Paradeep Phosphates IPO opens tomorrow: 10 key things to know before subscribing to the public issue

Paradeep Phosphates Limited, India’s second largest manufacturer of non-urea fertilizers and Di-Ammonium Phosphates (DAP) in the private sector, will launch its maiden public offer on May 17.

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

1. IPO Dates

The offer will open for subscription on May 17 (Tuesday) and the last day to subscribe to the public offer is May 19 (Monday).

2. Price Band 

The price band for the offer has been fixed between Rs 39-42 per equity share of face value Rs 10 each.

3. Offer Details`

Incorporated in 1981 and located in Paradeep, Orissa, the company aims to mop-up Rs 1,501 crore by a combination of fresh issue of equity shares aggregating upto Rs 1,004 crore and an offer for sale (OFS) of 118,507,493 Equity shares of Rs 10 each aggregating upto Rs 497.73 crore. The OFS comprises 6.02 million shares by Zuari Maroc Phosphates Pvt Ltd (ZMPPL), a joint venture of Zuari Agro Chemicals and OCP Group SA, up to 112.49 million shares by the government. ZMPPL has 80.45 percent stake, while the government holds around 19.55 percent stake in the company.

Post the issue, the promoter shareholding will come down to 56.1 percent from the current shareholding of 100 percent.

Of the total offer size, 50 percent of the net offer will be reserved for qualified institutional buyers, 35 percent for retail investors, and the remaining 15 percent for non-institutional investors.

4. Objectives of the Issue 

The company intends to utilize the net proceeds from the fresh issue to part-finance the acquisition of the manufacturing facility in Goa, repayment/prepayment of part of its borrowings and general corporate purposes.

The company will not get any proceeds from the OFS portion, the proceeds of which will entirely go to the promoters.

5. Lot Sizes

Investors can bid for a minimum lot size of 350 shares and in multiples thereof. The minimum investment for a retail investor works out to Rs 14,700 at the upper end of the price band. A retail investor can apply for upto 13 lots or 4,550 shares for an amount of Rs 1,91,100.

6. Company Profile & Industry

Incorporated as ‘Paradeep Phosphates Limited’ in December, 1981, The company is 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. Their fertilizers are marketed under some of the key brand names in the market ‘Jai Kisaan – Navratna’ and ‘Navratna’.

As of March 31, 2021, the total annual granulation capacity of DAP and NPK production plant was approximately 1.50 MMT (million metric tonnes); the total annual installed capacity of Sulphuric acid production plant was approximately 1.30 MMT while the total annual installed capacity of Phosphoric acid production plant was 0.30 MMT.

The company also has 2 captive power plants of 16 MW each, designed to run on the excess steam generated by the Sulphuric acid production plant.

As of March 31, 2022, the company's network includes 4,761 dealers and over 67,150 retailers serving over five million farmers in India.

The Indian fertilizer industry is highly fragmented and competitive and the company directly competes with strong names such as IFFCO, Hindalco (for phosphoric acid), Gujarat State Fertilizers Corporation, National Fertilizers (NFL), Rashtriya Chemicals and Fertilizers, Zuari Agro Chemicals Ltd and Mangalore Chemicals & Fertilizers Ltd.

7. Financials

For FY21, the firm reported a revenue of Rs 5164.73 crore as against Rs 4192.87 crore a year ago. Net profit for the period stood at Rs 223.27 crore versus Rs 193.22 crore last year. For the nine months ended December 2021, the company has already surpassed the revenue numbers it achieved in FY21. The company has recorded revenues of Rs 5,959.7 crore during the first nine months of FY22 and the net profit was also higher at Rs 362.78 crore.

Its net margins for 9MFY22 stood at 6.09 percent as against 4.32 percent in FY21.

8. Strengths and business strategy

 The company is well-positioned to capture the advantage of favorable government regulations in favor of Indian fertilizer industry. It has been able to drive raw material efficiency through backward integration of facilities and effective sourcing.

It has a secure and certified manufacturing facility and infrastructure as well as unutilised land is available for future expansion. It has a sizeable material storage, handling and port facilities.

It is the second largest manufacturer of Phosphatic fertilizers in India and has a established brand name backed by an extensive sales and distribution network.

Its key business strategy to achieve strong growth in future is to improve the leadership position by enhancing the production capabilities and having a more diversified product portfolio. It aims for continued improvement in cost efficiency and productivity and wants to increase its geographical reach in Eastern and Western India and expand distribution channels. The company would also scout for selective inorganic growth opportunities.

9. Promoters & Key Management Personnel

Paradeep Phosphates is a part of the Adventz Group, as well as OCP. The founding chairman of the Adventz Group was the late Dr. K.K. Birla and the current chairman is Saroj Kumar Poddar.

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 $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, and is owned 95% by the Moroccan government.

Narayanan Suresh Krishnan is the Executive Director and the Managing Director while Sabaleel Nandy is the President and Chief Operating Officer (Strategy, Supply Chain and Commercial) of the company.

10. Grey Market, Allotment & Listing Dates

The company’s shares are currently commanding a premium of Rs 3 per share in the grey market, according to IPO Watch implying a listing gain of 10 percent.

Shares will be allotted to successful bidders on May 24, and the refund to unsuccessful bidders will be credited their accounts on May 25. Shares will be credited to the demat account of the successful bidders by May 26 and the stock will debut on the bourses on May 27.