listing its shares on the stock exchanges.
Following are the key strengths of the company:
- The company is well positioned to capture the favorable Indian fertilizer industry dynamics supported by conducive government regulations.
- The company is the second largest manufacturer of phosphatic fertilizers in India.
- The company is driving raw material efficiency through backward integration of facilities and effective sourcing.
- The company has a secure and certified manufacturing facility and infrastructure and unutilized land available for expansion.
- The company has an established brand name backed by an extensive sales and distribution network.
- The company has a strong parentage, experienced management team and prominent shareholders.
Following are the key risks that the company faces in its business:
- The company’s business is dependent on the performance of the agricultural sector. So any adverse event in the agricultural sector could affect the company’s business.
- The company’s business is also subject to climatic conditions and is cyclical in nature.
- The fertilizer industry in India is regulated. Any change in government policies towards the agricultural sector can disrupt the company’s business.
- Until the completion of the Goa transaction, the company has only one manufacturing facility.
- There are certain outstanding proceedings against the company and its promoter group. Any adverse outcome in relation to this event could disrupt the company’s business.
- A major portion of the company’s revenues are derived from a limited number of states, leading to concentration risk.
- The company is dependent on a limited number of suppliers to source their key raw materials.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations increased from ₹4357.9 crores in FY19 to ₹5164.7 crores in FY21.
- The company’s profit after taxes increased from ₹158.9 crores in FY19 to ₹223.2 crores in FY21.
- The company’s net asset value per share stood at ₹31.76 as of FY21.
- The company’s earnings per share stood at ₹3.88 as of FY21.
- The company’s total borrowings decreased from ₹3122.9 crores in FY19 to ₹1251.1 crores in FY21.
- The company’s net worth increased from ₹1482.7 crores in FY19 to ₹1827.5 crores in FY21.
According to its prospectus, Paradeep Phosphates Limited counts Coromandel International Limited, Chambal Fertilizers Limited, and Deepak Fertilizers and Petrochemicals Limited among its peer group. The company’s return on net worth stood at 12.22%, which is lower as compared to its peer group.
There were the business fundamentals of Paradeep Phosphates Limited. The company is not yet out with its IPO subscription dates and the IPO issue price range. Investors should do their own due diligence before subscribing to the company’s IPO.