Platinum Industries IPO – Should You Invest?

Platinum Industries Limited IPO to open for subscription from February 27 to February 29, 2024. The company aims to raise Rs 235.32 crores through a fresh issue of 1.38 crore shares at a price band of ₹ 162 to ₹ 171 per share. Unistone Capital Pvt Ltd acts as the book running lead manager for the IPO, Let’s get into the details of Platinum Industries’s IPO, its financials, objectives, positive aspects, and risks associated with investing in the company.

About Platinum Industries Limited

Established in August 2016, Platinum Industries Limited specializes in the production of stabilizers, manufacturing PVC stabilizers, CPVC additives, and lubricants. With its manufacturing facility situated in Palghar, Maharashtra, spanning across 21,000 sq. ft., the company caters to various industries including PVC pipes, electrical wires, SPC floor tiles, packaging materials, among others.

Here are the IPO Details

IPO Opening Date 27-Feb-24
IPO Closing Date 29-Feb-24
IPO Listing Date 05-Mar-24
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 162 to Rs 171 per equity share
Lot Size 87 Shares
Listing at BSE and NSE
Total Issue Size Rs. 235.32 Crores

Platinum Industries IPO Limited – Financial Summary

Platinum Industries has showcased commendable financial performance over the years. Here are the financials of the company.

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Sep-23
Assets 32.26 84.48 121.17 137.72
Revenue 89.53 189.24 232.56 123.73
Profit After Tax 4.82 17.75 37.58 22.84
Net Worth 4.47 22.34 61.88 85.04
Reserves and Surplus 3.53 21.28 21.80 44.86
Total Borrowing 3.26 24.24 17.43 11.46

Platinum Industries IPO Objectives

The net proceeds from the IPO will be allocated towards various objectives including investment in the subsidiary, Platinum Stabilizers Egypt LLC, funding capital expenditure requirements for setting up manufacturing facilities in Egypt and India, financing working capital needs, and for general corporate purposes.

Platinum Industries IPO  – Positive Aspects of Investing

  • Market Position and Growth Potential: Platinum Industries operates in the specialty chemicals industry, offering PVC stabilizers, CPVC additives, and lubricants for various applications including PVC pipes, electrical wires, and packaging materials. The Indian specialty chemicals industry has shown resilience and growth potential, with an expected CAGR of 8.3% by fiscal 2026 according to CRISIL Report. The company ranks third in PVC stabilizer sales domestically, capturing approximately 13.00% market share for the financial year 2022-23.
  • Financial Performance: Platinum Industries has demonstrated robust financial performance compared to its peers in the industry. The company recorded the highest Revenue CAGR (FY20-FY23) of 48.8%, Gross profit increased with a CAGR of 92.4%, EBITDA margin of 145.5%, and PAT margin of 185.60% for fiscal 2023. This impressive growth trajectory indicates the company’s strong market position and operational efficiency.
  • Research and Development (R&D) Strengths: The company boasts an in-house R&D facility equipped with modern instrumentation and equipment focused on developing innovative products tailored to customer needs and market demands. With a skilled research staff, Platinum Industries continuously improves and upgrades its product portfolio to stay ahead of the competition.
  • Varied Product Portfolio: Platinum Industries offers a wide range of products catering to diversified industries. With over 400 grades developed for PVC applications alone, the company addresses various customer requirements and market demands effectively. This extensive product portfolio enhances its market competitiveness and revenue potential.
  • High Entry Barriers: The specialty chemicals industry is characterized by high entry barriers, including stringent R&D requirements, technical expertise, capital intensity, and customer relationships. These barriers create significant differentiation and protect established players like Platinum Industries. The company benefits from its strong R&D capabilities, technical know-how, and quality assurance procedures, positioning it as a formidable player in the market.
  • Quality Assurance: Platinum Industries emphasizes quality throughout its production process, implementing rigorous quality control procedures at every stage from raw material procurement to final product delivery. The company’s well-equipped analytical lab and experienced technicians ensure that only products meeting stringent quality standards are dispatched to customers.

Platinum Industries IPO Risk Factors

However, like any investment opportunity, Platinum Industries IPO comes with inherent risks.

  • Dependency on Single Manufacturing Facility: Operational disruptions due to social unrest, natural disasters, or breakdown of services in Palghar, Maharashtra.
  • Expansion Risks: Challenges in establishing distribution networks and expanding into new regions may impact sales and financial stability.
  • Customer Concentration Risk: Reliance on a few key customers for significant revenue; lack of long-term agreements increases revenue volatility.
  • Regulatory Compliance and Permits: Failure to obtain or maintain statutory and regulatory permits may lead to fines, penalties, or operational disruptions.
  • Project Implementation Risks: Delays or cost overruns in setting up manufacturing facilities may adversely affect financial condition and growth prospects.
  • Under-utilization of Manufacturing Capacities: Inefficient production levels could increase operating costs and impact future prospects.
  • Raw Material Procurement Challenges: Inability to procure raw materials timely or at reasonable costs may disrupt production processes and cash flows.
  • Compliance and Legal Issues: Past instances of delayed filings and non-compliance with regulations may lead to penalties and reputational damage.
  • Technical Collaboration Agreement: Termination or non-renewal of collaboration agreements may impact business operations and product quality.

Platinum Industries IPO Price Valuation

  • The IPO price band is Rs 162 to 171 per share
  • If we consider last 3 years weighted EPS of Rs 6.39, the P/E ratio works out to be 27x
  • If we consider the last year FY23 EPS of Rs 9.42, the P/E ratio works out to be 18x
  • If we annualise 6 months ended Sep-23 EPS, the P/E ratio works out to be 15x
  • The listed peers like Supreme Petrochem Limited trading at P/E 24x (Highest) and Apcotex Industries Ltd is trading at P/E of 22x (Lowest) and industry average P/E is 23x.
  • Hence, the IPO Price band at P/E of 18x to 27x is fully priced.

Platinum Industries IPO – Conclusion and Review

Platinum Industries’ IPO presents an exciting opportunity for investors to participate in the growth story of a dynamic player in the stabilizers manufacturing industry. With a strong track record of financial performance and strategic expansion plans, the company holds promise for long-term investors.

Investing in Platinum Industries IPO carries risks too. The company’s dependency on a single manufacturing facility in Palghar, Maharashtra, poses operational vulnerabilities in the face of disruptions. Moreover, expansion into new regions, concentration of key customers, regulatory compliance challenges, and potential delays in project implementation all present significant risks.

High risk investors can invest in such IPO after going through all the risk factors indicated in the Platinum Industries IPO RHP.

 

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