HP Adhesives IPO opens December 15: 10 key things to know about the offer

HP Adhesives Ltd., a manufacturer of consumer adhesives and sealants, will open its initial public offering on December 15.

Here are 10 key things to know before subscribing to the public issue:

1. IPO Dates The offer opens on December 15 and closes on December 17.
2. Price Band The shares will be offered at Rs 262-274 each, at a face value Rs 10 each.
3. Offer Details About 4.6 million shares will be offered in the Rs 126 crore issue. The IPO consists of a fresh offer of 4.14 million shares for Rs 113.4 crore and an offer for sale of about 457,000 shares by shareholder Anjana Haresh Motwani aggregating up to Rs 12.5 crore.

Of the net issue, 75 percent is reserved for qualified institutional buyers, 15 percent for non-institutional bidders, and 10 percent for retail investors.

4. Objectives of the Issue The company will use the proceeds from the fresh issue for working capital requirements and capacity expansion at its manufacturing facility at Narangi village of Raigad district in Maharashtra and an additional unit on an adjacent plot. The company will also expand installed capacities at existing product lines and add products to its portfolio.
5. Lot Sizes Investors can bid for a minimum of 50 equity shares and in multiples of 50 shares thereafter. Retail investors can invest a minimum of Rs 13,700 for a single lot and their maximum investment is Rs 1,91,800 for 14 lots.
6. Company Profile and Industry HP Adhesives is a multi-product, multi-category consumer adhesives and sealants company. It is one of the leading manufacturers in the consumer/bazaar segment of the adhesive industry for its largest product category – PVC solvent cement – in India. It also makes products for select large PVC pipe manufacturing companies. In addition to this, it sells ancillary products like ball valves, thread seals and other tapes, products for drainage and architectural solutions through its distribution network.

These adhesives and sealants are used in industries such as plumbing and sanitary, drainage and water distribution, general purpose building/construction and interior operations as well as for glazing operations, woodwork, footwear, automotive, foam-furnishing and other industries.

Pidilite is the market leader in consumer adhesives and sealants in India with an overall market share of 65 percent. HP Adhesives has a market share of about 17 percent for solvents. It will be the second-largest company in the segment among listed entities. Sonal Adhesives and Nikhil Adhesives are small companies and there are others in the unorganised sector.

7. Financials HP Adhesives clocked a profit of Rs 10.1 crore in FY21 against a loss of Rs 4.7 crore in the previous year. Revenue increased to Rs 118.2 crore from Rs 95.5 crore.

Profit in the six-month period ended September rose to Rs 3.1 crore from Rs 2.93 crore in the corresponding period a year earlier, while revenue surged to Rs 70.51 crore from Rs 44.92 crore.

The loss in FY20 was attributed to an exceptional one-time adjustment and other provisions of Rs 11 crore to clean the balance sheet while profit in the first half of FY22 was hurt by spiralling raw material prices that could not be passed on to customers.

8. Key Risks Crude oil and other petrochemical intermediates impact the company’s raw material prices. Any volatility in crude oil prices has an adverse impact on input costs.

The company does not have long-term agreements with raw material suppliers. Any issue in procurement of inputs may have a material adverse effect on business, results of operations, financial conditions and cashflows. The company offers credit for extended periods to distributors, which has increased its bad debts and working capital requirements.

9. Promoters and Management Anjana Haresh Motwani is the executive director and chairperson, while Karan Haresh Motwani is managing director. Surendra Kumar Mehta, Rajendra Kumar Jain and Ajeet Anant Walsvalkar are the independent directors of the company. Mihir Suresh Shah is the chief financial officer and Jyoti Nikunj Chawda is the company secretary and compliance officer of the company.
10. Grey Market, Allotment and Listing Dates The company’s shares currently do not command a premium in the grey market, according to IPO Watch.

The allotment of shares will be decided by December 22, unsuccessful investors will get refunds by December 23, and successful bidders will get shares credited to their demat accounts by December 24.

Shares of HP Adhesives will list on the BSE and the National Stock Exchange on December 27.