Half a dozen IPOs have announced their dates with price bands, and another half a dozen IPOs are expected to launch before the end of December 2023. Gandhar Oil Refinery IPO is scheduled to open on 22 November, 2023. Gandhar Oil Ltd is a prominent manufacturer of white oils that caters to the consumer and healthcare end-industries. Should you invest in the Gandhar Oil Refinery IPO? This article would provide details about the IPO, positive and negative factors and do a complete review.
About Gandhar Oil Refinery India Limited
Gandhar Oil Limited is a prominent manufacturer of white oils that caters to the consumer and healthcare industries.
The company offers an extensive range of 350+ products which primarily fall under three categories
1) Personal care, Healthcare performance oils (PHPO)
3) Process and insulating oils
The company’s products serve as crucial ingredients for various end products in sectors such as consumer goods, healthcare, automotive, industrial, power, tyre, and rubber, and are used by leading Indian and global companies. The company has catered to over 100 countries across the globe. It served more than 3500 clients including companies like P&G, Unilever, Marico, Dabur, Encube, Patanjali Ayurved, Bajaj Consumer Care, Emami and Amrutanjan Healthcare.
Gandhar Oil Refinery IPO – Key Details
|IPO Opening Date||22-Nov-23|
|IPO Closing Date||24-Nov-23|
|IPO Listing Date||05-Dec-23|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 2 per equity share|
|IPO Price band||Rs 160 to Rs 169 per equity share|
|Lot Size||88 Shares|
|Listing at||BSE and NSE|
|Total Issue Size||Rs. 500.69 Crores|
|Fresh issue||Rs. 302 Crores|
|OFS||Rs. 198.69 Crores|
|Financial Year ending / Period ending (Amt in Crores)|
|Profit After Tax||100.30||163.58||213.18||54.28|
Objects of the IPO
Gandhar Oil Refinery IPO Size is Rs 500.69 Crores which contains both fresh issue and OFS.
#1 – Offer for Sale (OFS) for Rs 198.69 Crores – This goes to the selling shareholders and the company would not get any proceeds.
#2 – Fresh issue Rs 302 Crores – These funds would be used for the following:
- Investment into Texol by way of a loan for financing the repayment/pre-payment of a loan availed by Texol from the Bank of Baroda
- Capital expenditure through purchase of equipment and civil work required for expansion in capacity of automotive oil at Silvassa Plant
- Funding working capital requirements of the company
- General corporate purposes
Gandhar Oil Refinery IPO – Positive Aspects
- Company is a leading manufacturer of white oils which caters to the consumer and healthcare end-industries.
- Company has extensive and diversified customer base and a supplier base comprised of leading oil companies with competitive pricing terms. Company has resilient, flexible and scalable business model with prudent risk management framework
- It has a track record of consistent financial performance both in terms of revenues and profits.
Gandhar Oil Refinery IPO – Risk and Negative Factors
- Company objects of the IPO contains OFS and fresh proceeds. OFS money would go to selling shareholders and company would not get anything.
- Company depend significantly on its personal care, health care and performance oil business division and downturns in the industries may adversely affect the business.
- It is subject to strict quality requirements and standards and inspections, and the success and acceptance of its products by its customers is largely dependent on its ability to meet such quality requirements and standards.
- The inability to effectively manage its growth and expansion or to successfully implement its business plan and growth strategy could have an adverse effect on its business.
- Company and some of its promoters are involved in certain regulatory actions (including notices and summons with requests for information from the Enforcement Directorate and the Central Bureau of Investigation) and proceedings and investigations in respect of certain criminal proceedings. Any adverse outcome in such matters may adversely affect its business, reputation, financial condition and results of operations.
- Company sources most of its base oil, its key raw material, from South Korea and the Gulf Co-operation Council region. Any inability to obtain base oil from these countries in the absence of alternative sources may result in a delay or cancellation of orders for its products.
- The company is exposed to counterparty credit risk, and any delay in or non-receipt of payments may adversely affect its cash flows and results of operations.
Investors should review all internal and external risk factors indicated in the RHP.
Gandhar Oil Refinery IPO Valuation
- The IPO price band is Rs 160 to 169 per share.
- If we consider the last year FY23 EPS of Rs 23.77, the P/E ratio works out to be 7x.
- If we consider last 3 years weighted EPS of Rs 20.11, the P/E ratio works out to be 8x.
- The listed peers like Privi Speciality Chemicals trading at P/E 222x (Highest) and Panama Petrochem is trading at P/E of 8x (Lowest) and industry average P/E is 52.6x. Hence, the IPO Price band at P/E of 7x to 8x is attractively priced.
Should you subscribe to or avoid the Gandhar Oil Refinery IPO?
Gandhar Oil Refinery is a leading manufacturer of white oils which caters to the consumer and healthcare end-industries. It has extensive and diversified customer base and a supply base and has resilient, flexible and scalable business model with a prudent risk management framework. It has a track record of consistent financial performance. The IPO is attractively priced.
On the negative side, the OFS portion of IPO proceeds would go to selling shareholders. In addition to this, there are several other risk factors indicated in Gandhar Oil RHP which investors should review it.
Investors who understand all these pros and cons can invest in this IPO.