Paradeep Phosphates Limited as a company was started in 1981. The company was started as a joint venture. It was established between the Republic of Nauru and the Government of India. At its inception, the company’s operation was to produce DAP. In 1993, their major Promoter, the Republic of Nauru, sold off their stake to the GoI. Paradeep Phosphates Limited became a PSU. Let’s delve deep into understanding some key elements about the Paradeep Phosphates IPO.
In February 2002, The Government of India sold its 74% stake to Zuari Maroc Phosphates Private Limited. Later on, the promoter company was demerged as Zuari Agro Chemicals. Currently, ZMPPL has a holding of 80.45% in the company. The rest is of the Government of India. Paradeep Phosphates Limited is currently an integrated player in DAP/NPK fertilizers market.
It is involved in the production, distribution, trading, and sales of fertilizers. Paradeep Phosphates Limited sells its fertilizers under’ Navratna’ and ‘Jai Kisaan -Navratna’. Along with their core business, the company also has a plant to manufacture sulphuric acid. It also manufactures phosphoric acid at Paradeep, Odisha.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the loans of the company that will be done on a consolidated basis.
- To meet corporate targets.
- To fund the working capital requirement.
- Paradeep Phosphates Limited also has an objective to fund its CAPEX Plan. The company wants to expand its existing manufacturing unit capacity. It also intends to develop new facilities. In fact, Paradeep Phosphates Limited intends to carry out a technology upgradation.
BASIS OF THE IPO OFFER:
- Paradeep Phosphates Limited currently has a strong position in terms of its valuations. It is also in a position to take advantage of Anti-dumping duty.
- GoI in the fertilizer sector has brought the growth of the business opportunity and other policies.
- Paradeep Phosphates Limited is India’s second-largest manufacturer. It is also the biggest distributor of Phosphatic fertilizers.
- The company has a focused on the Backward integration of its manufacturing plants. It is also focusing on smart sourcing for raw material utilization.
- Paradeep Phosphates Limited has a large Unused landbank to set up manufacturing capacity. The process of the company is a safe and accredited procedure.
- The company has a strategic benefit for the production facility. It also holds an advantage for material storage handling and port services.
- Paradeep Phosphates Limited has well-known brands under its item portfolio. Additionally, The company also has a wide distribution and logistics network.
- Furthermore, The company is backed by strong promoters, experienced management, and well-known stockholders.
PARADEEP PHOSPHATES IPO DETAILS:
Paradeep Phosphates Limited has its headquartered in Bhubaneswar, Odisha. The company submitted its DRHP to SEBI. The company is ready to float its IPO in the market. The IPO comprises of issue of fresh equity of Rs.1004 crores. The company will also carry out an OFS of 118,507,493 Equity Shares. The OFS will be brought forward by the Promoter and the company’s existing stakeholders.
The funds collected from the IPO will go to different divisions:
- partly financing of the fertilizer manufacturing facility been acquired in Goa
- for payment of debt
- general corporate purposes.
|IPO Opening Date||May 17, 2022|
|IPO Closing Date||May 19, 2022|
|Issue Type||Book Building Type Issue IPO|
|Face Value||Rs.10 per Equity share|
|IPO Price Band||Rs. 39 – Rs. 42 per equity share|
|Market Lot||One lot of 350 equity shares of the company|
|Minimum Order Quantity||One lot corresponding to 350 equity shares of the company|
|Minimum Order Price||Rs. 14,700|
|Maximum Order Quantity||13 lots corresponding to 4,550 equity shares of the company|
|Maximum Order Price||Rs. 191,100|
|Listing At||BSE, NSE|
|Issue Size||Rs. 1,501 crores|
|Fresh Issue||Rs.1,004 crores|
|Offer for Sale||118,507,493 Equity Shares|
|Price Band Announcement:||May 11, 2022|
|Anchor Investors Allotment:||May 16, 2022|
|Basis of Allotment Date||May 24, 2022|
|Initiation of Refunds||May 25, 2022|
|The Credit of Shares to Demat Account||May 26, 2022|
|IPO Listing Date||May 27, 2022|
|Basis of the Allotment Type||% Of IPO Offer|
|Qualified Institutional Buyer||50|
STRENGTH AND GROWTH ASPECTS OF OF PARADEEP PHOSPHATES IPO:
- Paradeep Phosphates Limited has established its reputation. It is the largest producer of complex fertilizers and DAP in India. The company has a capacity of 1.3MMTPA.
- The company has unique and flexible production units. It allows them to switch to DAP or NPKs as required by demand and supply.
- The growth of the Chemical and Agro- Chemical Sector industry will help the company. It will boost the margins and performance of the company at both top-line and bottom-line parameters.
- Paradeep Phosphates Limited has planned to increase its production unit facility to 1.7 MMTPA by FY2023.
- The company has a strong networking and monopoly business over DAP in India.
- Paradeep Phosphates Limited has a wide retail network of 4530 dealers and 60,000 retailers.
- The company will also benefit from the favorable outlook of the domestic demand.
- Boost from the GoI provides the Anti-Dumping duty for phosphate fertilizers. Earlier, it was imported from China.
- Paradeep Phosphates Limited also benefits in terms of raw materials. The company is in backward integration to produce phosphoric acid. The company doesn’t import this raw material.
- Whereas, the company has also commissioned in production of sulphuric acid. It set up a 1.32 MMTPA sulphuric acid plant in FY2016. The plant improved the cost structure of the company.
- Paradeep Phosphates Limited has a strong synergy with overseas companies.
- The company has its separate networking operations for the imported raw materials
Awards Received By Paradeep Phosphates Limited in the past, such as:
- Best Brand Platinum Award 2021 in the Corporate Excellence category.
- 19th Greentech Safety Award 2020 for outstanding achievement in the category of industry sector safety excellence
- ICONSWM Excellence Award 2019, which was given at the 9th International Conference on Sustainable Waste Management towards Circular Economy
- The company’s integrated business strategy has enabled them to increase profitability. This led to an increase of their working capital intensity. It has also maintained a competitive edge in the market.
- Paradeep Phosphates Limited has a long-term supply agreement for their major raw materials.
- Paradeep Phosphates Limited has a reputable financial record. It has produced strong results, highlighting its strong financial performance over the past quarters.
- The company regularly includes meetings with farmers.
- Undoubtedly, It also carried out meetings with the dealers and retailers. It has helped them strengthen their brand and develop new innovative solutions.
WEAKNESS AND THREATS OF OF PARADEEP PHOSPHATES IPO:
- Paradeep Phosphates Limited recently planned to complete the acquisition of the Goa plant. It had an absence of a strong and adequate equity contribution. In conclusion, the company lacks the funds to acquire the plant.
- The return metrics will weaken after the acquisition of the goa unit. It is a major concern for the company.
- Paradeep Phosphates Limited’s entire product portfolio is centered around phosphatic and complex fertilizers. The competitors of the company have a much-diversified product portfolio. Hence the company is more vulnerable to volatility in terms of margins and financial parameters.
- Paradeep Phosphates Limited also faced a problem of the vulnerability of profitability as India has many seasonal and agro-climatic changes.
- In a highly regulated sector, the company is engaged in business.
- Additionally, Paradeep Phosphates Limited also faced a challenge due to the sharp rise in prices of phosphorus fertilizers.
- The company has proposed that its working capital requirements remain high in recent years. It is due to delays in subsidy from the GoI.
- Paradeep Phosphates Limited registered high receivable days to increase its capital efficiency. It also impacted their margins and the high-interest costs.
- The large working capital requirement impacts the liquidity position of the company as well.
- Paradeep Phosphates Limited needs to significant leverage its balance sheet. It is to acquire ZACL’s assets.
- Paradeep Phosphates are fully reliant on some other raw materials. The company imports these raw materials. It includes rock phosphate, ammonia, sulfur, and potash.
- Paradeep Phosphates Limited will impact if it doesn’t foresee the supply and demand correctly. It can also be heavily impacted by the vulnerability in the supply of raw materials.
- Another failure of the company is the networking and distribution system.
- The Promoter, directors, and the company itself is currently under trial for a legal procedure.
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FINANCIAL TRENDS OF PARADEEP PHOSPHATES IPO:
|Particulars||For the year/period ended (in Cr.)|
|Profit After Tax||223.27||193.22||158.96|
|PARAMETER||MARCH 21||MARCH 20||YoY %|
|Core EBITDA Margin (%)||10.50||10.96||-4.25|
|EBIT Margin (%)||9.26||10.07||-8.06|
|Pre-Tax Margin (%)||7.10||5.49||29.21|
|PAT Margin (%)||4.33||4.63||-6.51|
|Cash Profit Margin (%)||5.94||6.36||-6.55|
|Net Sales Growth (%)||23.18||-3.79||712.02|
|Core EBITDA Growth (%)||13.50||2.87||369.81|
|EBIT Growth (%)||13.25||2.81||371.87|
|PAT Growth (%)||15.16||22.07||-31.32|
|EPS Growth (%)||15.55||21.55||-27.84|
PROMOTERS OF PARADEEP PHOSPHATES IPO:
The promoters of the company are:
- Zuari Maroc Phosphates Private Limited
- Zuari Agro Chemicals Limited
- OCP S.A.
- The President of India- GoI
|Pre-Issue Share Holding||100 %|
|Post Issue Share Holding|
Paradeep Phosphates was founded as a Joint Venture in 1981. It is a J.V. of ZMPPL- Zuari Maroc Phosphates Private Limited and the Government of India. The ZMPPL is a Joint Venture of ZACL- Zuari Agro Chemicals Limited and OCP Group S.A.
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