Paradeep Phosphates

Fertilizers | India

IPO | 16 May 2022

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Well-Placed to Capture Growth Opportunities
About the Company IPO Details
Price Band (Rs) Rs39-Rs42
Paradeep Phosphates (PPL) manufactures non-urea fertilizers in India and has the expertise in
Face Value (Rs) 10
trading, distribution of variety of complex fertilizers such as DAP, 3 grades of Nitrogen-Phosphorus-
Issue Open/Closing Date 17-May-22/19-May-22
Potassium (NPK-10, NPK-12, NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid. PPL
Fresh Issues (mn) 239.0
is the second-largest manufacturer of non-urea fertilizers and DAP. It has ~14% share in the OFS (mn) 118.5
total installed capacity of phosphoric acid in India. The company has brands like Kisaan- Total Issue (mn) 357.6
Navratna and Navratna. PPL is a part of the Adventz Group that is diversified into agri business, Minimum Bid Qty. (Nos) 350
engineering & infrastructure and emerging lifestyle businesses. It is also a part of OCP, one of the Issue Size (Rs bn) 15.0
leading producers of phosphate rock globally, and operates largely in Morocco and the Western QIB / HNI / Retail 50%/15%/35%
Sahara region. PPL’s manufacturing facility is located in Paradeep, Odisha, which can store up Implied Market Cap (Rs bn) 34.2
to 1.2 lakh mt of phosphate rock, 0.65 lakh mt of phosphoric acid, 0.55 lakh mt of sulphur and *At a higher band

0.35 lakh mt of MOP. The company is coming out with an IPO of Rs4.97bn comprising of a fresh
Object of the Issue
issue of Rs10bn and an OFS of 119mn shares. The price band is at Rs39-42 and the market cap
f Part-financing the acquisition of the Goa Facility.
at the higher band is seen at Rs34bn. The funds will be utilized to part-finance the acquisition of f Repayment of borrowings.
a Goa facility and repayment of borrowings. f Listing Benefit

Expansive Distribution Network

Key Risk
While the company has a strong presence in the Eastern part of India, it has an expansive sales
f Dependent agricultural sector
and distribution network of products across 14 states through a network of 11 regional marketing f Reduction in subsidies and incentives provided to
offices and 468 stock points. As of FY22, it has 4,761 dealers and over 67,150 retailers serving farmers
over 5mn farmers in India. Moreover, PPL employs 905 permanent personnel and has also hired f Unable to obtain or maintain regulatory approvals
for the products
6 consultants, in addition to contract labour, for operations when required. f Inability to expand or effectively manage distribution
network
Capacity Expansion on Track
f Have had negative cash flows in the past
The company is in the process of expanding its DAP and NPK capacity from 1.2mn MT in FY22
to 1.8mn MT, which is expected to be completed by May’22. With the addition of Goa facility, the Shareholding (%) Pre-Issue Post-Issue
total production capacity is set to rise by another 1.2mn MT. Further, opportunity exists to use the Promoters 100.0 56.1
additional available land parcel. Others - 43.9

Financials in Brief Key Financials

For 9MFY22, the company reported a revenue of Rs59.6bn, while EBITDA stood at Rs5.8bn, with (Rs mn) FY19 FY20 FY21
a margin of 9.7%. During FY19-21, its revenue clocked a CAGR of 9%, while EBITDA registered Revenue 43,579 41,929 51,647
a CAGR of 11%, as margin expanded from 10.1% in FY19 to 10.5% in FY21. PAT during FY19-21 EBITDA 4,415 4,597 5,422
clocked a CAGR of 19%, mainly due to the lower interest cost, as the total debt fell significantly EBITDA Margin (%) 10.1 11.0 10.5
from Rs31.2bn in FY19 to Rs12.5bn in FY21. Moreover, RoE expanded from 10.7% in FY19 to 12.2% PAT 1,590 1,932 2,233

in FY21, which further expanded to 16.6% in 9MFY22. PAT Margin (%) 3.6 4.6 4.3
EPS (Rs) 2.0 2.4 2.7
Our View P/E (x) 21.5 17.7 15.3
On FY22 annualized financials, the IPO is valued at 7.2x EV/EBITDA, 0.7x EV/sales and ~7x P/E. EV/EBITDA (x) 14.8 12.4 8.4
The IPO is available at ~7x TTM PE vs. the industry average of ~13x TTM PE. (Coromandel trades EV/Sales (x) 1.5 1.4 0.9
at 17x TTM PE, while RCF trades at 8.8x TTM PE) Similarly, in terms of EV to sales, the IPO is Net Worth 14,827 16,035 18,275
available at 0.7x vs industry average of 0.9x. Coromandel trades at EV/Sales of 1.3x while RCF RoE (%) 10.7 12.0 12.2

is at 0.5x. PPL is well positioned to capture the Indian fertilizer industry’s dynamics supported by Gross Debt 31,230 22,980 12,512
Net Block 10,243 12,140 12,262
the favourable government regulations. GoI has provided an additional Rs650bn allocation for
Net Asset Turnover (x) 4.3 3.5 4.2
fertilizer subsidy under the Atmanirbhar 3.0 package. PPL is able to drive raw material efficiency
Source: RHP
through backward integration of facilities and effective sourcing. Moreover, its manufacturing
facility is secured and certified with unutilized land available for expansion. Owing to its strong
financial track record, established brand name, sales and distribution reach, massive Research Analyst:
storage and material handling capabilities and capacity expansion, we recommend Arafat Saiyed
Contact: (022) 41681371 / 9819503007
SUBSCRIBE to the issue.
Email : arafat.saiyed@relianceada.com

1
 Exhibit 1: Capacity and utilisations of PPL

Utilisation (%)
Capacity (MTPA)
1.6 120

1.4
100
1.2
80
1.0
0.8 60

0.6 40
0.4
20
0.2
0.0 0
FY19 FY20 FY21
FY19 FY20 FY21

DAPand NPK Sulphuric acid Phosphoric DAPand NPK Sulphuric acid Phosphoric

Source: RHP Source: RHP

Exhibit 2: Production of PPL (000, MT) Exhibit 3: Inhouse Storage Facilities of PPL (MT)
600 568 1,40,000
1,20,000
500 458 1,20,000

400 1,00,000

296 80,000
300 65,000
215
60,000 50,000
200 45,000
40,000
94 106 40,000 35,000
100
20,000
-
DAP N-20 N-10 -
Phosphate Phosphoric Sulphur Sulphuric acid Liquid MOP
9MFY21 9MFY22 rock acid ammonia

Source: RHP Source: RHP

Exhibit 4: PPL’s Capacity of DAP/NPK (Lakh Metric Tons)

Source: RHP

2
Exhibit 5: PPL’s Capacity of Phosphoric Acid (Lakh Metric Tons)

Source: RHP

Exhibit 6: PPL’s regional Dealers and Sales mix

% of Sales

5.3%
22.6%

25.9%

46.2%

South East West North

Source: RHP

Exhibit 7: Fertiliser Consumption (Kg/ha)

400
346
350

300

250
209
200
162
150 121 127
104
100 70 73 80
58
41
50 26 25 25 29
16
-
N P K Total

World USA India China

Source: RHP

3
 Exhibit 8: Share of products in fertiliser consumption
40

35

30

25
(mn tonnes)

20

15

10

0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY26E

N P K

Source: RHP

Exhibit 9: Production capacities of Key Indian Players (FY20)

SPIC, 10% RCF, 1%

GSFC, 3%

FACT, 7%
IFFCO, 41%

Hindalco, 8%

Coromandel, 15%

PPL, 14%

Source: RHP

Exhibit 10: Trend in subsidy bill Exhibit 11: Subsidy disbursed by the Government

1,000 912 800 745

900 700
800 710
694 600
700 637
600 530 500 431
(Rs bn)
(Rs bn)

390
500 400
320 322
400 327 327 352 350
300 241 235 250
240 222
300 202 209 224 222 172
180 167 195 200
200 106 127 100 121
100 60 100
0 0
FY18 FY19 FY20 FY21 FY22E FY18 FY19 FY20 FY21

Indigenous Urea Imported Urea Non-urea fertilisers Total Indigenous Urea Imported Urea Non-urea fertilisers

Source: RHP Source: RHP

4
 Mitul Digitally signed by Mitul Dilipkumar Shah
DN: c=IN, o=Personal, title=1748,

Dilipkumar
pseudonym=ae7ad4bd9ee9795ea86bc594a157b5c534580118,
2.5.4.20=e0fb9e3e232847cf9f073d3b1df63fa001f377a7004fd86cbe
a87122ce044303, postalCode=400067, st=Maharashtra,
serialNumber=0fa3b306aafde36b539707b48cce4e7ac307839092b8
cd8323de535e18683c65, cn=Mitul Dilipkumar Shah

Shah
Date: 2022.05.16 22:45:25 +05'30'

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