Started in 1981, Paradeep Phosphate Limited is the second largest private sector manufacturer of non-urea fertilizers in Bharat and the second largest private sector manufacturer in terms of Di-Ammonium Phosphate ('DAP') volume sales for the nine months ended December 31, 2021. They are primarily engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-Potassium ('NPK') (namely NPK-10, NPK-12 and NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid ('HFSA'). They are also engaged in the trading, distribution and sales of Muriate of Potash ('MOP'), Ammonia, Speciality Plant Nutrients ('SPN') and City compost. The fertilizers are marketed under some of the key brand names in the market 'Jai Kisaan – Navratna' and 'Navratna'. Company is part of the Adventz Group, as well as OCP. The Adventz Group operates in several businesses and has a strong presence in the agribusiness, engineering and infrastructure businesses and emerging lifestyle business. OCP, founded in 1920, with revenues of over US$6.3 billion in 2020, is one of the leading producers of Phosphate rock globally and operates largely in the Morocco and Western Sahara region which has approximately 70% of the global Phosphate rock reserves, according to CRISIL Research, and is owned 95% by the Moroccan government. Phosphate rock is processed to produce phosphorus, which is one of the three main nutrients most commonly used in fertilizers (the other two are nitrogen and potassium). India has negligible Phosphate reserves and is dependent on imports of Phosphate rock (a source raw material) or Phosphoric Acid (an intermediate raw material) or DAP (finished phosphatic fertilizer).; Company's manufacturing facility is located in Paradeep, Odisha and includes a DAP and NPK production facility, a Sulphuric acid production plant and a Phosphoric acid production plant. They utilize Sulphuric and Phosphoric acids for manufacturing DAP and NPK. As of March 31, 2022, (i) the total annual granulation capacity of DAP and NPK production plant was approximately 1.50 million MT; (ii) the total annual installed capacity of Sulphuric acid production plant was approximately 1.30 million MT; and (iii) the total annual installed capacity of Phosphoric acid production plant was 0.30 million MT, in addition, the plant has three operational concentrators to concentrate weak Phosphoric acid into strong Phosphoric acid. They also have facilities to store 120,000 MT of Phosphate rock, 65,000 MT of Phosphoric acid solution, 55,000 MT of sulphur, 45,000 MT of Sulphuric acid, 40,000 MT of liquid ammonia and 35,000 MT of MOP at Paradeep facility. They also have two captive power plants of 16 MW each, designed to run on the excess steam generated by the Sulphuric acid production plant. Company has established an extensive sales and distribution network, with a strong presence in the eastern part of India. As of March 31, 2022, they distributed the products across 14 states in Bharat through the network of 11 regional marketing offices and 468 stock points. The network includes 4,761 dealers and over 67,150 retailers, catering to over five million farmers in Bharat, as of March 31, 2022. As per financial performance, Paradeep Phosphates Limited has posted total income/net profits of Rs 4,397.21 Cr / Rs 156.65 Cr (FY19), Rs 4,227.77 Cr / Rs 190.19 Cr (FY20), Rs 5,183.94 Cr / Rs 223.97 Cr (FY21) and Rs 5,973.69 Cr / Rs 361.28 Cr (9M FY22). So company has posted good growth. But when we compare long term Company has posted an average EPS of Rs. 3.52 and average RoNW of 11.91% for last three fiscals. Issue is priced at a P/BV of 1.1 as per NAV of 38.04 on 31.12.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 15 and as per FY22 annualised earnings P/E is around 7, which looks fairly priced. As per RHP, comparison between listed players is shown in above table. On BRLM's front, 4 lead managers are associated with this IPO, and have handled around 31 IPOs in last three fiscals.Axis Capital Limited: This is 37th IPO from this BRLM. From last 10 IPOs, 4 opened below issue price and remaining are opened above issue price on the day of listing. As of now, 4 are trading below issue price and other are trading above issue price. ( As on 13.05.22)ICICI Securities Limited: This is 41st IPO from this BRLM. From last 10 IPOs, 4 opened below issue price and remaining opened above issue price on the day of listing. As of now, 4 are trading below issue price and other are trading above issue price. ( As on 13.05.22)JM Financial Limited: This is 26th IPO from this BRLM. From last 10 IPOs, 2 opened below issue price and remaining opened above issue price on the day of listing. As of now, 5 are trading below issue price and other are trading above issue price. ( As on 13.05.22)SBI Capital Markets Limited: This is 18th IPO from this BRLM. From last 10 IPOs, 6 opened below issue price and remaining opened above issue price on the day of listing. As of now, 7 are trading below issue price and other are trading above issue price. ( As on 13.05.22) As per financials, company has shown good results, RoNW is 12.22% and P/E is around 15 and 7 as per FY21 and annualised FY22 earnings, which looks fairly priced. Last year was exceptional for all fertilizer companies and same is case with Paradeep. Performance of BRLM is average. So, we are giving SUBSCRIBE rating to this IPO and one may apply for long term perspective as current market is very volatile.
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