Paradeep Phosphates IPO: Everything you need to know

Paradeep Phosphates IPO: The initial public offering (IPO) of fertilizer company Paradeep Phosphates opened for subscription on Tuesday, May 17, 2022. The offer was subscribed 29 per cent by the end of the first day of bidding.

It received total bids for 7,86,87,000 shares across both the stock exchanges against 26,86,76,858 shares on offer, data from National Stock Exchange (NSE) showed.

The Rs 1501.73 crore Paradeep IPO will be available for subscription till Thursday, May 19, 2022, and the price band of the company has been fixed at Rs 39-42 per share.

Paradeep IPO comprises a fresh issue of shares worth Rs 1,004 crore and an offer-for-sale (OFS) of 11.85 crore equity shares by promoters and other selling shareholders.

As part of the OFS, Zuari Maroc Phosphates Pvt Ltd (ZMPPL) will offload 60,18,493 equity shares and the government of India will sell up to 11,24,89,000 equity shares. The government will be offloading its entire 19.55 per cent stake in the company.

At present, ZMPPL holds 80.45 per cent and the government of India owns the rest 19.55 per cent stake in the company.

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

The net proceeds from the fresh issue will be used for part financing of the acquisition of the Goa facility, repayment/prepayment of certain borrowings and for general corporate purposes, according to the details given in the red herring prospectus (RHP).

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 35 per cent for retail investors.

Investors who wish to subscribe to Paradeep IPO can bid in a lot of 350 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,700 to get a single lot of Paradeep Phosphates. The shares will be listed on both BSE as well as the NSE.

The applicants also must note that the cut-off time for UPI mandate confirmation is Friday, May 20, 2022, upto 12:00 pm. If they fail to do so then their application may not be considered.

Axis Capital, ICICI Securities, JM Financial and SBI Capital Markets are the book running lead managers to the offer while Link Intime India is the registrar of the issue.

Before heading into the IPO, Paradeep Phosphates on Friday raised over Rs 450.51 crore (Rs 4,50,51,94,386.00) from 20 anchor investors in lieu of 10,72,66,533 equity shares at Rs 42 each, data from the stock exchanges showed.

The anchor investors comprise of Goldman Sachs, BNP Paribas Arbitrage, Kuber India Fund, Copthall Mauritius Investment, Societe Generale, ICICI Prudential Mutual Fund (MF), Nippon India MF, SBI MF, Tata MF, HDFC MF, DSP MF and Mirae MF among others.

The research teams at Geojit Financial Services and IIFL Securities in their respective IPO notes gave a “Subscribe” rating to the offer.

IIFL Research in its report noted, “At the upper price band of ₹42, Paradeep Phosphates Limited is demanding a P/E multiple of ~11X based on FY21 earnings while the company’s price to sales ratio is at 0.66X of FY21 revenue. The industry average PE multiple is 15.73X of FY21. Considering the favorable Indian fertilizer industry dynamics, it being one of the market leaders in Phosphatic fertilizers in India, its plans to improve cost efficiencies, and its plans to expand distribution channels, we recommend ‘Subscribe’ to the issue, with long term perspective.”

Geojit Research in its IPO note said, “At the upper price band of Rs.42, PPL is available at P/E of 7.1x (FY22 annualized) which is attractive on a short to medium term basis. PPL is well-positioned to capture favourable Indian fertilizer industry dynamics supported by conducive government regulations, driving raw material efficiency through backward integration of facilities and effective sourcing and established brand name backed by an extensive sales and distribution network. Considering PPL’s expansion plans, deepening the presence in western and southern regions of India, we assign a ‘Subscribe’ rating for the issue on a short to medium basis.”

The share allotment is likely to take place on Tuesday, May 24, 2022, and the shares are expected to be listed on Friday, May 27, 2022, according to the timeline given in the RHP.

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