IPO alert: Refrigerant supply shortage could propel this company to new heights!
The company is preparing to launch its Initial Public Offering (IPO) soon - should you invest?
About the issue
Stallion India Fluorochemicals Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
January 16, 2025 |
| IPO Closing Date |
January 20, 2025 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 85 to Rs 90 per equity share |
| Min Order Quantity |
165 shares |
| Listing At |
BSE, NSE |
| Total Issue |
2,21,61,396 shares of FV Rs 10* |
| (Aggregating up to Rs 199.45 Cr)* |
| Fresh Issue |
1,78,58,740 shares of FV Rs 10* |
| (Aggregating up to Rs 160.73 Cr)* |
| Offer for Sale |
43,02,656 shares of FV Rs 10* |
| (Aggregating up to Rs 38.72 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Funding incremental working capital requirements of the company.
2. Funding capital expenditure requirements for the company’s semi-conductor and speciality gas debulking & blending facility.
3. Funding capital expenditure requirements for the company’s refrigerant debulking & blending facility.
4. General corporate purposes.
Promoter holding
Shazad Sheriar Rustomji, Manisha Shazad Rustomji and Rohan Shazad Rustomji are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 94.63 per cent in the company.
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Company profile
The company operates in the business of selling refrigerants, industrial gases, and related products. Its core operations include the debulking, blending, and processing of refrigerants and industrial gases, along with the sale of pre-filled cans and small cylinders/containers.
These gases find applications across various industries, including air conditioners and refrigerators, firefighting, semiconductor manufacturing, automobile manufacturing, pharmaceuticals and medical sectors, glass bottle manufacturing, and aerosols and spray foam production.
The company operates four facilities located in Khalapur (Maharashtra), Panvel (Maharashtra), Ghiloth (Rajasthan), and Manesar (Haryana).
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
H1FY25 |
| Revenue |
186.34 |
226.06 |
236.23 |
141.53 |
| Profit Before Tax |
30.07 |
12.97 |
21.27 |
22.47 |
| Net Profit |
21.11 |
9.75 |
14.79 |
16.57 |
While the company has consistently reported revenue growth in recent years, its profitability was impacted in FY23 and FY24 primarily due to fluctuations in raw material prices, particularly fluorine-based chemicals. These price hikes were driven by global supply disruptions, which raised production costs and squeezed margins. Additionally, reduced demand from key industries, influenced by global economic slowdowns and lower consumer spending, directly affected fluorochemical sales during this period.
When annualized, the figures from H1FY25 suggest a revenue growth of around 20 per cent and an impressive 124 per cent surge in net profit compared to FY24.
While the huge rise may seem less impressive due to the low base effect, the annualized net profit still demonstrates a growth of 57 per cent compared to FY22, a period when the company delivered strong results.
Valuation & Returns
| Company Name |
P/E |
P/B |
RoE (%)* |
| Stallion India Fluorochemicals Ltd |
17 |
2 |
13 |
| Listed Peers |
| Navin Fluorine International Ltd |
85 |
7 |
12 |
| SRF Ltd |
66 |
6 |
12 |
| Gujarat Fluorochemicals Ltd |
99 |
7 |
8 |
The issue is priced with a P/BV ratio of 4.11 times, calculated using its Net Asset Value (NAV) of Rs 21.89 as of September 30, 2024. At the upper price cap, it is priced at a P/BV ratio of around 2.42 times, considering its post-IPO NAV.
Considering the company's annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio is calculated at 17x. The company delivered a notable return on equity (RoE) of 13 per cent and a return on capital employed (RoCE) of 14 per cent for FY24.
As a result, the company has significantly outperformed its listed peers in terms of both valuation and returns.
Outlook
A major U.S. distributor recently raised concerns about significant supply shortages of R32 and R125, two critical gases used in air conditioners and fire extinguishers. These shortages have created challenges for the heating, ventilation, and air conditioning (HVAC) sector, which relies heavily on these gases for its operations. Consequently, global prices for refrigerant gases have been rising sharply.
Stallion India Fluorochemicals Ltd, which derives a substantial portion of its revenue from operations involving these gases, stands to benefit significantly from this trend. With the opportunity presented by increasing gas price, the company is well-positioned for substantial growth soon.
Considering the company's established market presence, diverse customer base spanning high-growth industries, and proven financial track record, we recommend investors consider subscribing to the issue with a long-term investment perspective.