What you must know about Platinum Industries IPO?

Platinum Industries Ltd – About the company

Platinum Industries Ltd was incorporated in the year 2016 for the manufacture of stabilizers, which is their core competency. The product portfolio of the company includes PVC stabilizers, CPVC additives and lubricants. Its manufactured products find wide application in PVC pipes, PVC profiles, PVC fittings, electrical wires & cables, SPC floor tiles, Rigid PVC foam boards, and packaging materials, among others. Platinum Industries Ltd has its manufacturing facility in Palghar, Maharashtra, which is spread across 21,000 SFT. The top line of the company has grown at a frenetic pace of 42.1% CAGR over the last 5 years and is expected to sustain this rate of frenetic growth. Currently, Platinum Industries Ltd has a total of 12 distribution centres spread across India. The company employees 71 personnel across its various business functions.

As a leading PVC stabilizer manufacturers, its product verticals are spread across 4 segments. The Hybrid low-lead stabilizers can be used to add resistance to UPVC pipes, foam boards, roofings, panels etc. It has a very low lead content. The second vertical of CPVC compounds are complete dry blends and compounds ready to use. They are cost effective and offer a balanced formulation for CPVC pipes and fittings. The third vertical of Lubricants includes PE Wax, OPE Wax and LUBPACK. Polyethylene Wax is a low molecular weight PE polymer for enhancing the final product with high softening point, high chemical resistance, and excellent thermal stability. Finally, Platinum Industries also manufactures 4 types of metallic soaps like calcium stearates, zinc stearates, barium stearates, and aluminium stearates. These stearates basically repel water.

The fresh funds will be used to invest in the subsidiary, Platinum Stabilizers Egypt LLC for capex needs, capex for current Palghar unit, and for funding working capital needs. Promoters currently hold 94.74% in the company, which will get diluted post the IPO to 71.00%. The IPO will be lead managed by Unistone Capital Private Ltd, while Bigshare Services Private Ltd will be the registrar to the IPO.

Highlights of the Platinum Industries IPO Issue

Here are some of the key highlights to the public issue of Platinum Industries IPO.

• Platinum Industries IPO will be open from February 27th, 2024 to February 29th, 2024; both days inclusive. The stock of Platinum Industries Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹150 to ₹157 per share.
   
• Platinum Industries IPO will be entirely a fresh issue of shares and no offer for sale (OFS) component in the IPO. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership.
   
• The fresh issue portion of the Platinum Industries IPO comprises the issue of 1,37,61,225 shares (137.61 lakh shares approximately), which at the upper price band of ₹157 per share will translate into a fresh issue size of ₹216.05 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will double up as the overall issue size too. Thus, overall IPO of Platinum Industries Ltd will comprise of the issue of 1,37,61,225 shares (137.61 lakh shares approximately) which at the upper end of the price band of ₹157 per share aggregates to total issue size of ₹216.05 crore.

The IPO of Platinum Industries Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor quota allocation quota

The company was promoted by Krishna Dushyant Rana and Parul Krishna Rana. As per the terms of the offer, not more than 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while not less than 35% of the net offer size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee and promoter quota, if any. In the IPO of Platinum Industries Ltd, there is no reservation for employees. The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately. The anchor allocation will be opened and also closed on the day before the opening of the IPO.

Lot sizes for investing in the Platinum Industries IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Platinum Industries Ltd, the minimum lot size is 95 shares with upper band indicative value of ₹14,915. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Platinum Industries Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Platinum Industries IPO and how to apply?

The issue opens for subscription on 27th February 2024 and closes for subscription on 29th February 2024 (both days inclusive). The basis of allotment will be finalized on 01st March 2024 and the refunds will be initiated on 04th March 2024. In addition, the demat credits are expected to also happen on 04th March 2024 and the stock will list on 05th March 2024 on the NSE and the BSE. Platinum Industries Ltd will test the appetite for such industrial support stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 04th March 2024 under ISIN (INE0PT501018). Let us now turn to the practical issue of how to apply for the IPO of Platinum Industries Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Platinum Industries Ltd

The table below captures the key financials of Platinum Industries Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Platinum Industries Ltd which can be enumerated as under

1. In the last 3 years, revenue growth has been robust with the sales growing nearly 2.5-fold in the last 2 years. The business of PVC stabilizers is a fast growing sector. This is also true about net profits, where the company has reported net margin increase from 5.39% to an impressive 16.37% in the last 2 years.
    
2. The net profits showed a sharp growth in the last 2 years to (FY23). In fact, the net profits are up nearly 8-fold over the last 2 years, albeit on a small base. What is more impressive is the ROE at 61.26%, despite the dilution of equity over the years and ROA at 31.28% in the latest year.
    
3. The company has a very high sweating of assets at about 1.91X in the latest fiscal year. The high asset turnover ratio also gets magnified by the high levels of ROA. The company has surely stabilized in its area of operation.

Let us turn to the valuations part. On the latest year diluted EPS of ₹9.42, the upper band stock price of ₹157 gets discounted at a P/E ratio of 16-17 times. However, this is reasonable P/E considering the growth and ROE in the industry. Also, if you consider the H1-FY24 EPS of ₹5.73 and annualize it, the forward P/E is still more reasonable.

Here are some qualitative advantages that Platinum Industries Ltd brings to the table.

• It has a very rich and varied product portfolio in the PVC stabilizer segment with applications across a host of user industries.
   
• Some of the products that the company operates in are niche products with high entry barriers, making it a future source of value.
   
• The company has its in-house R&D facilities and this has enabled the company to maintain steady growth in sales and profits.

While the company has a niche in the industry sub-segment, it is vulnerable to risks like global chemical cycles, China dumping risk etc. However, investors can bet on the financial performance of the company and the niche positioning in the industry. Investors in the IPO of Platinum Industries must ideally be prepared for cyclical risk and be ready to reconcile to a longer holding period for the stock.