IPO Size: Rs. 235 cr, entirely Fresh Issue, for   

• Rs. 139 cr for 2 greenfield capex in Maharashtra and Egypt
• Rs. 30 cr working capital  

Price band: Rs. 162-171 per share

• Rs. 14 cr private placement at Rs.157 per share to individual investors on 17.1.24

M cap: Rs. 939 cr, implying 25% dilution

IPO Date: Tue 27^th Feb to Thu 29^th Feb 2024, Listing Tue 5^th Mar 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Speciality Chemicals Maker for Plastics

Platinum Industries is India’s 3^rd largest PVC stabilizer manufacturer having a 36,000 TPA capacity plant in Maharashtra and enjoying ~13% domestic market share. Its products PVC stabilizers (lead and non-lead based), lubricants and CPVC additives are used in PVC pipes and fittings, PVC profiles, electrical wires and cables, SPC floor tiles, rigid PVC foam boards, packaging materials etc. The 8 year old company supplies to all major domestic PVC players like Supreme, Astral, Prince Pipes, Ashirvad.

2.5x Capacity Addition over the next 12 months

It is building 2 greenfield plants, will expand capacity to 1,26,000 TPA by Q4FY25E:

1. 30,000 TPA capacity plant for PVC stabilizers and CPVC additives in Egypt, with Rs. 68 cr investment
2. 60,000 TPA non-lead based PVC stabilizer plant in Palghar (Maharashtra), with Rs. 71 cr investment. Once completed, this will be India’s largest lead-free PVC stabilizer plant.  

Healthy Growth

Company reported 38% volume CAGR between FY21-23 with 17% realization CAGR, taking revenue to Rs. 231 cr in FY23, up from Rs. 89 cr in FY21. H1FY24 revenue stood at Rs. 123 cr, with share of non-lead based PVC stabilizer rising to 41% of revenue, from 26% in FY21, as industry moves away from hazardous lead-based stabilizer. Lubricants, another high-margin product, saw revenue mix improve to 29%, from 17% in FY21.

High Margin Business

Higher volume, improved realization and better product mix has doubled gross margin to 41% in H1FY24, from 21% in FY21. H1FY24 EBITDA stood at Rs. 31 cr, translating to 26% margin, with PAT of Rs. 23 cr, leading to net margin of 19%. EPS stood at Rs. 9.4 and Rs. 5.7 for FY23 and H1FY24 respectively.  

New products under launch and higher volumes may sustain these high margins, despite slowdown in overall speciality chemicals industry. Platinum’s product are barely 3% of user-industry’s input cost besides being technically-superior. Hence, it has limited impact from overall industry headwinds.   

Attractive Valuation

Annualising H1FY24 EPS of Rs. 5.7, leads to a PE multiple of 15x on current year basis but both peers Baerlocher India Additives and Goldstab Organics are unlisted. Platinum Industries is on track to clock 60+% RoE for FY24E, with double-digit margin, cash rich balance sheet and fresh issue to be majorly used for sizeable capacity addition. IPO price’s 9% premium to private placement undertaken 5 weeks ago is unjustified, but 71% post IPO promoter holding (95% currently) and growth visibility leaves room for upside from current valuation as well.