Paradeep Phosphates IPO: GMP, Review, Subscription Status And Other Details

This is another busy week for the IPO or primary market which saw the listing of LIC just yesterday. Also, another IPO by Paradeep Phosphate kicked off only yesterday ( May 17, 2022). Here is a low down on the issue together with the GMP and subscription status.

Issue details: IPO size: Rs. 1501.74 crore

IPO offer period - May 17-May 19

Price band-Rs. 39-42

Fresh Issue size: 1,004 crore

Offer for sale size: 498 crore

No. of shares pre-issue: 57.5 crore

Fresh Issue: 23.9 crore

Offer for sale: 11.9 crore

No. of shares post-issue: 81.4 crore

Bid Lot size: 350 Equity share and in multiple of 350 equity share thereafter

QIB: (including Anchor) portion: 50% Non-Institutional reserved portion: 15% Retail investors portion: 35%

The issue is an OFS or offer for sale and fresh issuance. As part of the OFS, the government shall dilute its entire stake of 19.55%. As of now, ZMPPL (Zuari Maroc Phosphates Pvt Ltd) holds 80.45% and the government of India owns the remaining 19.55 per cent stake in the company. The offer for sale ( ₹500 crore) includes up to 6,018,493 equity shares by Zuari Maroc Phosphates Private Limited and up to 112,489,000 equity shares by The President of India, acting through the Ministry of Chemicals and Fertilizers, Government of India.

Issue objectives:

Proceeds of fresh issue (Rs. 1,000 crore) will be used to partly fund the acquisition of the fertiliser manufacturing facility in Goa and payment of debt and general corporate purposes.

About Paradeep Phosphates:

Founded in 1981 under the Companies Act, 1956, Paradeep Phosphates Limited (PPL) is India's third-largest producer of non-urea fertilizer and the second-largest producer of Di-Ammonium Phosphate (DAP). The company has a proven track record of achieving robust financial results.

Financials

In the Fy 2021, the company logged profit to the tune of Rs. 223.27 crore as against Rs. 193.22 crore in the previous year. The revenue however charted a decline to Rs. 4227.78 crore in the review period. Further in the nine-month period ended December 2021, it logged profit of Rs 362.781 crore, while revenue from operations also increased significantly to Rs 5,183.94 crore.

Paradeeep Phosphates IPO GMP:

As per ipowatch.in, the IPO of Paradeep is commanding a premium of barely Rs. 3 in the grey market, signalling another muted listing after LIC. Another portal, topsharebrokers.com also suggests the GMP to be Rs. 3 for the currently open issue.

Subscription status:

As per Angel One, the IPO of Paradeep Phosphates as on Day 2 of bidding as of 2:16 pm was subscribed 0.43 times.

Should You Subscribe To Paradeep Phosphates IPO?

Here are the views on the IPO by brokerages:

Angel One- Neutral rating

In terms of valuations, the stock will trade at post issue P/E multiples of 15.3xFY2021 EPS, which is in line with other players like Chambal fertilizer and Deepak fertilizer though they may not be strictly comparable, said Angel One.

Given the fact that the company is valued in line with peers and is likely to face headwinds in terms of cost pressures due to the recent increase in raw material prices, , the brokerage has recommended a 'neutral' rating on the issue.

Arihant Capital: Subscribe for long-term

"At the upper price band of Rs 42, the company is valued at a P/E multiple of 11x based on its FY21 EPS of Rs 3.9. The company is a major player in the fertilizer sector and is expanding its capacity and backward integration operations. Also, it has raw material security through its promoters. Factoring in the business model, the demand for its products and the company fundamentals, the brokerage recommend that long term investors can subscribe to the Initial Public Offering of Paradeep Phosphates Ltd", notes the brokerage.

Kotak Securities: Not rated

The brokerage highlights that the company is well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations. As of March 31, 2022, (i) its total annual granulation capacity of DAP and NPK production plant was approximately 1.50 million MT; (ii) its total annual installed capacity of Sulphuric acid production plant was approximately 1.30 million MT; and (iii) its total annual installed capacity of Phosphoric acid production plant was 0.30 million MT, in addition, the plant has three operational concentrators to concentrate weak Phosphoric acid into strong Phosphoric acid. PPL has an established track record of delivering robust financial performance, according to Kotak Securities.