Platinum Industries IPO Review – Finance, GMP, and more

Platinum Industries IPO Review Platinum Industries is facing an IPO issue of Rs. 235.52 Cr will commence on February 27, 2024. The issue closes on February 29 and will be listed on the exchange on March 5, 2024. In this article, we will look at Platinum Industries Limited IPO Review 2024 and analyze its strengths and weaknesses. Read on to find out!

About Platinum Industries Limited

Platinum Industries is a specialty chemical company engaged in the manufacturing of PVC stabilizers. It is a chemical additive used to improve the durability and performance of polyvinyl chloride (PVC)-based products.

These stabilizers improve the thermal stability of the material, allowing it to withstand heat without significant degradation or loss of physical properties. The company is the third largest PVC stabilizer manufacturer by sales, accounting for 13.00% market share in the domestic market.

The company has three business segments: PVC stabilizer, CPVC additives, and lubricant. These products apply to PVC pipes, wires, cables, PVC foam boards and other packaging materials.

Chlorinated PVC (CPVC) additives are chemicals that strengthen PVC to withstand exposure to a wide range of chemicals and corrosive substances. This makes CPVC suitable for applications involving hot water treatment, such as piping systems, fire sprinklers, and industrial pipes.

Lubricants are an essential part of PVC formulations. These lubricants are used to reduce friction between PVC molecules by lowering melt viscosity.

Platinum Industries has a manufacturing facility spread over 21,000 square feet of land in Palghar, Maharashtra. The facility is located near the Nhava Sheva (JNPT) port, which allows the company to import raw materials and export finished products to international markets.

It has also proposed expanding its production capacity in India by proposing a second manufacturing facility in Palghar, Maharashtra. Additionally, the company is seeking to enter the Egyptian market through its proposed manufacturing facility.

According to the CRISIL report, Egypt currently has no PVC stabilizer manufacturing facilities and meets its PVC stabilizer demand through imports led by countries such as Turkey, Iran, Saudi Arabia and India.

Industry introduction

The Indian specialty chemicals industry, which accounts for about 26% of the total chemicals industry (excluding pharmaceuticals), was worth $29 billion in FY20. The industry grew at a CAGR of 6.7% in fiscal 2015-20, driven by increased domestic purchases and increased exports from various end-user industries.

However, in FY21, the industry declined by 3.4% due to slowdown in economic activity and subsequent decline in demand from end-user industries. The industry showed recovery in FY23 with a value of $37.9 billion. India’s specialty chemicals industry is expected to grow at a compound annual growth rate (CAGR) of 8.3% between 2023 and 2026 to reach USD 48.1 billion by FY 2026.

Per capita chemical consumption in India is low compared to Western countries. So there is more room for demand. Indian chemical manufacturers are benefiting greatly as the geopolitical landscape shifts and global supply chains shift away from China.

The Department of Chemicals and Petrochemicals (DCPC) has identified around 100 chemicals/intermediates being imported at high value, and these chemicals are used in the manufacture of products with significant export potential.

These 100 chemicals are proposed to be supported under the Production Linked Incentive (PLI) scheme for the chemicals sector. The proposed PLI scheme aims to encourage domestic production of intermediates and raw materials for pesticides, dyes and pharmaceuticals, with a focus on domestic value addition.

Although the PLI system for basic chemicals has not been introduced yet, the government has introduced a PLI system with a cumulative amount of Rs. 21,940 Cr as incentives for manufacturing of Key Starting Materials (KSM)/Drug Intermediates (Dis), Active Pharmaceutical Ingredients (APIs) and other products in India.

Platinum Industries IPO Review – Finance

Platinum Industries reported revenue of Rs. 231 Cr in FY23, up 23% from Rs. 188 Cr in FY 2022. Since FY21, revenue has grown at a CAGR of 61%.

The company earns 51% of its revenue from supplying PVC stabilizers and 26.75% from selling lubricants. CPVC segment constitutes approximately 7.6%. The company also trades essential chemicals such as titanium dioxide, waxes and zeolite PVC/CPVC resins and derives 14% of its revenue from this segment.

The company derives 94.5% of its revenue primarily from the domestic market, with only 5.5% of its revenue coming from exports. Our top three customers account for 64% of the company’s revenue, and our top 10 customers account for 86.5% of our revenue.

The net profit of the company in 23 is Rs. 37.6 Cr, an increase of 112% from Rs. 17.7Cr in 2022. Profits have grown at a CAGR of 179% since fiscal 2021. The company maintains an EBITDA margin of 23.27% and a net profit margin of 16.24%.

The company’s return on equity is very high at 90.02% due to low reserves. These margins fell to 133% and 139% in FY22 and FY21 respectively, and investors should expect margins to fall further and stabilize as the company builds reserves.

Return on capital is 57%, which is relatively lower than ROE. This is a result of the company’s current debt assumption. The company’s debt-to-equity ratio is 0.28 times.

Platinum Industry – Key Players

Platinum Industries has no direct competition in India, where it is listed. However, Supreme Petrochem and Apcotex Industries Ltd are two specialty chemical companies with exposure to the construction and industrial support industries.

When comparing Platinum to its peers by revenue, Platinum is dwarfed by both companies. However, in terms of net worth return, Platinum Industries recorded a higher return at 61.26% compared to Supreme and Apcotex at 27% and 23%.

In terms of price-to-earnings ratio, the Platinum industry with a basic income of Rs is 9.42 per share as compared to the upper price range of Rs. 171 is trading at a PER of 18.15 times.

Company Strengths

1. Consistent Financial Performance: The company has grown from a two-product portfolio to a multi-product manufacturing company. Revenue and net profit have grown significantly at 62% and 179% CAGR, respectively, since FY21.
2. Research and development capabilities: The company has an in-house R&D facility of 3352 SqFt. The facility features modern laboratory equipment and skilled researchers focused on developing innovative products.
3. Diverse product portfolio: In PVC applications alone, the company has developed more than 400 grades to meet customer requirements. Additionally, the company is diversifying its revenue streams across PVC, CPVC, lubricants and trading businesses.
4. High barriers to entry: The special nature of this industry leads to significant differentiation between products, high levels of R&D and technological know-how. These things hinder new companies from entering the field.
5. Leaders in the domestic market: Platinum Industries is a market leader in PVC stabilizers. The company also plans to focus on expanding its presence in global markets. We also plan to increase sales to mid-sized customers offering specialized applications for developing niche products.

company’s weaknesses

1. Single manufacturing facility: The company is currently in the early stages of operating from just one facility. Natural disasters, civil unrest, and service interruptions can have a significant impact on your bottom line.
2. Expand into new territories: The Company intends to use the net proceeds from the issue to establish a facility in Egypt to manufacture and sell the shares in Egypt. The company has so far been primarily focused on India, so expansion into new economies could be risky.
3. Revenue Concentration: The company generates approximately 78% of its revenue from its top five customers and 86% from its top 10 customers. This puts the company at concentration risk, and missing out on a single large customer could significantly hurt its bottom line.
4. Legal and regulatory requirements: The company is required to obtain several licenses, registrations and permits from various government authorities to run the facility smoothly. Contamination or non-compliance with such norms may result in closure of the facility.
5. Lack of long-term contracts with suppliers: The Company enters into long-term contracts with its suppliers, and changes in the supply of raw materials may reduce the Company’s margins.

Platinum Industries Limited – GMP

Shares of Platinum Industries Ltd were trading at a premium of 32.16% in the gray market on February 23, 2024. The stock in Gray Market was trading at Rs 226. This gives a premium of Rs 55 per share over the ceiling price of Rs 171.

Platinum Industries IPO Review – Key IPO Information

promoter: Krishna Dushyant Rana and Parul Krishna Rana

Book Operations Lead Manager: Unistone Capital Private Ltd

Proposal registered by: Bigshare Services Pvt Ltd.

purpose of the problem

1. Rs 74 Cr will be utilized to set up an Egyptian subsidiary and set up manufacturing units in the country.
2. Rs 79 Cr will be utilized to finance capital expenditure for setting up a second manufacturing facility in Palghar, Maharashtra.
3. Rs 30 Cr will be used to finance the working capital requirements of the company.
4. The remaining amount will be utilized for general corporate purposes.

conclusion

The IPO is an exciting opportunity for investors looking to enter the Indian specialty chemicals industry. The company has shown strong sales and profit growth over the past three years. We have a diversified product portfolio and excellent R&D capabilities.

But the risks of concentrating revenue from top customers and relying solely on a single manufacturing facility continue to hang over their heads like a sword. Nonetheless, the company is setting up another Indian subsidiary and expanding into other markets where it can reach a more diverse customer base.

That’s it for our Platinum Industries IPO review. Because the company is so small, it needs to be able to scale its profits quickly to deliver greater value to shareholders. As of now, it will be issued to shareholders at a price-to-earnings ratio of 18.15 times. So are you going to apply for an IPO? Let us know in the comments below.

Written by Nasir Hussein

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