Paradeep Phosphates Limited IPO  

Paradeep Phosphates Limited

Rs.14,700 / 350 shares
Minimum Investment

IPO Details:

IPO date:
17th May to 19th May, 2022

Issue size:
Rs. 1,501.73 crores

Listing at:
BSE & NSE

Retail quota:
35%

IPO price:
Rs 39 - Rs 42 per equity share

Minimum lot size:
350 equity shares and in multiple of 350 equity shares thereafter

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Company Background of Paradeep Phosphates Limited

Paradeep Phosphates is the second largest private sector manufacturer of non-urea fertilizers in India and the second largest private sector manufacturer in terms of Di-Ammonium Phosphate (DAP) volume sales for the nine months ended December 31, 2021.

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The company is primarily engaged in manufacturing, trading, distribution and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus-Potassium (NPK) (namely NPK-10, NPK-12 and NP-20), Zypmite, Phospho-gypsum and Hydroflorosilicic Acid (HFSA). It is also engaged in the trading, distribution and sales of Muriate of Potash (MOP), Ammonia, Speciality Plant Nutrients (SPN) and City compost. The company’s fertilizers are marketed under some of the key brand names in the market ‘Jai Kisaan – Navratna’ and ‘Navratna’.

The company is the part of Adventz Group, as well as OCP Group S.A. The founding chairman of the Adventz Group was the late Dr. K.K. Birla and the current chairman is Mr. Saroj Kumar Poddar. The Adventz Group operates in several businesses and has a strong presence in the agri business, engineering and infrastructure businesses and emerging lifestyle business.

Paradeep Phosphates has established an extensive sales and distribution network, with a strong presence in the eastern part of India. As of March 31, 2022, the company distributed its products across 14 states in India through its network of 11 regional marketing offices and 468 stock points. The company’s network includes 4,761 dealers and over 67,150 retailers, catering to over five million farmers in India, each as of March 31, 2022.

The company’s manufacturing facility is located in Paradeep, Odisha and includes a DAP and NPK production facility, a Sulphuric acid production plant and a Phosphoric acid production plant.

Let us now look at a few competitive strengths and strategies of Paradeep Phosphates Limited...

Competitive Strengths

+ Well-Positioned to Capture Favorable Indian Fertilizer Industry Dynamics Supported by Conducive Government Regulations:Due to certain factors such as increase in crop intensity, increase in per capita food consumption and dietary changes, per capita rise in income and ease of credit availability and high subsidy support from the government, the company expects to continue witnessing growth in the Indian fertilizer industry. The demand for fertilizers in India is expected to reach approximately 66 million tonnes by Financial Year 2026 growing at a CAGR of 2.9%-3.1% from Financial Year 2022 to Financial Year 2026. Further, the company expects to benefit from the government policies that support the fertilizer industry. Over the next five years, DAP and NPK is expected to lead the growth of the Phosphatic fertilizers segment along with complex fertilizers as India’s production of crops such as fruits and vegetables, sugarcane and cotton witness a higher growth compared to the past. (Source: CRISIL Report) The company believes it is well positioned to capture a significant share of this growth due to (i) its sizeable and certified manufacturing facility and infrastructure; (ii) backward integration of its manufacturing process that typically allows it to have reliable supply of raw materials and cost advantages, and thus production flexibility, over other fertilizer manufacturers that are not backward integrated; and (iii) the company’s established sales and distribution network which will be enhanced by the addition of the sales and distribution network associated with the Goa Facility.

+ Second Largest Manufacturer of Phosphatic Fertilizers In India: Among private sector entities with a focus on the non-urea segment, the company is the second largest in terms of phosphatic fertilizer (DAP and NPK complexes) capacity, as of March 31, 2022. As of March 31, 2022, (i) the company’s total annual granulation capacity of DAP and NPK production plant was approximately 1.50 million MT; (ii) the company’s total annual installed capacity of Sulphuric acid production plant was approximately 1.30 million MT; and (iii) the company’s total annual installed capacity of Phosphoric acid production plant was 0.30 million MT. In addition, the plant has three operational concentrators to concentrate weak Phosphoric acid into strong Phosphoric acid. For the Financial Year 2022, the company was the second largest backward integrated manufacturer in the private sector with Phosphoric acid capacity in India.

+ Driving Raw Material Efficiency Through Backward Integration of Facilities and Effective Sourcing : The company is committed to the integration of the industrial value chain from securing a stable supply of raw materials and owning integrated facilities to maintaining a wide distribution network for its products and ensuring good customer service. The primary raw materials include Phosphate Rock, Phosphoric acid, Ammonia, Sulphur and MOP. The company produces some of Phosphoric acid and Sulphuric acid requirements, with the other raw materials being sourced from suppliers. The company sources the raw materials from a number of suppliers based locally and in countries such as Morocco, Jordan, Qatar and Saudi Arabia, among others. In the nine months ended December 31, 2021 and the Financial Year 2021, the company procured raw materials totaling to approximately Rs 49,170.90 million and Rs 34,485.77 million, respectively, from approximately six suppliers and all of them have been supplying raw materials to the company for more than 10 years. The company believes it has a strong relationships with suppliers for the company’s raw material requirements.

+ Strategic Location of its Manufacturing Facility and Sizeable Material Storage, Handling and Port Facilities : The company’s manufacturing facility is strategically located near the Paradeep port, where the company owns a captive berth with 14 meters draft with facilities to unload solid and liquid cargo. As a result, the company is generally able to meet loading and unloading schedules of the carriers and save on demurrage charges. The company proposes to replace its ship unloader by procuring a new one by December 2022 to enhance reliability and efficiency of its port operations. It also has a closed conveyor belt which is 3.4 km long connecting the Paradeep port to its facility. This enables the company to transport the raw materials in solid form directly to its facility. In addition, the company has a cross-country pipeline which is 3.1 km long which enables it to transport raw material in liquid form directly to its facility. The company also owns a railway siding. Paradeep Phosphates have capacity to store up to 120,000 MT, 65,000 MT, 55,000 MT and 35,000 MT of Phosphate Rock, Phosphoric acid, Sulphur and MOP, respectively. The company also has an Ammonia storage facility of approximately 40,000 MT. The ability to store raw materials at the company’s facility enables it to withstand disruptions in supply as well as volatility in the price of raw materials for a short duration.

+ Strong Parentage, Experienced Management Team and Prominent Shareholders: Paradeep Phospates has an experienced management team with relevant industry experience, which is supported by a capable and motivated pool of employees. The company’s current management team has been instrumental in the steady improvement of its financial performance pursuant to its effective management and operational optimization of its assets. It believes that its experienced management team has demonstrated the ability to successfully build and integrate its various operating activities through their cumulative years of work experience. The company also believes that the knowledge and experience of its senior and mid-level management team members provides the company a competitive advantage as it seeks to grow its business.

Key Strategies

Here are a few strategies Paradeep Phosphates Limited has for its business:

Improve leadership position by enhancing production capabilities and having a more diversified product portfolio
Continue to improve cost efficiency and productivity
Increase geographical reach in Eastern and Western India and expand distribution channels
Improve market leadership through investment in brand building and other campaigns
Continue to attract, retain and develop human capital

Paradeep Phosphates Limited Consolidated Financials

And finally here’s a look at key financials of Paradeep Phosphates Limited...

Revenue from operations

Particulars (in Rs. million)

Particulars (in Rs. million)

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Top Paradeep Phosphates Limited IPO FAQs

Paradeep Phosphates Limited IPO has an issue size of Rs. 1,501.73 crore. The IPO opens for subscription on 17th May 2022, and ends on 19th May 2022.

Allotment dates are yet to be decided

Link Intime India Private Limited is the registrar for this IPO

The dates are yet to be decided.

You can read more about Paradeep Phosphates Limited and its IPO from the company’s red herring prospectus (RHP) here.