Paradeep Phosphates lists at 4% premium; extends rally to gain up to 13%

Paradeep Phosphates made a decent market debut on Friday, with its shares getting listed at Rs 43.55 on the BSE, a 4 per cent premium over its issue price of Rs 42 per share. Post listing, the stock of the fertiliser company surged as much as 13 per cent to Rs 47.25. On the National Stock Exchange (NSE), the stock opened at Rs 44.

At 10:07 am; Paradeep Phosphates was trading at Rs 45.85, up 5 per cent from its opening level on the BSE. A combined around 56 million equity shares had changed hands on the BSE and NSE.

The Rs 1,500-crore initial public offering (IPO) of Paradeep Phosphates had managed to scrape through despite challenging market conditions.

The issue garened 1.75 times subscription. The retail investor portion of the issue was subscribed 1.37 times, high-networth individual (HNI) portion was covered 82 per cent and the institutional investor category saw three times subscription.

The net proceeds of the fresh issue are proposed to be utilised to partly finance the acquisition of the Goa facility, repayment/prepayment of certain borrowings and general corporate purposes.

Paradeep Phosphates is part of the Zuari group and is engaged in manufacturing, trading, distribution, and sales of a variety of complex fertilizers such as DAP, three grades of Nitrogen-Phosphorus Potassium (namely NPK-10, NPK-12, and NP-20), Zypmite, Phosphogypsum and Hydroflorosilicic Acid.

The company is the second largest private sector manufacturer of non-urea fertilizers and Diammonium Phosphate(DAP) in terms of volume sales for the nine months ended December 31, 2021. The company's fertilizers are marketed under the brand names Jai Kisaan-Navratna and Navratna.

In terms of valuations, the stock will trade at post issue P/E multiple of 15.3 times FY21 EPS (at the upper end of the issue price band), which is in line with other players like Chambal fertilizer and Deepak fertilizers, though they may not be strictly comparable, said Angel One in an IPO note.

Upon the completion of the Goa transaction, the company will acquire the business of developing, manufacturing and trading of urea and NPK products carried out at the Goa facility.

Subsequent to the acquisition of the Goa facility, its total fertilizer production capacity is expected to increase by 1.2 million MT, comprising annual granulation capacity of DAP and NPK production plants to increase by approximately 0.80 MT; and annual capacity of producing Urea to be approximately 0.04 MT, said HDFC Securities said in an IPO note.

The company is also in the process of increasing the production capacity of certain facilities, developing new plants and modernizing certain equipment, the brokerage said.