Paradeep Phosphates Rs 1,500-crore IPO opens today; should you subscribe- Here’s what brokerages say
Paradeep Phosphates Rs 1,500-crore IPO opens today; should you subscribe? Here’s what brokerages say The initial public offer (IPO) of Paradeep Phosphates opens for subscription today (17 May), and will close on Thursday (19 May). The price band for the Rs 1,501 crore IPO has been fixed at Rs 39-42 per equity share of face value Rs 10 each. The shares will be listed on BSE as well as NSE. Paradeep Phosphates shares on Tuesday were commanding a premium of Rs 3 in the grey market, 10% on the issue price. Ahead of the IPO, several brokerages have given a subscribe rating to the issue given its fair valuations compared to its peers. Paradeep Phosphates, India’s second largest manufacturer of non-urea fertilisers and di-ammonium phosphates (DAP) in the private sector, raised a little over Rs 450 crore from anchor investors on Friday. The company has allocated a total of 10.7 crore equity shares to anchor investors at Rs 42 apiece, aggregating the transaction size to Rs 450.52 crore. Goldman Sachs, BNP Paribas Arbitrage, Kuber India Fund, Copthall Mauritius Investment and Societe Generale are among the anchor investors. Issue size: 1501.7 croreFresh Issue size: 1,004 croreOffer for sale size: 498 crorePrice Band: Rs 39 to Rs 42 per equity shareFace Value: Rs10/shareNo. of shares pre-issue: 57.5 croreFresh Issue: 23.9 croreOffer for sale: 11.9 croreNo. of shares post-issue: 81.4 croreBid Lot size: 350 Equity share and in multiple of 350 equity share thereafterQIB: (including Anchor) portion: 50%Non-Institutional reserved portion: 15%Retail investors portion: 35% Proceeds of fresh issue ( Rs 1,000 crore) will be used to partly finance the acquisition of the fertiliser manufacturing facility in Goa and payment of debt and general corporate purposes. Paradeep Phosphates is the second largest private sector manufacturer of non-urea fertilizers in India and the second largest private sector manufacturer of Di-Ammonium Phosphate. It has a vast network of dealers and distributors for marketing and distribution of its products. The company has a huge economy of scale to compete in the industry. “At the upper price band of Rs 42, the company is valued at a P/E multiple of 11x based on its FY21 EPS of Rs 3.9. The company is a major player in the fertilizer sector and is expanding its capacity and backward integration operations. Also, it has raw material security through its promoters. Factoring in the business model, the demand for its products and the company fundamentals, we recommend that long term investors can subscribe to the Initial Public Offering of Paradeep Phosphates Ltd.” According to the brokerage firm, Paradeep Phosphates is well-positioned to capture the favorable Indian fertilizer sector dynamics supported by conducive government regulations. It is driving raw material efficiency through backward integration of facilities and effective sourcing. The company has a secure and certified manufacturing facility, infrastructure and unutilized land available for expansion. Strategic location of the manufacturing facility and sizable material storage, handling and port facilities are other positives for the firm. It also has a strong parentage, experienced management team and prominent shareholders. “At a higher price band of Rs 42, PPL is demanding an FY21 EV/Sales multiple of 0.7x, which is at significant discount to the peer average of 1.1x. Considering the above observations, we assign a “SUBSCRIBE” rating for the issue,” Choice Broking said in its note. The issue comprises both an offer for sale and fresh issue. While the Government of India will be selling its entire 20% holding in the company Zuari Maroc Phosphates Pvt Ltd. will also be selling part of its holding in the offer for sale. “In terms of valuations, the stock will trade at post issue P/E multiples of 15.3xFY2021 EPS (at the upper end of the issue price band), which is in line with other players like Chambal fertilizer and Deepak fertilizer though they may not be strictly comparable. Given the fact that the company is valued in line with peers and likely to face headwinds in terms of cost pressures due to recent increase in raw material prices, we recommend a NEUTRAL rating on the issue.” The brokerage noted that Paradeep Phosphates is well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations. As of March 31, 2022, (i) its total annual granulation capacity of DAP and NPK production plant was approximately 1.50 million MT; (ii) its total annual installed capacity of Sulphuric acid production plant was approximately 1.30 million MT; and (iii) its total annual installed capacity of Phosphoric acid production plant was 0.30 million MT, in addition, the plant has three operational concentrators to concentrate weak Phosphoric acid into strong Phosphoric acid. PPL has an established track record of delivering robust financial performance, according to Kotak Securities. “With the company in the midst of installing an evaporator to increase the inhouse production of strong phosphoric acid and increase in the phosphoric acid production capacity to 1500 TPD, the extent of backward integration will further improve, leading to improvement in the contribution margins. At the upper end of the price band, the issue is valued at a P/E of 7x based on FY22 annualised earnings, which we believe is reasonably priced,” the brokerage said in its report. Hence, it recommends a ‘subscribe’ rating on this issue for the long term. “At the upper price band of Rs.42, PPL is available at P/E of 7.1x (FY22 annualized) which is attractive on a short to medium term basis. PPL is well-positioned to capture favourable Indian fertilizer industry dynamics supported by conducive government regulations, driving raw material efficiency through backward integration of facilities and effective sourcing and established brand name backed by an extensive sales and distribution network. Considering PPL’s expansion plans, deepening the presence in western and southern regions of India, we assign a ‘Subscribe’ rating for the issue on a short to medium basis.” “Company is bringing the issue at price band of Rs 39-42 per share at p/e multiple of 11x on FY21 eps basis. Company being second largest private sector manufacturer of Phosphatic fertilizers in India is well-positioned to capture favorable Indian fertilizer industry dynamics supported by conducive government regulations. Company with established brand name backed by an extensive sales and distribution network has strong parentage, experienced management team and prominent shareholders is looking decent investment avenue for long term investment. Hence we recommend “Subscribe” on issue for long term.” (The recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.).jpg)
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- AMC”.
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In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base.
Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC’s sponsor is not getting any undue advantage.
In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.
Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC’s assurances.
To facilitate trustees’ supervision, AMCs should provide them with analytical information.
Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.
Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders. The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.
“In view of the increasing scale and reach of the mutual fund industry, trustees’ role in respect of unitholders’ protection assumes even greater significance,” Sebi said on Friday.
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Over the past decade there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.
To ensure that trustees devote time and attention to their core responsibilities, Sebi has suggested that for fulfilling other responsibilities, trustees may rely on professional firms such as audit firms, legal firms, merchant bankers for carrying out due diligence on their behalf.
The Sebi also listed some duties trustees can delegate to AMCs. This include ensuring that all systems are in place prior to the launch of any scheme by the AMC, and calculating any income in the mutual fund due to the fund and any income received in the mutual fund for unitholders.
The regulator has proposed to provide a one year time to existing trustees with board of trustee structure to convert into a trustee company, from governance point of view.
Presently, two structures for trustees are permitted — corporate and board of trustees structure. Moreover, there are a few mutual funds which have the board of trustees structure while the trustees of all other mutual funds have adopted the structure of a trustee company.
Considering the enhanced role of trustees over the period of time, Sebi has suggested to increase the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.
Also, it has been proposed that the chairperson of the trustee company should be an independent director.
Sebi has suggested that apart from the meeting of the audit committee of AMCs and trustees (which mostly comprises of independent directors), the board of AMCs and the board of trustees may be mandated to meet at least once a year to discuss the issues concerning the mutual funds.
The regulator proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.
The proposed amendment may include a clause which casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.
The Securities and Exchange Board of India (Sebi) has sought comments from public till February 24 on these proposals.
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