Paradeep Phosphates files IPO papers: Key takeaways from DRHP

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Paradeep Phosphates, a leading fertiliser company, on August 13 filed a draft red herring prospectus (DRHP) for its upcoming initial public offering (IPO) with the market regulator Securities and Exchange Board of India (SEBI).

The company is a joint venture between Adventz Group Company, Zuari Agro & Maroc Phosphates, which is a wholly-owned subsidiary of OCP, Morocco. The Government of India is, notably, owner of 19.5 percent stake in Paradeep Phosphates.

Here are some of the key takeaways from the DRHP

The offer comprises a fresh issue of equity shares aggregating to Rs 1,255 crore.

The offer for sale is of up to 120,035,800 equity shares, whose face value is stated as Rs 10 each.

Out of the total equity shares being offered for sale, Zuari Maroc Phosphates will offer up to 7,546,800 shares and up to another 112,489,000 equity shares will be offered by the Government of India.

The portion of the offer available for allocation to retail individual investors is 35 percent.

The object of the IPO is to partly finance the acquisition of the fertiliser manufacturing facility in Goa, the DRHP states. The "repayment/prepayment of certain borrowings" and "general corporate purposes" are stated as the other primary objectives behind the offering.

"The net proceeds will first be utilised for the objects as set out above. Subject to this, our company intends to deploy any balance left out of the net proceeds towards our general corporate purposes, as approved by our
management, from time to time, subject to such utilisation for general corporate purposes not exceeding 25 percent of gross proceeds of the Fresh Issue," it added.

The risk factors stated in the DRHP includes climate conditions which may have an adverse effect on the business, any possible changes in government policy, any unplanned shutdown in manufacturing facility, future impact of COVID-19, inability to expand and dependence on a limited number of suppliers.

In its industry overview, the DRHP of Paradeep Phosphates states that agriculture plays an important role in economic and social development across the globe. "As of 2018, agriculture constituted 4 percent of global gross domestic product (GDP). In some of the developing countries the share of agriculture can be as much as 25 percent of their GDP. As per World Bank estimates, agriculture will feed approximately 9.7 billion people across the world by 2050."