Shree Pushkar Chemicals and Fertilisers IPO – Should you invest?
Shree Pushkar Chemicals and Fertilisers IPO
Mumbai based, Shree Pushkar Chemicals and Fertilisers IPO will open for subscription on 25th August, 2015. They manufacture products like Dye Intermediates, Acid Complex, Cattle Feed Supplement and Fertilizers. Its revenues doubled in last 5 years. It earned 7% profits for FY2014-15. What are the positive factors of Shree Pushkar Chemicals and Fertilisers IPO? Are there any hidden factors of Shree Pushkar Chemicals and Fertilisers Ltd IPO? Should you invest in Shree Pushkar Chemicals and Fertilisers Limited IPO or not?
About Shree Pushkar Chemicals and Fertilisers Limited
They manufacture products in 4 major verticals viz., Dye Intermediates, Acid Complex (comprising sulphuric and its derivative acids), Cattle Feed Supplement and Fertilizers (Single Super Phosphate & Soil Conditioner).
It commenced business operations in the year 1993 with a trading business and has emerged to become one of the few manufacturers with widest range of dye intermediates in India with zero waste. They indicate that they have state of art integrated manufacturing facilities located at Lote Parshuram, Maharashtra. Over the years, the integration (backward and forward) has helped them to diversify into wide range of products in such a way that many of the intermediate products are used to manufacture other value added products leading to efficiencies in the cost of production and low dependence on raw materials from external sources.
Issue details of Shree Pushkar Chemicals and Fertilisers IPO
- IPO opens: 25-August-2015
- IPO closes: 27-August-2015
- Face Value: Rs 10 per share
- Issue price band: Rs 61 to Rs 65 per share
- Minimum Shares: 200 shares
- Minimum amount: Rs 12,200 at lower price band
- Issue size: Rs 70 Crores
- Lead Managers: Keynote Corporate Services Ltd
- Listing: BSE and NSE
- Download Shree Pushkar Chemicals and Fertilisers Limited IPO Prospectus at this link
Purpose of the IPO
Funds would be used for following purpose.
- Acquisition of an existing factory within MIDC industrial area Lote-Parshuram bearing no B-97
- Setting up of facilities at B-97
- Setting up of additional effluent treatment plant
- Construction of additional godown(s)
- General corporate purposes
Company Financials (reinstated)
- Company generated revenue of Rs 131.26 Crores for the year ended Mar-11 and Rs 266.81 Crores for the year ended Mar-15.
- Company posted a Profit of Rs 2.75 Crores for the year ended Mar-11 and a Profit of Rs 18.65 Crores for the year ended Mar-2015.
- Its EPS for FY 2014-15 is Rs 9.01 and last 3 years average EPS of Rs 6.77.
Reasons to invest Shree Pushkar Chemicals and Fertilisers IPO
- Good revenue growth in last 5 years. Its revenue doubled in last 5 years.
- Crisil rates Shree Pushkar Chemicals IPO as “Grade 3” which indicates “average fundamentals”.
- Consistent improvement in profits in the last few years. It earned profits of 7% for FY 2014-2015 compared to previous year of 5% in FY2013-2014.
Reasons not to invest in Shree Pushkar Chemicals and Fertilisers IPO
- Company and or its Promoters /Directors are involved in certain legal proceedings. Any adverse decision in such proceedings may render us / them liable to liabilities / penalties and may adversely affect our / their business and results of operations.
- Company has entered into Equity Subscription Agreement (Subscription Agreement) with IFCI Venture Capital Funds Limited and is also a party to the Agreement for Buy-back of Shares between Punit Makharia, Gautam Makharia and the Investor both dated April 27, 2009.
- Certain Equity Shares of the Company held by Promoter, Punit Makharia are pledged.
- Company has certain contingent liabilities that have not been provided for in its Company‘s financials, which if realized, could adversely affect its financial condition.
- Company has experienced negative cash flows. Any negative cash flow in future could affect company results of operations.
- Company‘s audited financial information for FY 2011-12 and FY 2012-13 had certain qualifications in the auditor‘s report.
- There have been certain instances of delay in repayment of term loans to banks and financial institutions in the past.
- Company has delayed in complying with the filing requirements regarding the appointment of cost auditor under the Companies Act, 1956 and Companies Act, 2013 with the RoC for the years 2012-2013 and 2013-2014. Such delay/non compliance may subject Company to statutory penalties.
- Company has provided a corporate guarantee for Rs 21.10 million guaranteeing the due repayment of a housing loan availed by Bhanu Makharia, mother of company Promoter Director, Punit Makharia, from CitiBank N.A. As a result of this, company may be in violation of certain provisions of the Companies Act, 1956 including Section 295. Further, any enforcement of this corporate guarantee would have an adverse impact on the cash flows.
- Company business is dependent on its key customers and the loss of any significant customer could adversely affect its financial results.
- Company operations are subject to environmental, workers‘health and safety and employee laws and regulations. Company may incur material costs to comply with, or suffer material liabilities or other adverse consequences as a result of, environmental laws and regulations which may have a material adverse affect on its business, financial condition and results of operations.
- Company requires several licenses/ approvals/ permissions for carrying on its business. If Company is unable to obtain the required approvals and licenses in a timely manner, business and operations may be adversely affected.
- Success depends largely upon the services of its Promoters and other Key Managerial Personnel and its ability to attract and retain them. Demand for Key Managerial Personnel in the industry is intense and company inability to attract and retain Key Managerial Personnel may affect the operations of the Company.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 14 onwards.
What does the Company say about this IPO?
Its Chairman and Managing Director, Mr.Punit Makharia says
“Our company also setting up an additional effluent treatment plant at the existing facility to make the unit a zero discharge unit. The firm also proposes to manufacture fertiliser-sulphate and potash – with an installed capacity of 10,000 MTPA at Lote Parshuram (Maharashtra)"
Dyestuffs are critical inputs to several industries such as textiles, paper & packaging, leather, foodstuffs, polymers, coating and printing ink. Amongst these, textiles, paper and leather industries together account for over 85 per cent of the total demand for dyestuffs.
Outlook for these sectors remain positive, driven by steady domestic demand and strong export potential, Mr.Makharia said.
Recommendation / Investment strategy
- At the issue price band of Rs 61 to Rs 65 and EPS of FY2015 and last 3 years average, P/E Ratio is being asked is 6.77 to 9.60.
- Its competitors in Dye Intermediaries business P/E ratios are Bodal Chemicals (Highest) is 4.4 and Bhageria Dye Chem (Lowest) is 3.43. Its competitors in Speciality Chemicals business P/E ratios are Vinati Organics Ltd (Highest) is 22.12 and Atul Ltd (Lowest) is 19.25. Hence we can assume that issue price is reasonably priced.
- Shree Pushkar Chemicals and Fertilizers revenues have been growing consistently. It is consistently improving its profits from 4.1% in FY2013, 5% in FY2014 and 7% in FY2015. Its issue price is also reasonably priced. Considering all these positive factors, investors can invest in this IPO at higher price band.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Shree Pushkar Chemicals and Fertilisers IPO – Should you invest