Paradeep Phosphates IPO opens for subscription today: 10 things to know

The ₹1,500 crore IPO of Paradeep Phosphates opens on May 17 and closes on May 19. The price band has been fixed at ₹39-42 per share.  Ahead of the opening of the IPO, fertilizer company Paradeep Phosphates had raised a little over ₹450 crore from anchor investors at ₹42 apiece. Goldman Sachs, BNP Paribas Arbitrage, Kuber India Fund, Copthall Mauritius Investment and Societe Generale are among the anchor investors.

10 things to know about Paradeep Phosphates IPO

The government of India will be offloading its entire 19.55% stake in the company. Currently, ZMPPL (Zuari Maroc Phosphates Pvt Ltd)  holds 80.45% and the government of India owns the rest 19.55 per cent stake in the company.

The offer for sale ( ₹500 crore) comprises of 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.

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

Paradeep Phosphates is primarily engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as Di-Ammonium Phosphate (DAP) and NPK fertilizers. Paradeep Phosphates Limited (PPL) is the second largest private sector manufacturer of non-urea fertilizers in India and the second largest private sector manufacturer in terms of DAP volume sales for the nine months ended December 31, 2021.

Its fertilizers are marketed under some of the key brand names in the market -- 'Jai Kisaan – Navratna' and 'Navratna.

Lot size: Bids can be made for a minimum of 350 Equity Shares and in multiples of 350 equity shares thereafter.

According to Kotak Securities, Paradeep Phosphates has established track record of delivering robust financial performance. Its total income for the nine months ended December 31, 2021 and the financial years 2021, 2020 and 2019 was ₹5973.69 cr, ₹5183.94 cr, ₹4227.78 cr and ₹4397.21 cr, respectively, while 

Its profit for the period/year was ₹362.78 crore, ₹223.27 crore, ₹193.22 cr and ₹158.96 crore, respectively.  Its EBITDA for the nine months ended December 31, 2021 and the Financial Years 2021, 2020 and 2019 was ₹593.06 cr, ₹561.26 cr, ₹493.83 cr and ₹480.75 cr, respectively.

Choice Broking has a subscribe rating to the issue. “At higher price band of Rs. 42, PPL is demanding an FY21 EV/Sales multiple of 0.7x, which is at significant discount to the peer average of 1.1x. Considering the above observations, we assign a “SUBSCRIBE” rating for the issue,” the brokerage said in a note. 

Domestic brokerage Angel One has a neutral rating on the issue. “In terms of valuations, the stock will trade at post issue P/E multiples of 15.3xFY2021 EPS (at the upper end of the issue price band), which is in line with other players like Chambal fertilizer and Deepak fertilizer though they may not be strictly comparable. Given the fact that the company is valued in line with peers and likely to face headwinds in terms of cost pressures due to recent increase in raw material prices, we recommend a neutal rating on the issue.”