Is HP Adhesives IPO Good to invest?

HP Adhesives IPO (HP Adhesives Limited IPO) details and ReviewHP Adhesives IPO (HP Adhesives Limited IPO) Details

Mumbai based HP Adhesives is coming up with an IPO that would open for subscription on 15th December 2021. HP Adhesives is adhesives and sealants manufacturer in India. Company has strong revenue growth in the last 3.5 years. Should you invest in HP Adhesives IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.

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About HP Adhesives Limited

Company is a fast growing multi-product, multi category consumer adhesives and sealants company in India. For PVC Solvent cement, they are the leading manufacturing company in India in the consumer / bazaar segment of the adhesive industry.

Company manufactures a wide range of consumer adhesives and sealants such as PVC, cPVC, uPVC solvent cement, synthetic rubber adhesives etc.,

They also manufacture these products for select large PVC pipe manufacturing companies under co-branding or private label on order basis.

Apart from above, company also sell ancillary products like ball valves, thread seal and other taps and FRP products for drainage and architectural solutions that are distributed along with its products to the end customers through its distribution network.

HP Adhesives IPO details and Price

IPO Opening Date 15-Dec-21
IPO Closing Date 17-Dec-21
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 262 to Rs 274 per equity share
Lot Size 50 Shares
Min Order Quantity 50 Shares
Listing at BSE and NSE
Total Issue Size Rs.125.97 Crores
    Fresh issue     Rs.113.44 Crores
    OFS     Rs.12.53 Crores

HP Adhesives IPO RHP

What are the strengths of HP Adhesives Limited?

1) Consistently growing company with established brand presence

2) Company has wide Product Portfolio and multiple SKUs

3) It is focusing on multiple end-user industries

4) It has diversified customer-base

5) Synergy of young and experienced management team with a committed employee base

6) It has efficient manufacturing set-up with scope for expansion

7) It has effective quality checks thereby reducing batch failure

8) R&D set up for constant product improvement and new product development

What are the Objects of the IPO Offer?

HP Adhesives IPO Size is Rs 125.97 Crores and below are the objects of the IPO:

1) Offer for Sale (OFS) Rs 12.53 Crores:  Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.

2) Fresh issue of Rs 113.44 Crores:  Fresh issue would be done towards the following purposes:

i) Funding the working capital requirements of the company

ii) Funding capital expenditure for expansion of production capacity at the existing manufacturing facility in Maharashtra and at the additional unit having a proposed construction area admeasuring about 4,532.57 sq. mtrs.

Who are the promoters of HP Adhesives Limited?

Anjana Haresh Motwani and Karan Haresh Motwani are the promoters of the company.

How is the company financial track record?

Here are the total assets, revenues and profits of the company in the last 3 years and 6 months.

Financial Year ending / Period ending (Amt in Mns)
Particulars FY19 FY20 FY21 Sep-21
Total Assets 567.2 568.1 897.8 1,049.1
Revenues 879.8 979.1 1,238.8 727.3
Profit After Tax 40.0 -46.7 100.6 31.0
Profit % 4.55% -4.77% 8.12% 4.26%

Why to invest in HP Adhesives IPO?

Here are the positive factors in this company.

1) Company manufactures a wide range of consumer adhesives and sealants in India. It has diversified product portfolio with strong brand presence.

2) Company has strong revenue growth in the last 3.5 years. Its revenues for FY19, FY20 and FY21 are at Rs 87.9 Crores, 97.9 Crores and Rs 123.8 Crores respectively.

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Risk Factors of investing in HP Adhesives IPO

1) Company’s margins are fluctuating in the last 3.5 years. It earned profit of 4.5% in FY19, loss of 4.7% in FY20, profit of 8.1% in FY21 and profit of 4.2% for 6 months ending Sep-21. Even if we remove exceptional items in FY21, still the loss is over 4% of revenue.

2) Company IPO objects contain Rs 12.5 Crores towards Offer for sale (OFS) where the money would go to selling shareholders and company would not get anything.

3) Company proposed capacity expansion plans relating to its manufacturing facility are subject to risk of unanticipated delays in implementation and cost overruns.

4) Continuing covid-19 pandemic impact is uncertain and might have impact in future too.

5) Company intends to utilize a portion of the net proceeds for funding its capital expenditure requirements. They are yet to place orders for such capital expenditure machinery.

6) Company have had negative cash flows in the past and it might experience cash flows in the future too.

7) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.

FAQs – HP Adhesives Limited IPO

What is HP Adhesives IPO Rating?

Company do not require to get IPO rating. Currently, HP Adhesives short term rating is CARE A3 and long term rating is CRISIL BBB-; Outlook: Stable from CARE Ratings.

What is the minimum amount to subscribe to this IPO?

Investors need to apply for 50 shares at minimum lower price band of Rs 262 per share = Rs 13,100. Similarly, the minimum amount to be applied on upper price band would be Rs 50 x 274 = Rs 13,700.

Is it good or bad for investment?

Company has generated strong revenue growth in the last 3.5 years. However, company margins are fluctuating. It incurred losses in FY20.

What is HP Adhesives IPO GMP today?

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market. HP Adhesives IPO GMP is not available as there are no trades happening.

HP Adhesives Limited IPO Valuation

The HP Adhesives IPO price band is Rs 262 to Rs 274 per share.

If we consider last 3 years weighted average EPS of Rs 3.19 and the upper price band of Rs 274, P/E works out to be 86x.

If we take FY2021 EPS of Rs 7.74 and the upper price band of Rs 274, P/E works out to be 35x.

If we take 6 months ended Sep-21 EPS and annualize for FY22, P/E works out to be 61x.

Means company is asking IPO price of Rs 274 in the P/E ratio of 35x to 61x.

There is only listed peers Pidilite Industries trading at P/E 81x. If we consider this, the IPO price of HP Adhesives is reasonably priced.

HP Adhesives IPO dates for subscription, Allotment and Listing

Offer Open 15-Dec-21
Offer close 17-Dec-21
Finalization of Allotment 22-Dec-21
Initiation of Refunds 23-Dec-21
Credit to Demat Account 24-Dec-21
IPO Shares Listing Date 27-Dec-21

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HP Adhesives IPO Review and Analysis – Should you invest?

After going through all these points, you might be wondering whether HP Adhesives IPO is good or bad for investment?

HP Adhesives Limited manufactures a wide range of consumer adhesives and sealants in India. Company has wide and diversified product portfolio.

Company has generated strong revenue growth in the last 3.5 years.

However, company margins are fluctuating. Company incurred loss in FY20 (even after removing exceptional items). However, moved back to profits for FY21 and for 6 months ended Sep-21.

The IPO price seems to be reasonably priced.

Stock markets are volatile and taking corrections now and then, hence investors should be little cautious about investing in IPOs.

Considering all these positive and risk factors indicated above, investors can invest in this IPO for medium to long term perspective.

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Suresh KP

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