Platinum Industries IPO - Investment Rationale, Issue Details, Financials, Strength, Risks: Anand Rathi

Anand Rathi's Report

Platinum Industries Ltd. launched its initial public offering today and the investors can subscribe to the issue till Feb. 29. The Rs 235.3 crore IPO comprises only of fresh issue.

The manufacturer of speciality chemical agents like stablisers and lubricants has fixed a price band in the range of Rs 166 to Rs 171 per share, with a minimum application lot size of 87 shares.

Objects of the Issue

• Investment in the subsidiary, Platinum Stabilizers Egypt LLC.

• Funding capital expenditure requirements of the company (Palghar Facility).

• Funding working capital requirements of the company.

• General corporate purposes.

Strengths

• Consistent financial performance.

• R & D and Sustainability

• Varied product portfolio catering to diversified industries

• Quality Products

Key Strategies:

• Expanding their production capacities and broadening the global footprint.

• Increase in market share.

• Modernization and Expansion of their facility in India.

• Continue to build the global customer base and enter new geographical markets.

• Continue to innovate new product categories, catering to wider end-applications.

Valuation

The company has grown from commencing from two products portfolio to a multi-product manufacturing company with sales across India and in international markets. It is into manufacturing of various important industrial products like PVC Stabilizers, lubricants etc. along with strong R&D capabilities.

At the upper price band company is valuing at price/earning of 25.0 times, with a market cap of Rs 9,392.1 million post issue of equity shares and return on net worth of 61.26%.

We believe that valuations of the company is fairly priced and recommend a “Subscribe-Long Term” rating to the IPO.

Key risk:

• The company operates out of a single manufacturing facility which is located at Palghar, Maharashtra, any localized social unrest, natural disaster or breakdown of services or any other natural disaster in and around Palghar, Maharashtra or any disruption in production at, or shutdown of, their manufacturing unit could have material adverse effect on their business and financial condition.

• The company is in the process of expanding the operations and establishing a network of distributors and customers in regions where they do not have a significant presence or prior experience. Any failure to expand into these new regions could adversely affect their sales, financial condition, result of operations and cash flows.

• They are dependent on a few customers for a major part of their revenues. Further they do not enter into long-term arrangements with their customers and any failure to continue their existing arrangements could adversely affect the business and results of operations.

• The company is required to obtain, renew or maintain certain statutory and regulatory permits and approvals required to operate their business and if they fail to do so in a timely manner or at all and their business, financial conditions, results of operations, and cash flows may be adversely affected.

• Under-utilization of their manufacturing capacities and an inability to effectively utilize their expanded manufacturing capacities could have an adverse effect on the business, prospects, and future financial performance.

• The company do not have long-term agreements with their suppliers for raw materials and an inability to procure the desired quality, quantity of their raw materials in a timely manner and at reasonable costs, or at all, may have a negative impact on the business, results of operations, financial condition, and cash flows.

• There have been some instances of delayed filing with the Registrar of Companies and other non-compliances under the Companies Act in the past which may attract penalties.

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