KNOW THE COMPANY:
HP Adhesives Limited is a company engaged in producing adhesives and sealants. The company’s product portfolio includes consumer sealants and adhesives such as different types of PVC, PVA, solvent cement, synthetic rubber, acrylic and silicone adhesive and sealants. The company also produces gasket shellac, PVC pipe lubricants.
HP Adhesives visa its product portfolio is engaged in many industries. The company is also engaged in the woodwork, glazing operations, automotive and footwear industry. It also manufactures industrial ancillaries such as ball valves, FRP products and thread seals. The company currently has four major centers in the country. These centers are in Delhi, Kolkata, Indore and Bengaluru. HP Adhesives also has a vast distribution network of 750 distributors and 50,000 dealers. The company also has an international presence, with its product line being sold in 21 different countries. The company has one Multi- Speciality Manufacturing unit in Raigad, Maharashtra. It has a manufacturing capacity of 15400 metric tons.
The company’s primary revenue stream is that from:
| PVC, cPVC and uPVC | 70.44% |
| Silicone sealants | 7.99% |
| PVA adhesives and synthetic rubber adhesives | 5.33% |
HP Adhesives have a Rs 13500-14000 crore market as per the data in FY2020. The company has divided their business verticals into two major categories, which includes:
- Industrial Adhesives: B2B Industry driven business
- consumer and bazaar adhesives.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the company’s loans, which be availed on a consolidated basis.
- To meet corporate targets.
- To fund the working capital requirement.
BASIS OF THE IPO OFFER:
- HP Adhesives has a diversified product portfolio line, multiple SKUs with a widespread presence with many clients across various industries.
- The company has an experienced promoter base and competent management that has a great understanding of the market and business opportunities for the company.
- The company has a strong presence in the consumer market sector and a growing international presence. It has helped the company to increase its brand awareness over the years.
- HP Adhesives have a substantial Sales and distribution chain.
- The company’s manufacturing and production facility are located to attain a strategic and locational advantage for its operation and financial performance.
- The company focuses on enhancing its operational effectiveness and expansion plan and setting up an R&D unit to improve its product quality and develop a new product line.
HP ADHESIVES IPO DETAILS:
HP Adhesives, the company, was first a private firm which later became a public company, shifted its headquarters in Mumbai. Recently the company got approval from SEBI to float their IPO in the market. The company submitted their DRHP to the SEBI earlier these years. As per the DRHP, the company will float an IPO that is a combination of an OFS of 4,57,200 equity shares from selling stakeholders and an issue of fresh equity worth 41,40,000 Equity shares.
HP Adhesive’s IPO offer comprises 25.02 percent of POPES, also known as the post-offer paid-up equity share of the company. The company also stated that the funds raised through the issue of the fresh equity would be used for the company’s working capital requirements and the project of expansion in the production capacity. The company also stated that it would buy some new machinery for their Raigad plant with the issue of fresh equity.
| IPO Opening Date | 15 December 2021 |
| IPO Closing Date | 17 December 2021 |
| Issue Type | Book Building Type |
| Face Value | Rs. 10 per Equity Share |
| IPO Price | Rs. 262 – Rs. 274 per equity share |
| Market Lot | 1 lot of 50 Shares |
| Minimum Order Quantity | 50 Shares = 1 lot |
| Maximum Order Quantity | 700 Shares = 14 lots |
| Minimum Order Price | Rs. 13,700 |
| Maximum Order Price | Rs. 191,800 |
| Listing At | BSE, NSE |
| Issue Size | 45,97,200 Equity Shares |
| Fresh Issue | 41,40,000 Equity Shares |
| Offer for Sale | 4,57,200 Equity Shares |
| Basis of Allotment Date | 22 December 2021 |
| Initiation of Refunds | 23 December 2021 |
| The Credit of Shares to Demat Account | 24 December 2021 |
| IPO Listing Date | 27 December 2021 |
| Basis of Allotment Type | % Of the Allotment of the IPO Offer |
| Qualified Institutional Buyer | 75 |
| Non-Institutional Investor | 15 |
| Retail | 10 |
FINANCIAL TRENDS:
| Earnings Per Share (Rs) | 7.74 | -3.64 | 312.75 |
| Book NAV/Share (Rs) | 9.74 | 1.91 | 409.56 |
| Tax Rate (%) | 23.96 | 12.73 | 88.19 |
| Core EBITDA Margin (%) | 10.13 | 4.96 | 104.33 |
| EBIT Margin (%) | 13.36 | -3.34 | 499.85 |
| Pre-Tax Margin (%) | 11.20 | -6.41 | 274.64 |
| PAT Margin (%) | 8.51 | -5.60 | 252.16 |
| Cash Profit Margin (%) | 10.12 | -3.35 | 402.10 |
| ROA (%) | 14.12 | -8.69 | 262.45 |
| ROE (%) | 132.86 | -190.34 | 169.80 |
| ROCE (%) | 34.09 | -7.53 | 552.65 |
| Asset Turnover(x) | 1.66 | 1.55 | 6.76 |
| Sales/Fixed Asset(x) | 4.88 | 4.43 | 10.13 |
| Working Capital/Sales(x) | -21.62 | -8.08 | -167.59 |
| Fixed Capital/Sales(x) | 0.21 | 0.23 | -9.20 |
| Receivable days | 65.90 | 85.51 | -22.94 |
| Inventory Days | 78.64 | 79.99 | -1.68 |
| Payable days | 62.68 | 75.85 | -17.35 |
| EV/Net Sales(x) | 0.46 | 0.56 | -17.31 |
| EV/Core EBITDA(x) | 3.09 | 7.26 | -57.45 |
| EV/EBIT(x) | 3.46 | -16.73 | 120.68 |
| EV/CE(x) | 0.62 | 0.87 | -28.60 |
| Net Sales Growth (%) | 39.82 | 0.00 | 0.00 |
| Core EBITDA Growth (%) | 171.68 | 0.00 | 0.00 |
| EBIT Growth (%) | 659.06 | 0.00 | 0.00 |
| PAT Growth (%) | 312.75 | 0.00 | 0.00 |
| EPS Growth (%) | 312.75 | 0.00 | 0.00 |
| Total Debt/Equity(x) | 3.35 | 14.09 | -76.20 |
| Current Ratio(x) | 0.92 | 0.80 | 15.12 |
| Quick Ratio(x) | 0.44 | 0.44 | -0.83 |
| Interest Cover(x) | 6.18 | -1.09 | 668.30 |
| Particulars | For the year with amount ending in Crore | ||||
| 31-Mar-21 | 31-Mar-20 | ||||
| Total Assets | 89.78 | 56.81 | |||
| Total Revenue | 123.88 | 86.83 | |||
| Profit After Tax | 10.06 | – 4.73 |
STRENGTHS AND GROWTH ASPECTS:
- The company registered an improvement in their scale of operations in the first half of the FY21 in post COVID Era.
- HP Adhesives’ major strength lies in its promoter and management team. The company’s promoters have experience of 30 years in the adhesive industry.
- The diversified product portfolio, multiple SKU’s and presence in multiple industries through their business product line. HP Adhesives currently has a firm undertone and strong operational and financial performance on both Top-line and Bottom-line front.
- HP Adhesives is the biggest and the most prominent company engaged in solvent cement, gasket shellac, PVC pipe lubricants in Asia.
- The company also enjoys the benefit of its Pan India distribution network, which incorporates 750 distributors, 50,000 dealers, 74 OEM clients, and 26746 retail stores.
- HP Adhesives will benefit from the growth in the adhesive sector. The estimated growth is 8-9% CAGR within FY25.
- The company has improved significantly on the financial parameters with higher net margins, better operational margins, high profitability ratio, strong liquidity and improved debt metrics. HP Adhesives also registered a total operating income of Rs. Two hundred fifty crores, where the tangible net worth base of the company increased to Rs.75 crore before filling up for the IPO.
- The PAT and PBILDT margins of the company also improved by 10% and 17% due to higher production and an increase in the demand for their product line in the market.
- HPAL’s presence is more robust in the western region as it derived almost half of its entire domestic revenue from this region in FY21
- The company’s short-term focus is to expand its manufacturing and distribution network. The company benefits a lot from its strategic manufacturing facility near JNPT port which allows them to get raw material on time.
WEAKNESS AND THREATS:
- HP Adhesives has a very modest scale of operations considering the amount of market the company owns, its net-worth and other parameters. It is also due to the underutilization of their manufacturing plant, which has negatively impacted the company.
- The company is vulnerable to volatility in the availability, pricing and supply-demand of the raw materials required for their finished product.
- HP Adhesives also face an additional threat in their raw material by the price of crude oil and petrochemical intermediates. Its raw materials are derived from these substances only. It can significantly impact their profitability, margins, and other ratios.
- The company is engaged in a highly competitive environment where it faces competition from many organized and fragmented peers.
- The company needs to comply with the strict industrial, environmental and quality control guidelines required in the sector.
- HP’s Adhesive manufacturing operation is a highly working capital-intensive business.
- The company relies heavily on the western region of India as around 80% of its revenue is from the domestic western region of the country.
- The company also has a challenge with their ongoing expansion project.
- HP Adhesives, the company, and promoters are currently facing a trial under legal procedure. Any negative news on this front will hurt the company’s brand image.
- The COVID-19 leading to lockdown and disruption in the supply chain operation has led to financial and operational inefficiency in the company.
- The company holds some disclosed contingent liabilities that have led to a negative impact on the company.
PROMOTERS:
- Mrs. Anjana Haresh Motwani
- Mr. Karan Haresh Motwani
| Pre-Issue Share Holding | 95.31% |
| Post Issue Share Holding |
CONTACT DETAILS:
HP Adhesives Limited
11/ Unique House – Chakala Cross Road, Andheri East,
Mumbai – 400 099, Maharashtra, India,
Telephone: +91 22 68196300
E-mail: investors@hpadhesives.com
Website: www.hpadhesives.com
REGISTRAR:
BIGSHARE Services Private Limited
1st floor, Bharat Tin Works Building,
Opp. Vasant Oasis, Makwana Road,
Marol, Andheri (East),
Mumbai- 400 059, Maharashtra, India.
Telephone: +91 22 6263 8200
Facsimile: +91 22 6263 8299
E-mail: ipo@bigshareonline.com
Website: www.bigshareonline.com
LEAD MANAGER(S):
- Unistone Capital Private Limited
