Gandhar Oil Refinery IPO opens on November 22: Should you subscribe to Rs 500-crore issue?

Gandhar Oil Refinery IPO will close on November 24 and the price band has been fixed at Rs 160-169 per share

Gandhar Oil Refinery IPO is set to hit the street on November 22. The white oil manufacturer plans to raise Rs 500.69 crore via the public offer. The offer consists of a fresh issue of 1.78 crore shares worth Rs 302 crore and an offer-for-sale of 1.17 crore shares worth Rs 198.69 crore. Brokerages such as BP Wealth, Swastika Investmart and StoxBox have assigned a ‘Subscribe’ rating to the issue owing to healthy financial performance, expansion of product portfolio, growing overseas business and fair valuation.

The offer will close on November 24 and the price band has been fixed at Rs 160-169 per share. Promoters Ramesh Babulal Parekh, Kailash Parekh, and Gulab Parekh will sell 22.5 lakh shares each in the OFS. Further, Green Desert Real Estate Brokers, Denver Bldg Mat & Décor TR LLC, and Fleet Line Shipping Services LLC will exit the company by selling their entire stake in the OFS.

Also Read: Gandhar Oil Refinery IPO: 10 things to know before subscribing to the Rs 500-crore issue

A big chunk from the fresh issue will be used for the working capital requirements of the company, amounting to Rs 185 crore. Further, the debt of Rs 22.71 crore availed by Texol will be repaid and Rs 27.73 crore will be spent for the purchase of equipment and civil work required for expansion in the capacity of automotive oil at the Silvassa plant.

Financials

Gandhar Oil Refinery’s revenue from operations grew 15.13 percent to Rs 4,079.4 crore in FY23 from Rs 3,543.3 crore in FY22. Profit after tax rose 30.3 percent to Rs 213.17 crore from Rs 163.58 crore in the same period. The personal care, healthcare and performance oils (PHPO) was the largest business division contributing 55 percent to the topline in FY23, followed by lubricants with a 25 percent share in the revenue. The rest of the contribution to revenue came from process and insulating oils (PIO) and channel partners.

Key Risks

(i) Gandhar Oil Refinery heavily relies on personal care, healthcare, and performance oil business segments. Downturns or ineffective sales management in these industries could cause a revenue decline.

(ii) The company sources a significant portion of raw materials from a limited number of suppliers without long-term contracts.

Also Read: Countdown begins for Tata Technologies IPO: Should you subscribe to Rs 3,042-crore issue?

Should you subscribe to Gandhar Oil Refinery IPO?

Swastika Investmart: Subscribe

Gandhar Oil Refinery is finally launching its IPO after abandoning plans to do so in 2017. “The issue appears to be fairly priced, with a P/E ratio of 7.10x. So considering all these factors, we assign a subscribe rating to this IPO,” said analysts at Swastika Investmart.

BP Wealth: Subscribe

Gandhar Oil Refinery was India's largest manufacturer of white oils by revenue in FY23, including domestic and overseas sales, and was one of the top five players globally in terms of market share in CY22.

“The issue is fairly valued. We recommend a ‘SUBSCRIBE’ rating for the issue,” said analysts at BP Wealth.

StoxBox: Subscribe

“Gandhar Oil Refinery has posted strong financial performance in the past and is likely to sustain going forward due to its focus on expanding its product portfolio and growing overseas business. We recommend investors to subscribe to the issue from a medium to long-term perspective,” said Prathamesh Masdekar, Research Analyst, StoxBox.

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