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Review By Dilip Davda on February 24, 2024

•    PIL is a unique player in PVC stabilizers and lubricants with multi-products.
•    The company is expanding its domestic venture and also establishing new project at Egypt.
•    It posted growth in its top and bottom lines for the reported periods. 
•    Based on FAY24 annualized earnings, the issue appears fully priced.
•    Considering its niche place among the segment and its first mover tag, investors may lap it up for the medium to long term rewards.

ABOUT COMPANY:
Platinum Industries Ltd. (PIL) is a multi-product company engaged in the business of manufacturing stabilizers. Its business segment includes PVC stabilizers, CPVC additives and lubricants. Thus it operates in speciality chemicals and its products finds application in PVC Pipes, PVC profiles, PVC fittings, electrical wires and cables, SPC floor tiles, Rigid PVC foam boards, packaging materials etc. 

According to the CRISIL Report, we are the third largest player of PVC stabilizer in terms of sales with an 13.00% market share for the financial year 2022-23 in the domestic market. Amongst the considered peers in the industry, our Company has in the fiscal 2023 recorded the highest Revenue CAGR (FY20-FY23) of 48.8%, Gross profit increased with a CAGR of 92.4%, EBITDA margin of 145.5%, PAT margin of 185.60%, respectively. Our gross margin improved significantly between fiscals 2020 and 2023, from 15.6% to 37.5%, thereby recording the highest gross margin vis-à-vis all peers in fiscal 2023. (Source: CRISIL Report)

PVC stabilizers are chemical additives used in the production of polyvinyl chloride (PVC) based products to enhance the performance and durability of PVC. These stabilizers enhance the thermal stability of PVC by allowing it to withstand heat without significant degradation or loss of physical properties. They prevent the discoloration, embrittlement and degradation of PVC caused by UV exposure, ensuring the longevity and aesthetics of PVC-based applications. It also improves the mechanical properties of PVC, such as its impact strength, tensile strength, and flexibility.

In recent times, there has been a noticeable shift in the trends and preferences within the PVC stabilizer industry, particularly in sectors such as potable water distribution, agriculture, constructions, medical consumables, wires and cables. Traditionally, lead-based PVC stabilizers were commonly utilized for their stabilizing properties. However, concerns regarding the potential health effects associated with lead have led to a change in the industry landscape. To address these concerns, there has been a gradual transition towards the usage of calcium zinc-based PVC stabilizers. Calcium-zinc stabilizers offer a viable alternative as they provide effective stabilization while eliminating the potential health risks associated with lead. Calcium-zinc stabilizers have gained popularity due to their improved environmental and safety profiles. We have also recognized the significance of this industry shift and have responded by gradually transitioning from lead-based PVC stabilizers to calcium zinc-based and calcium organic based stabilizers. This transition allows us to align with current market demands and adhere to evolving safety and environmental norms. By offering calcium zinc-based stabilizers and calcium organic based stabilizers, we provide our customers with products that meet their performance requirements while prioritizing health and sustainability.

Our business model is aimed at consistently expanding our product portfolio by introducing new products to cater to multiple end-use applications. With strict focus on product quality and good track record in the distributor network, we have an established brand image which helps us in penetrating new product categories.

For FY22 and FY23 it served 273 customers a year and for H1 of FY24, it has served 171 customers. As of December 31, 2023, it had 97 employees on its payroll. It also hires contract labour as and when needed. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 13761225 equity shares of Rs. 10 each to mobilize Rs. 235.32 cr. at the upper cap. It has announced a price band of Rs. 162 - Rs. 171 per share. The issue opens for subscription on February 27, 2024 and will close on February 29, 2024. The minimum application to be made is for 87shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.05% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 67.72 cr. for investment in its Egypt project, Rs. 71.26 cr. for expansion at its Palghar unit, Rs. 30 cr. for working capital and the rest for general corporate purposes.

The company did a pre-IPO placement in the month of January 2024 for 910700 shares at a fixed price of Rs. 157 per share and mobilized Rs. 14.30 cr. and has reduced its IPO size to that extent. 

The company has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. 

Having issued/converted initial equity capital at par value, the company issued/converted further equity shares in the price range of Rs. 157 - Rs. 588.55 between March 2023 and January 202. It has also issued bonus shares in the ratio of 38 for 1 in March 2023. The average cost of acquisition of shares by the promoters is Rs. 0.26 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 41.16 cr. will stand enhanced to Rs. 54.93 cr. Based on the upper band of IPO price, the company is looking for a market cap of Rs. 939.22 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/ net profit of Rs. 89.53 cr. / Rs. 4.82 cr. (FY21), Rs. 189.24 cr. / Rs. 17.75 cr. (FY22), and Rs. 232.56 cr. / Rs. 37.58 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 22.84 cr. on a total income of Rs. 123.73 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 6.39 and an average RoNW of 75.06%. The issue is priced at a P/BV of 8.09 based on its NAV of Rs. 21.13 as of September 30, 2023, and at a P/BV of 2.81 based on its post-IPO NAV of Rs. 60.93 per share (at the upper cap).

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 20.55. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 5.39% (FY21), 9.43% (FY22), 16.24% (FY23). 18.59% (H1-FY24), and RoCE margins of 74.28%, 52.51%, 56.85%, 28.83% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has shown Supreme Petro and Apcotex Ind. as their listed peers. They are trading at a P/E of 37.8, and 39.9 (as of February 23, 2024). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The sole BRLM associated with the issue has handled 6 mainboard and 9 SME IPOs in the past three fiscals, out of which 1 issue closed below the issue price on listing date. 

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