Issue Offer
Issue Opens on Dec 15, 2021Issue Close on Dec 17, 2021 Total IPO size (cr)125.96 Fresh issue (cr) 113.44 Offer For Sale (cr) 12.53 Price Band (INR) 262-274 Market Lot 50 Face Value (INR)10 Retail Allocation 10% Listing On NSE, BSE
Objects of the issue
⮚ For funding the working capital.
⮚ Capital expenditure for expansion.
Issue Break-up (%)
QIB Portion 75 NIB Portion 15 Retail Portion 10
⮚ Shareholding (No. of Shares)
Pre Issue1,42,34,947Post Issue1,83,74,947
Indicative Timetable
Finalization of Basis of Allotment 22-12-2021 Refunds/Unblocking ASBA Fund 23-12-2021 The credit of equity shares to DP A/c 24-12-2021 Trading commences 27-12-2021
Registered in 2019, HP Adhesives Limited is an adhesives and sealants company. The company manufactures a wide range of consumer adhesives and sealants such as PVC, cPVC, and uPVC solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants, and PVC pipe lubricants.
These adhesives and sealant products have applications in multiple industries such as plumbing and sanitary, drainage and water distribution, general-purpose building/ construction, and interior operations as well as for glazing operations, woodwork, footwear, automotive, foam-furnishing, and other varied industries.
⮚ Apart from the above products, the company also sells ancillary products like ball valves, thread seals, and other tapes and FRP products for drainage and architectural solutions.
⮚ The company has grown from a single product to a multi-product adhesives company with sales across India (through a pan-India distribution network) and also in international markets.
⮚ Over the years, Company’s brands “HP” and “Strong Weld” in the PVC adhesives product category have gained increasing acceptance on account of high product quality and efficient pricing.
⮚ The company has a solid business model that focuses on consistently expanding its product portfolio by introducing new product categories and SKUs to cater to a wide range of end-use applications and selling them through its distribution network across India.
⮚ As of September 30, 2021, its distribution network comprised of 4 depots situated in Delhi, Kolkata, Bengaluru, and Indore and more than 750 distributors who cater to more than 50,000 dealers in India
⮚ The company wants to expand its manufacturing capacity at Village Narangi, Raigad, Maharashtra to cater to the growing demand for several product categories.
Outlook & Valuation:
In the last 3 years, the company has shown stable growth in revenue where it grew from Rs 87.97 cr to Rs 123.87 cr over the period of FY19 to FY21, during the same period profit has grown from Rs 4 cr in FY19 to Rs 10.05 cr in FY21, but the company faced a huge loss of Rs. (4.67) cr in FY20 on the back of exceptional item.
The industry is expected to grow at a CAGR of 6-8% while the company is in a growth phase and is expanding installed capacities for its product lines and is also expanding its portfolio.
The IPO is valued at a PE of 35x and P/BV of 28x to its FY21 earnings. However, if we annualized FY22 earnings PE and P/BV work out to be 81x and 10.38x which is in line with the peer. Due to its small size, the SME-IPO is going to be listed in the T2T segment.
We have an "AVOID" rating for the IPO.
For additional information & risk factors please refer to the Red Herring Prospectus
IPO Note
HP ADHESIVES LIMITED
KEY MANAGERIAL PERSONNEL
⮚ Anjana Haresh Motwani, with over 40 years of experience in the adhesive industry, is currently designated as the Executive Director and Chairperson of the Company.
⮚ Karan Haresh Motwani currently holds the position of Managing Director of the Company. He was admitted to the partnership M/s. HP International in 2007.
⮚ Mr Mihir Shah, is the chief financial officer of the Company. He has been associated with the Company since May 2021. He has an overall experience of nearly 15 years in investment banking.
⮚ Ms Jyoti Nikunj Chawda is the Company Secretary & Compliance Officer of the Company. She is a commerce and law graduate from the University of Mumbai and holds an overall experience of nearly 7 years in secretarial and compliance functions.
⮚ Ms Nidhi Haresh Motwani is the Vice President – Operations of the Company, She has been associated with the Company since February 2016. She has an overall experience of 10 years in the fields of branding, marketing, and sales.
⮚ Mr Saurabhraj Bhatt is the Vice President – Sales and Marketing, of the Company. He has an overall experience of about 22 years. He handles the product promotion, branding, sales, and marketing functions of the Company.
⮚ Mr. K. P. Unnikrishnan is the Assistant Vice President – New Product Development of the Company. He has a multi-functional experience of 36 years
⮚ Mr. Sabrinath Gopalkrishnan Nair is the Senior Manager – Purchase of the Company. He has experience of over 28 years in accounts, inventory control and logistics operations.
COMPETITIVE STRENGTHS
⮚ Consistently growing company with established brand presence
⮚ Wide Product Portfolio and Multiple SKUs
⮚ Focusing on multiple end-user industries
⮚ Extensive distribution network across India catering to customers.
⮚ Efficient manufacturing set-up with scope for expansion
⮚ Effective quality checks
⮚ R&D set up for constant product improvement and new product development
KEY STRATEGIES
⮚ Further, strengthen brand image
⮚ Expansion of manufacturing facility
⮚ Further expansion of distribution network across India and globally
KEY CONCERNS
⮚ The impact of the COVID-19 pandemic on business and operations is uncertain.
⮚ The company does not have any long-term arrangements with its distributors.
⮚ Restrictions on the import of raw materials may adversely impact the business.
⮚ Prices of the principal raw materials are subject to changes in the prices of crude oil.
⮚ The company has incurred losses in the recent past.
IPO Note
HP ADHESIVES LIMITED
COMPARISON WITH LISTED INDUSTRY PEERS (AS OF 31ST MARCH 2021)
Name of the Company EPS (Basic) NAV P/E Total Income (Mn) RoNW (%)HP Adhesives Limited 7.74 9.74 35 118.16 79%Peer GroupPidilite Industries Limited 22.26 114.78 81.28 7293.00 114.78
FINANCIALS (RESTATED CONSOLIDATED)
Particulars (Rs. In Lakh) FY 2021 FY 2020 FY 2019Equity Share Capital 1,300.00 1,300.00 1,300.00Other Equity (34.12) (1,051.56) 166.23Net Worth 1,265.88 248.44 1,466.23Total Borrowings 3,138.52 3,405.98 2,358.33Revenue from Operations 11,816.16 9,547.93 8,741.75EBITDA 1,768.67 691.95 870.09Profit Before Tax 1,323.02 (536.06) 405.91Net Profit for the year 1,005.96 (467.05) 400.07
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