IPO Analysis: Platinum Industries Ltd

IPO Rating: Apply for the long-term

About the Issue  

Platinum Industries Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 10 each. The IPO price range is set between Rs 162 and Rs 171 per equity share, resulting in a total issue size of Rs 235.32 crore at the upper price band.  

The IPO is scheduled to commence on February 27, 2024, and will conclude on February 29, 2024. The market lot size for the IPO is 87 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,131 shares or a total investment of Rs 1,93,401 assuming the upper price band.   

Objects of the Issue  

Considering that the offer is exclusively a fresh issue, it is crucial to note that the company will directly profit from the offer proceeds. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Investment in the subsidiary, Platinum Stabilizers Egypt LLC (PSEL), for financing its capital expenditure requirements for the setting up of a manufacturing facility for PVC Stabilizers at SC Zone, Governorate of Suez, Egypt.

2. Funding of capital expenditure requirements of the company towards setting up a manufacturing facility for PVC Stabilisers at Palghar, Maharashtra, India

3. Funding working capital requirements of the company

4. General corporate purposes

Promoter holding  

Krishna Dushyant Rana and Parul Krishna Rana are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 94.72 per cent in the company.   

Company profile  

It's a diversified company involved in manufacturing stabilizers along with other products. The company's business segments encompass PVC stabilizers, CPVC additives, and lubricants. Its products find applications in various industries such as PVC pipes, PVC profiles, PVC fittings, electrical wires and cables, SPC floor tiles, rigid PVC foam boards, packaging materials, etc. Additionally, the company operates in the speciality chemicals industry.

According to the CRISIL Report, it ranks as the third-largest player in PVC stabilizers based on sales, holding around 13 per cent market share in the domestic market for the financial year 2022-23. The company also engages in trading activities involving associated commodity chemicals like titanium dioxide and PVC/CPVC resin. Furthermore, it exports its products to various countries, expanding its market reach globally.

Its manufacturing facility is situated in Palghar, Maharashtra, strategically positioned near the JNPT (Nhava Sheva) Port, Maharashtra. This location allows for convenient receipt of imported raw materials and facilitates the export of finished goods to international markets. Additionally, the company, through its subsidiary Platinum Stabilizers Egypt LLC, plans to initiate a project in Egypt. Furthermore, it is in the process of establishing a new manufacturing facility in Palghar, Maharashtra, which will be utilized for the production of non-lead-based PVC stabilizers.

Financials  

The company has effectively enhanced its top-line and bottom-line performance in recent years. In FY22, both revenue and net profit experienced remarkable year-on-year growth, with a 111 per cent surge in revenue and a 270 per cent rise in net profit compared to FY21. 

This notable growth trend persisted into FY23, and the figures for the first half of FY24 also demonstrated similarly positive results, indicating sustained growth for FY24. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 90 per cent and 57 per cent, respectively, for the fiscal year 2023.

Valuation and outlook  

The issue is priced with a P/BV ratio of 8.09 times, calculated using its Net Asset Value (NAV) of Rs 21.13 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 15.

Platinum Industries Ltd demonstrated exceptional outperformance compared to its listed peers, excelling in terms of both valuation and returns. Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.