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Paradeep Phosphates limited is coming up with an IPO to raise fund, the issue comprises fresh issue of Rs 1,255 crore and an offer for sale of shares up to 12 crore by its existing shareholders and promoters. This company will list on NSE and BSE both. The face value of each share is Rs 10.

About Company

Paradeep Phosphates Limited is primarily into manufacturing, trading, distribution, and sales of variety of complex fertilizers such as Di-ammonium phosphate, three grades of Nitrogen-Phosphorus-Potassium, Zypmite, Phosphogypsum and Hydroflorosilicic acid. The company is also engaged in the trading, distribution and sales of Muriate of Potash, Ammonia, Speciality Plant Nutrients and City compost. Paradeep Phosphates limited's fertilizers are marketed under key brand names ‘Jai Kisaan – Navratna’ and ‘Navratna’. Paradeep Phosphate limited is having total fertilizer capacity of 1.40 million metric-tons and more than 5 million farmers are under the reach of the Paradeep Phosphates limited. Company’s annual turnover is more than Rs 5,000 crore. Company has its manufacturing facility at Paradeep, Odisha. Company’s promoters are Zuari Maroc Phosphates Limited (ZMPL) and Government of India. ZMPL is holding around 80.45% shares of the company and GOI is holding 19.55% stakes on the company.

Industry Overview

Paradeep Phosphates operates in Agriculture industry, India is agriculture rich country, 58% of India’s total population directly and indirectly dependent on agriculture. Agriculture contributes 17.8% of overall GDP of India. India is the largest producer of Pulses, Tea, and Spices and second largest producer of Rice, Wheat, Cotton, Sugarcane, Fruits, and Vegetables.

India is having largest agricultural land after USA. The Indian farming industry reached at a value of USD 270 billion (?20,336 billion) in 2020. According to the IMARC group's report, the farming market to grow at a CAGR of 10.4% during 2021-2026.

The Indian fertilizer industry reached at a value of USD 11.73 billion (?887 billion) in 2020. IMARC Group's report expects the market to grow at a CAGR of 5.5% during 2021-2026.

Financials of the company

Company is having robust financials, during the time of covid-19 and national lockdown company somehow maintained the profitability and revenue growth. In fiscal year 2019 company’s profit after tax was around Rs 159 crore, and it has increased above to 223 crore in fiscal year 2021.

                                                                                                                            All amounts is in INR Crore

Strengths of the Company-

• Well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations. The demand for fertilizers in India is expected to reach approximately ~68 million tons by Financial Year 2026 growing at a CAGR of 1.50%-2.50% from Financial Year 2021 to Financial Year 2026.
• Second largest manufacturer of Phosphatic fertilizers in India. Company is holding 14% of total capacity of Indian domestic installed capacity of phosphoric acid.
• Driving raw material efficiency through backward integration of facilities and effective sourcing. Company source its raw materials from a number of suppliers based locally and in countries such as Morocco, Jordan, Qatar and Saudi Arabia, among others, and company is getting supply from those suppliers from last 10 years.
• Secure and certified manufacturing facility and infrastructure and unutilized land available for expansion
• Experienced management team. And company has 40+ years experience in this industry.
• Strategic location of manufacturing facility and sizeable material storage, handling and port facilities. Paradeep Phosphates ltd's manufacturing facility is strategically located near the Paradeep port of Odisha, where company own a captive berth with 14 meters draft with facilities to unload solid and liquid cargo. Company also has a closed conveyor belt which is 3.4 km long connecting the Paradeep port to its manufacturing facility. Company has capacity to store up to 120,000 MT, 65,000 MT, 50,000 MT and 35,000 MT of Phosphate Rock, Phosphoric acid, Sulphur and MOP, respectively. Company is also having an Ammonia storage facility of approximately 40,000 MT
• Established brand name backed by an extensive sales and distribution network. Company distributes its products across 17 states across India. As of 31 March 2021, company has set up a network of 11 regional marketing offices and 1,324 stock points across India. As of 31 March 2021, company’s network comprised 4,529 dealers and over 60,257 retailers in India.

Risk Factors-

• Company works in Fertilizer industry, which is completely dependent on the agriculture sector.
• The fertilizer industry in India is completely regulated. Any policies launched by government may affect the result of operations.
• Company is dependent for raw materials from various suppliers across the world, any delay and interruption can affect the cash-flows of the company.
• A shortage or non-availability of electricity, water, fuel or (Regasified Liquefied Natural Gas) RLNG or an increase in fuel prices may adversely affect the production operations of the company.

Listed Peers

• Chambal Ferilisers & Chemicals limited
• Coromandal International
• Deepak Fertilizers

Objective to raise funds

• Company to repay its borrowings of Rs 300 crore.
• Company to utilize Rs 642 crore for the acquisition of facilities in Goa.
• And few of its proceeds will be utilized for general corporate purposes.

Key Point

• Government to sell their all stakes (19.85%) through offer for sale.

My Observation

Analyzing all the factors of the company, this IPO seems good to invest in. Investors are suggested to invest in this IPO for long term wealth creation.