Please refer to important disclosures at the end of this report
1
I
ncorporated in 1981, Paradeep Phosphates Limited is a manufacturer of
non-urea fertilizers in India. The company is part of the Zuari group and
is
engaged in manufacturing, trading, distribution, and sales of a variety of
complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-
Potassium (namely NPK-10, NPK-12, and NP-20), Zypmite, Phospho-
gypsum and Hydroflorosilicic Acid. Paradeep P
hosphates Limited is the
second largest private sector manufacturer of non-urea fertilizers and Di-
Ammonium Phosphate(DAP) in terms of volume sales for the nine months
ended December 31, 2021. The company's fertilizers are marketed under
the brand names Jai Kisaan-Navratna and Navratna.
Positives: (a) Second largest manufacturer of Phosphatic fertilizers in India
(b)
Cost reductions
through backward integration of facilities and effective sourcing
(c)
Established brand name backed by an extensive sales and distribution
network (d) Secure and certified manufacturing facility and infrastructure
(e)
Unutilized land available for expansion
Investment concerns: (a)
Business has high dependence on performance of
agricultural sector.
(b) Highly Regulated industry. (c) Business is subject to climate
conditions and is cyclical in nature.
Outlook & Valuation:
The issue comprises both of an offer for sale and fresh
issue. While the Government of India will be selling its entire
20% holding in the
company Zuari Maroc Phosphates Pvt Ltd.
will also be selling part of its holding
in the offer for sale. In terms of valuations, the stock will trade at post issue
P/E
multiples of 15.3xFY2021 EPS (at the upper end of the issue price band), which
is in line with other players like Chambal fertilizer and Deepak fertilizer though
they may not be strictly comparable. Given t
he fact that the company is valued
in line with peers and likely to face headwinds in terms of cost pressures due to
recent increase in raw material prices, we recommend a NEUTRAL rating on the
issue.
Key Financials
Y/E March (` cr) FY2019
FY2020 FY2021 9MFY22
Net Sales
4,358
4,193
5,165
5,960
% chg
(3.8)
23.2
Net Profit
159
193
223
363
% chg
22.6
15.6 -
OPM (%)
8.5
9.2
8.9
8.6
EPS (`)
2.8
3.4
3.9
6.3
P/E (x)
15.2
12.5
10.8
-
P/BV (x)
1.6
1.5
1.3
-
RoE (%)
10.7
12.1
12.2
-
RoCE (%)
8.1
9.9
14.9
-
EV/Sales (x)
1.3
1.1
0.7
-
EV/EBITDA (x)
12.5
10.2
6.4
-
Angel Research; Note: Valuation ratios based on post-issue shares and at `42per share.
Neutral
Issue Open: May 17, 2022
Issue Close: May 19, 2022
Fresh Issue:
`1,004cr
QIBs 50%
Non-Institutional 15%
Retail 35%
Promoters 56.1%
Public 43.9%
Offer for sale:
`498cr
Issue Details
Face Value:
`10
Present Eq. Paid up Capital:
`575cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital:
`815
cr
Issue size (amount):
`1,502cr
Price Band:
`39
-42
Lot Size: 350 shares
Post-issue mkt.cap:
`3,248
*– 3,421cr**
Promoter holding Pre-Issue: 100%
Promoter holding Post-Issue: 56.10%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Amarjeet S Maurya
Amarjeet.maurya@angelbroking.com
+022 4000 3600, Extn: 6810
Paradeep Phosphates IPO
IPO Note |
FERTILIZER
May 13, 2022
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
2
Company background
Paradeep Phosphates Limited is a public company headquartered in
Bhubaneswar, India. Zuari Agro Chemicals Limited (ZACL) holds 40.23% of
equity shares of Paradeep Phosphates Limited through its joint venture Zuari
Maroc Phosphates Private Limited (ZMPPL). The Company is primarily engaged
in the manufacture of Di-Ammonium Phosphate (DAP), Complex Fertilizers of
NPK grades, and Zypmite (Gypsum based product) having its manufacturing
facility at the port town of Paradeep, District Jagatsinghpur, Odisha. The
Company is also involved in trading of fertilizers, ammonia, neutralized phospo
gypsum, micronutrient, and other materials.
The Company caters to the demands of farmers all over the country through its
“Navratna” brand of fertilizers. The Company has one associate incorporated
in Myanmar under the name of Zuari Yoma Agri Solutions Limited.
Issue details
PPL is raising ₹497.7cr through OFS and ₹1,004cr through Fresh Issue
in the
price band of ₹39-₹42 per share.
Exhibit 1: Pre and post IPO shareholding pattern
No of shares (Pre-issue) % (Post-issue) %
Promoter 57,54,50,000 100.00% 45,69,42,507 56.10%
Public 0 0.00% 35,75,55,112 43.90%
Total 57,54,50,000 100.00% 81,44,97,619 100.00%
Source: Source: RHP, Note: Calculated on upper price band
Objectives of the Offer
The net proceeds of the Fresh Issue are proposed to be utilized in the
following manner:
Repayment or pre-payment of certain borrowings availed by the Company.
Part-financing the acquisition of the Goa Facility
General corporate purpose
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
3
Key Managerial Personnel
Sabaleel Nandy is the President and Chief Operating Officer. He joined the
Company on August 1, 2020. He holds a bachelor’s degree in technology (civil
engineering) from Indian Institute of Technology, Kharagpur and a post-graduate
diploma in management from Indian Institute of Management, Lucknow. He serves
on the boards of ZMPPL, Zuari Farm Hub Limited and ZYASL. Previously, he was
associated with Tata Chemicals North America as an executive director. He was also
the head of manufacturing of the Tata Chemicals Limited plant in Haldia.
Pranab Kumar Bhattacharyya is the Chief Manufacturing Officer – PPL Plant. He
joined the Company on July 1, 2016. He holds bachelor’s degrees in science and
technology (chemical technology – ceramic engineering) from University of Calcutta.
He also successfully completed the post-graduate executive management program
from the S.P. Jain Institute of Management and Research, Mumbai. Previously, he
was associated with Hindalco Industries Limited as an assistant general manager.
Alok Saxena is the General Manager and Head of Corporate Finance. He joined
the Company on November 1, 2020. He holds a bachelor’s degree in technology
(computer engineering) from Govind Ballabh Pant University of Agriculture and
Technology and successfully completed a post-graduate program in management
from the Great Lakes Institute of Management, Chennai. Previously, he was
associated with Tata Consultancy Services as a systems engineer. He has been with
Adventz group for over a decade and has handled key strategic, business
transformation, M&A and commercial portfolios within the group
Sachin Patil is the Company Secretary and Compliance Officer. He joined the
Company on November 4, 2020. He holds a bachelor’s degree in corporate
secretariship (first class with distinction) from Karnatak University, Dharwad. He is
an associate member of the Institute of Company Secretaries of India. He was earlier
associated with Zuari Global Limited as Assistant Company Secretary and
Compliance Officer.
Bijoy Kumar Biswal is the Chief Financial Officer. He joined the Company on
November 6, 2021. He is a member of the Institute of Chartered Accountants of
India in 1998. He was earlier associated with Forte Furniture Products India Private
Limited as Chief Financial Officer.
Harshdeep Singh is the Chief Commercial Officer since March 29, 2022. He joined
the Company on September 16, 2015. He holds a bachelor’s degree in engineering
(chemical engineering) from Sambalpur University and master’s degree in business
administration (international business) from Indian Institute of Foreign Trade.
Previously, he was associated with Tata Chemicals Limited as an assistant vice
president - commercial
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
4
Exhibit 2: Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2019
FY2020 FY2021
Net Sales
4,358
4,193
5,165
% chg (3.8)
23.2
Total Expenditure
3,916
3,733
4,622
Raw Material
3,124
2,944
3,871
Personnel
131
132
139
Other Expenses
661
657
612
EBITDA
442
460
542
% chg
4.1
17.9
(% of Net Sales)
10.1
11.0
10.5
Depreciation & Amortization
70
72
83
EBIT
371
387
459
% chg
4.3
18.5
(% of Net Sales)
8.5
9.2
8.9
Interest & other Charges
159
192
111
Other Income
39
35
19
(% of PBT)
15.6
15.2
5.2
Recurring PBT
251
230
367
% chg (8.4)
59.2
Tax
92
36
143
(% of PBT)
36.8
15.8
39.1
PAT before P/L of Associate
159
194
223
% chg
22.0
15.2
Share in profit of Associate
(0)
(1) (0)
PAT
159
193
223
Basic EPS (Rs)
2.8
3.4
3.9
Source: Company, Angel Research
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
5
Consolidated Balance Sheet
Y/E March (` cr) FY2019 FY2020 FY2021
SOURCES OF FUNDS
Equity Share Capital
575
575
575
Reserves& Surplus
907
1,028
1,252
Shareholders’ Funds
1,483
1,604
1,828
Total Loans
3,123
2,298
1,251
Other Liabilities
20
27
20
Total Liabilities
4,626
3,929
3,099
APPLICATION OF FUNDS
Net Block
1,024
1,214
1,226
Capital Work-in-Progress
255
149
220
Investments -
3
125
Current Assets
4,315
3,605
2,816
Inventories
1,422
1,079
899
Sundry Debtors
2,342
2,149
1,156
Cash
20
6
93
Loans & Advances - - -
Other Assets
531
372
669
Current liabilities
975
1,060
1,232
Net Current Assets
3,340
2,545
1,585
Deferred Tax Liabilities (26) (22) (93)
Other Assets
33
39
36
Total Assets
4,626
3,929
3,099
Source: Company, Angel Research
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
6
Exhibit 3: Consolidated Cash Flow Statement
Y/E March (` cr) FY2019 FY2020
FY2021
Profit before tax 251 230
367
Depreciation 70 72
83
Change in Working Capital -1,305 778
993
Interest / Dividend (Net) 119 174
101
Direct taxes paid -36 -29
-77
Others -19 46
35
Cash Flow from Operations -920 1,271
1,501
(Inc.)/ Dec. in Fixed Assets -126 -139
-169
(Inc.)/ Dec. in Investments 5 -6
-121
Interest Received 18 1
1
Cash Flow from Investing -103 -143
-289
Inc./(Dec.) in long term loans -59 -69
-30
Inc./(Dec.) in short term loans 1,312 -794
-976
Dividend Paid (Incl. Tax) -69 -69
0
Interest / Dividend (Net) -165 -209
-118
Cash Flow from Financing 1,018 -1,141
-1,124
Inc./(Dec.) in Cash -5 -14
88
Opening Cash balances 24 19
4
Closing Cash balances 19 5
92
Source: Company, Angel Research
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
7
Key Ratios
Y/E March FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
15.2
12.5
10.8
P/CEPS
10.6
9.1
7.9
P/BV
1.6
1.5
1.3
EV/Sales
1.3
1.1
0.7
EV/EBITDA
12.5
10.2
6.4
EV / Total Assets
1.2
1.2
1.1
Per Share Data (Rs)
EPS (Basic) 2.76
3.36
3.88
EPS (fully diluted)
2.8
3.4
3.9
Cash EPS
4.0
4.6
5.3
Book Value
25.8
27.9
31.8
Returns (%)
ROCE
8.1
9.9
14.9
Angel ROIC (Pre-tax)
8.1
9.9
16.0
ROE
10.7
12.1
12.2
Turnover ratios (x)
Asset Turnover (Net Block)
4.3
3.5
4.2
Inventory / Sales (days)
119
94
64
Receivables (days)
196
187
82
Payables (days)
59
70
66
Working capital cycle (ex-cash) (days)
256
211
79
Source: Company, Angel Research
Paradeep Phosphates Limited | IPO Note
M
ay
13
, 2022
8
Research Team Tel: 022 - 40003600 E-mail: research@angelbroking.com Website: www.angelone.in
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