Track record justifies price-band though `Fertilisers’ tag may restrict near term capital appreciation in view of deficient monsoon.
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OFFER AT A GLANCE |
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Name |
Shree Pushkar Chemicals & Fertilisers Ltd |
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Public Offer |
Fresh issue of 87.43 to 94.49 lakh shares of Rs 10 each from the company and Offer for Sale of 20.27 lakh shares from IFCI Venture Capital |
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Offer % on Total Equity |
35.64% to 37.11% |
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Post-IPO Promoter Stake |
58.9% to 60.27% |
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Offer Price |
Between Rs 61 and Rs 65 |
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Offer Amount |
Rs 70 cr |
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Application Quantity |
200 & Multiples of 200 |
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Bid/Offer Opens |
August 25, 2015 |
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Bid/Offer Closes |
August 27, 2015 |
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Listing |
NSE and BSE |
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IPO Rating |
Nil |
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Book Running Lead Manager |
Keynote Corporate Services |
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Registrars |
Bigshare Services |
The IPO
The present offer valued Rs 70 cr consists of Fresh Issue of 87.43 to 94.49 lakh shares of Rs 10 each (aggregating to Rs 57 cr) from the company and Offer for Sale of 20.27 lakh shares (Rs 13 cr) from IFCI Venture Capital. The offer is being made through the book-building route with a price band of Rs 61-65. The IPO constitutes 35.64% to 37.11% of the company’s post-IPO equity of over Rs 30 cr. The promoters propose to hold 59-60%. Investors have to apply for a minimum of 200 shares (Rs 12200). Keynote Corporate has been appointed as the book running lead manager.
IPO Object
The company intends to utilize the fresh issue proceeds for the following: Acquiring of an existing factory within MIDC Industrial Area, Lote-Parshuram, at a cost of Rs 2.29 cr; Setting up of facilities at the acquired factory at a cost of Rs 41.59 cr for manufacture of Reactive Dyes (3,000 TPA) H-Acid (750 TPA) and Vinyl Sulphone Ester (1,000 TPA); Setting up of additional effluent treatment plant at the existing facility (Unit I) to make the unit a “Zero Discharge” unit at Rs 4.88 cr; and construction of additional Godown(s) at the existing facility (Unit II) for meeting the additional storage requirements for finished goods at a cost of Rs 2.38 cr.
Company Background
Incorporated in 1993 as Shree Pushkar Petro Products Ltd by Mumbai-based first generation entrepreneurs Punit Makharia (45) and his brother Gautam Makharia (42) the company commenced operations in the same year with trading activity. Over the years, the company claims to have emerged as one of the few manufacturers with widest range of dye intermediates in India with zero waste. It reportedly has state of art integrated manufacturing facilities at Lote Parshuram, Maharashtra. The company is said to be amongst India`s large manufacturers of K-Acid – an intermediate used for manufacturing Reactive Dyes used in textiles.
In 2009 the company acquired additional plot at Lote Parshuram, for setting up a plant for manufacture of fertilizers. It commenced production of fertilizers in 2011 besides commissioning a 500KW Captive Power Plant. The name of the company was changed to Shree Pushkar Chemicals & Fertilisers Ltd (SPCFL) in 2012. Currently SPCFL is having four major verticals viz., Dye Intermediates, Acid Complex (comprising sulphuric and its derivative acids), Cattle Feed Supplement and Fertilizers (Single Super Phosphate & Soil Conditioner).
SPCFL claims to have a wide range of products for diverse customers based in India and abroad. Its products are marketed in the states of Maharashtra, Gujarat and Karnataka in India. The company is a recognized Export House and its products are reportedly exported to one of the world’s leading dye manufacturers namely Huntsman Corporation of USA and also to Archroma management LLC, a global color and speciality chemical company headquartered in Swizterland. Besides these, SPCFL also exports to countries like Brazil, Thailand, Pakistan and Mexico.
No doubt the company operates in competitive environment which has number of organized and unorganized players in the Industry. The range of products that the company manufactures constitutes nearly 80% of the product line in the Dyes Intermediates segment. Some of the companies which manufacture similar products in Dye Intermediates and Acids are said to be Kiri Industries, Bodal Chemicals, Mayur Dye Chem, Bhageria Dye Chem, etc.
Financial Performance
SPCFL has a decent financial track. Its top line has more than doubled in last five years. Net profit has steadily increased from Rs 2.75 cr in FY11 to Rs 18.65 cr in FY15. More importantly, its operating cash flow has been increasingly positive in last three years which has helped the company to significantly reduce the debts as well as interest burden. The company has productive assets (net block) worth Rs 69 cr against which its borrowings stood at less than Rs 25 cr. Nevertheless, one aspect that does not give much comfort is the company’s operating margin. The profit margin has not moved beyond 13.9% in last five years. In fact, in last fiscal it has dropped to 11.8%. Also, the two-decade old company is yet to join the dividend list.
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SPCFL’S FINANCIALS AT A GLANCE |
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(Rs in lakh) |
Mar-15 |
Mar-14 |
Mar-13 |
Mar-12 |
Mar-11 |
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Gross Revenue |
26681 |
21037 |
17657 |
15097 |
13126 |
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Dye Intermediates |
20268 |
16536 |
12809 |
11477 |
12234 |
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Dye Intermediates % |
76 |
79 |
73 |
76 |
93 |
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Operating Profit |
3184 |
2945 |
2331 |
2029 |
1010 |
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Operating Margin % |
11.8 |
13.9 |
12.9 |
13.3 |
7.2 |
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Interest |
542 |
1062 |
1028 |
962 |
361 |
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Depreciation |
363 |
464 |
405 |
339 |
191 |
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Tax |
415 |
375 |
173 |
193 |
183 |
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Net Profit |
1865 |
1044 |
725 |
535 |
275 |
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Net Oper. Cash Flow |
4968 |
2590 |
1478 |
-966 |
876 |
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Equity Cap |
2071 |
2071 |
2071 |
2071 |
2024 |
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Reserves |
6745 |
4289 |
3246 |
2492 |
1879 |
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Net Block |
6912 |
5805 |
5767 |
5284 |
4854 |
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Long Term Borrowings |
27 |
1203 |
1114 |
645 |
641 |
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Short Term Borrowings |
2456 |
4976 |
6097 |
5770 |
3171 |
Valuation
Even though the company has added fertilizers to its name, its operations are continued to be dominated by dye intermediates. With the proposed expansion project, contribution from dye intermediates is slated to increase further. A close look at the current market prices of existing listed peers in dye intermediates reveals the industry is certainly not a market favourite at present. Many a player in the industry is currently have a P/E multiple of less than 7 times its earnings. As the offer price of Rs 61-65 discounts SPCFL’s current earnings more than 7 times, any significant appreciation can be expected only after the expansion project goes on stream.
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HOW SHREE PUSHKAR CHEMICALS COMPARES |
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COMPANY NAME |
MCAP |
EQ |
REV |
P/E |
P/BV |
P/NB |
OPM |
Yld |
Share |
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|
(Rs Cr) |
(x) |
(%) |
Price |
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Bodal Chemicals |
369 |
22 |
950 |
11.8 |
5.4 |
2.1 |
19.9 |
0 |
33.85 |
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Kiri Industries |
205 |
21 |
843 |
– |
1.4 |
0.5 |
6.7 |
0 |
97.90 |
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Bhageria Dye-Chem |
117 |
8 |
325 |
4.5 |
1.7 |
6.5 |
12.5 |
1.7 |
146.40 |
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Aksharchem (India) |
101 |
7 |
200 |
6.8 |
1.4 |
1.8 |
13.8 |
3.6 |
138.50 |
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Dynemic Products |
59 |
11 |
114 |
5.8 |
1.2 |
1.5 |
16.4 |
2.9 |
52.30 |
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Shree Hari Chemicals |
45 |
4 |
62 |
3.3 |
2.1 |
4.1 |
29.4 |
1.0 |
100.15 |
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Shree Pushkar – High |
196 |
30 |
267 |
7.5 |
1.6 |
2.0 |
11.8 |
0 |
65.00 |
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– Low |
189 |
31 |
267 |
7.0 |
1.5 |
1.9 |
11.8 |
0 |
61.00 |
Lead Managers’ Track
For the book running lead manager to the public offer, Keynote Corporate, SPCFL’s IPO is the first main frame IPO after a gap of four years. In the last three years, the investment banker has brought three IPOs on the SME platform of NSE. The three SMEs are currently traded well above their offer prices. However, on the main frame the story is entirely different. Of the twenty one currently traded IPOs managed by Keynote in last 10 years, only four are quoting above the investment cost. Whereas Uniply Industries (Jun-05) and Thangamayil (Jan-2010) have given healthy returns to the IPO investors, as many as eight IPOs have inflicted a capital loss of more than 75% on the investors.
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KEYNOTE CORPORATE-ASSOCIATED IPOs |
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ISSUER NAME |
IPO |
IPO |
CUR. |
GAIN |
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|
DATE |
PRICE |
PRICE |
% |
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Uniply Industries |
9-Jun-05 |
24.00 |
128.50 |
435 |
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PBA Infrastructure |
24-Oct-05 |
60.00 |
13.88 |
-77 |
|
Sree Sakthi Paper |
17-Jan-06 |
30.00 |
14.04 |
-53 |
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Gitanjali Gems |
16-Feb-06 |
195.00 |
40.20 |
-79 |
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Inditrade Capital |
17-Apr-06 |
40.00 |
23.00 |
-43 |
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Zenith Birla (India) |
16-Oct-06 |
45.83 |
0.83 |
-98 |
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KLRF |
27-Nov-06 |
55.00 |
44.20 |
-20 |
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Nissan Copper |
4-Dec-06 |
39.00 |
1.72 |
-96 |
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Refex Industries |
23-Jul-07 |
65.00 |
9.31 |
-86 |
|
Porwal Auto Comp |
17-Dec-07 |
75.00 |
13.00 |
-83 |
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Sita Shree Food |
11-Mar-08 |
30.00 |
13.80 |
-54 |
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Bafna Pharma |
27-May-08 |
40.00 |
28.05 |
-30 |
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Lotus Eye Care |
12-Jun-08 |
38.00 |
13.97 |
-63 |
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20 Microns |
8-Sep-08 |
27.50 |
26.90 |
-2 |
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Globus Spirits |
31-Aug-09 |
100.00 |
65.95 |
-34 |
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Thangamayil Jewell |
27-Jan-10 |
75.00 |
181.90 |
143 |
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Emmbi Industries |
1-Feb-10 |
45.00 |
39.65 |
-12 |
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Prakash Steelage |
5-Aug-10 |
110.00 |
112.50 |
2 |
|
Bedmutha Industries |
28-Sep-10 |
102.00 |
13.00 |
-87 |
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Gravita India |
1-Nov-10 |
25.00 |
29.30 |
17 |
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Servalakshmi Paper |
27-Apr-11 |
29.00 |
3.56 |
-88 |
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Veto Switchgears |
3-Dec-12 |
45.45 |
71.45 |
57 |
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MITCON |
15-Oct-13 |
61.00 |
77.70 |
27 |
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Sanco Industries |
22-Feb-14 |
18.00 |
22.05 |
23 |
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Note: IPO price adjusted to stock splits & bonus issues |
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