Paradeep Phosphates IPO- Review & Analysis – Apply or Avoid

Paradeep Phosphates IPO

Paradeep Phosphates, supported by Zuari Agro Chemicals, is planning an initial public offering (IPO) on May 17, 2022. In India, Paradeep Phosphates produces non-urea fertilisers. In the last three years and nine months, the company’s revenues have increased dramatically. For a similar time period, its margins are also improving. Should you invest in Paradeep Phosphates’ initial public offering? What are the potential risks in this IPO? Is the IPO valuation appropriate? Allow me to conduct this IPO evaluation and provide a thorough analysis.

About Paradeep Phosphates Limited

The company was founded in 1981. It is India’s leading producer of non-urea fertilisers. It manufactures, trades, distributes, and sells a variety of complex fertilisers, including DAP, three grades of nitrogen phosphorus potassium, NPK-10, and others.

For the nine months ended December 21, the company was the second largest private sector manufacturer of non-urea fertilisers and Di Ammonium Phosphate in terms of sales. The brand “Jai Kisaan-Navratna and Navratna” is on these fertilisers.

The company has developed a large sales and distribution network with a strong presence in India’s eastern region. In Paradeep, Odisha, it has a manufacturing facility.

Paradeep Phosphates IPO dates, issue details, Size and Price Band

IPO Opening Date 17-May-22
IPO Closing Date 19-May-22
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 39 to Rs 42 per equity share
Lot Size 350 Shares
Listing at BSE and NSE
Total Issue Size Rs. 1501.73 Crores
    Fresh issue     Rs. 1004 Crores
    OFS     Rs. 497.73 Crores

What are the competitive strengths of Paradeep Phosphates Limited?

1) The company is well positioned to benefit from positive fertiliser industry dynamics in India, which are aided by favourable government laws.

2) It is India’s second-largest producer of phosphoric fertilisers.

3) Through backward integration of facilities and excellent sourcing, the company improves raw material efficiency.

4) The company has a secure and accredited manufacturing facility, as well as undeveloped land for expansion.

5) The company’s manufacturing site is strategically located, and it has large material storage, handling, and port facilities.

6) Well-known brand name with a large sales and distribution network

7) Prominent stockholders, competent management team, and strong parentage

What are the Objects of the Paradeep Phosphates IPO Offer?

The IPO size of Paradeep Phosphates is Rs 1,501.73 crores, with both an OFS and a fresh issue.

1) Offer for Sale (OFS) for Rs 497.73 crores: Under the OFS, selling shareholders would receive the full amount, while the firm would receive nothing.

2) Rs 1,004 crore fresh issue: The following would be done with a new issue:

The acquisition of the Goa Facility was partially financed.
Repayment or payback of some of its debts.
General business reasons

Who are the promoters of Paradeep Phosphates Limited?

Zuari Maroc Phosphates Private Limited, Zuari Agro Chemicals Limited, OCP S.A and President of India, acting through the Ministry of Chemicals and Fertilizers, Government of India are the promoters of the company.

Paradeep Phosphates Limited- Financial Track 

Financial Year ending / Period ending (Amt in Mns)
Particulars FY19 FY20 FY21 Dec-21
Total Assets 56,277 50,103 44,232 71,863
Revenues 43,972.1 42,277.8 51,839.4 59,736.9
Profit After Tax 1,589.6 1,932.2 2,232.7 3,627.8
Profit % 3.62% 4.57% 4.31% 6.07%

 Paradeep Phosphates IPO Prospectus (RHP)

Reasons to Apply for Paradeep Phosphates IPO

1) In India, the firm is the leading non-urea manufacturer. It is India’s second-largest producer of phosphate fertilisers.

2) With an established brand identity, the company is well positioned to seize the lucrative Indian fertiliser market.

3) In the last three years and nine months, the company has had strong sales growth.

4) Company margins have improved significantly from Rs 158.9 crores (3.6%) of revenues in FY2019 to Rs 223.2 crores (4.3%) of revenues in FY2020 (FY21). Its margins rose to 6% of revenue for the nine months ending December 21.

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Risk Factor with Paradeep Phosphates IPO

1) The success of the company is dependent on the agricultural sector, where its fertilisers are used. Any changes in this industry’s performance can have a negative impact on company performance.

2) The company’s business is cyclical and dependent to climate conditions. Seasonal changes and unfavourable local and worldwide weather patterns can have a negative impact on business.

3) We are all aware that the fertiliser sector is heavily controlled. Any change in government policies affecting this industry might have an influence on business.

4) Until the Goa acquisition is completed, the company has only one manufacturing plant. Any unanticipated slowdowns or shutdowns in this manufacturing facility can have a negative impact on the company’s bottom line.

5) The company aims to buy the Goa factory, which has lost money after taxes for the past three years,

Paradeep Phosphates IPO Dates – Subscription, Allotment and Listing Dates

Offer Open 17-May-22
Offer close 19-May-22
Finalization of Allotment 24-May-22
Initiation of Refunds 25-May-22
Credit to Demat Account 26-May-22
IPO Shares Listing Date 27-May-22

How to buy Paradeep Phosphates IPO online through Zerodha?

You can login to your demat account, visit the IPO section and apply for this IPO during the subscription dates.

You can also apply this IPO on Zerodha. If you do not have Zerodha account, sign-up here and proceed to the next step.

Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.

Follow below steps to apply this IPO in Zerodha platform:

1) Visit the Zerodha portal and login to Console.

2) Go to Portfolio and click the IPOs link.

3) Visit ‘Paradeep Phosphates Limited IPO’ row and click the ‘Bid’ button.

4) Enter your UPI ID, Qty and the Price which you want to bid.

5) Click on ‘Submit’ IPO application form.

6) Visit the UPI App (net banking or BHIM) to approve the mandate.

Paradeep Phosphates IPO – Should you Invest or not?

Paradeep Phosphates Limited is a non-urea fertilizer manufacturer and second largest manufacture of phosphate in India.

Company generated good revenue growth in the past.

Its margins are improving year on year.

Its issue price is attractively priced.

Considering all these positive factors and negative factors indicated above, investors may subscribe to this IPO for medium to long term perspective. Since markets are in correction mode, one may or may not get listing gains.

Paradeep Phosphates IPO

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