HP Adhesives Limited IPO

Apply 0
Avoid 0

(i) The Company’s largest product category – PVC solvent cement, they are amongst the leading manufacturing companies in India in the consumer/ bazaar segment of the adhesive industry.

(ii) They manufacture a wide range of consumer adhesives and sealants such as PVC, cPVC and uPVC solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants and PVC pipe lubricant which are sold across India, through an extensive distribution network of distributors, and exported also to several countries, through network of distributors and direct customers.

(iii) They also manufacture these products for select large PVC pipe manufacturing companies under co-branding or private label on order basis. Apart from the above products, they also sell ancillary products like ball valves, thread seal and other tapes and FRP products for drainage and architectural solutions that are distributed along with its products to the end customers through the distribution network.

(iv) The aforesaid adhesives and sealant products have applications in multiple industries such as plumbing and sanitary, drainage and water distribution, general purpose building/ construction and interior operations as well as for glazing operations, woodwork, footwear, automotive, foam-furnishing and other varied industries.

(v) As of September 30, 2021, the distribution network comprised of 4 depots situated in Delhi, Kolkata, Bengaluru and Indore and more than 750 distributors who cater to more than 50,000 dealers in India.

Competitive Strengths
a. Consistently growing company with established brand presence
b. Wide Product Portfolio and multiple SKUs
c. Focusing on multiple end-user industries

Objects of the HP Adhesives Limited IPO:

The Offer comprises a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholder. The Company proposes to utilize the Net Proceeds towards funding of the following objects: 1. Funding the working capital requirements of the Company. 2. Funding capital expenditure for expansion of production capacity at the existing manufacturing facility at Village Narangi, Raigad, Maharashtra and at the additional unit ad measuring about 5,397.53 sq. mtrs. (built-up) area on the adjacent plot (“Proposed Expansion”): • to expand the existing installed capacities for the existing product lines; and • to enable us to also add new products to the existing product portfolio. 3. General corporate purposes.
DRHP of HP Adhesives Limited IPO

HP Adhesives Limited IPO Details:

Open Date: Dec 15 2021
Close Date: Dec 17 2021
Total Shares: 4,597,200
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built
Issue Size: 125.96 Cr.
Lot Size: 50 Shares
Issue Price: ₹ 262 - 274 Per Equity Share
Listing At: NSE,BSE
Listing Date: Dec 27 2021

Promoters And Management:

i. Anjana Haresh Motwani, with over 40 years of experience in the adhesive industry, currently designated as the Executive Director and Chairperson of the Company. She holds a bachelors’ degree in Arts (Special) and diploma in Administrative Management from University of Bombay and a diploma in Export Business Management from Indian International Trade Center, Bombay. In 1979, she founded M/s. Hindustan Plastics, sole proprietorship concern, for manufacturing solvent cement. Subsequently, she was admitted as a partner to M/s. HP International in 2001. Post 2007, she has been leading the operations of M/s. HP International. She has been instrumental in the growth and development of the Company. ii. Karan Haresh Motwani currently holds the position of Managing Director of the Company. He has completed Bachelor of Management Studies from Narsee Monjee Institute of Management Studies, Mumbai and the Post Graduate Programme in Management from S.P. Jain Institute of Management & Research, Mumbai. He was admitted to the partnership M/s. HP International in 2007 and has since played a key role in growing the business including introducing new products and expansion of distribution network. He plays a crucial role in devising the growth strategy and executing the vision. iii. Surendra Kumar Mehta is a Non-executive and Independent Director of the Company. He has is a qualified chartered accountant and company secretary. He has over three decades of cross-functional experience in manufacturing, service and IT industry.

Financials of HP Adhesives Limited IPO:

Particulars (in Lakh) March-21 March-20
Revenue 11,816 8,451
Cost of materials consumed 9,708 5,224
Increase in inventories -1,586 182
Employee benefits expense 1,473 1,114
Other Expense 1,023 1,510
Operating profit 1,196 418
OPM % 10% 5%
Other Income 571 232
Finance Cost 255 259
Depreciation 190 189
Profit Before tax 1,323 -541
Profit After Tax 1,006 -472
EPS 7.74 -3.64
Valuation Total Outstanding Shares before IPO = 1,42,34,947 Fresh Shares to be issued in IPO= 4,140,000 Total Outstanding Shares after IPO = 18,374,947 Issue Price = 274 PAT = 10 Crores EPS = 5.5 P/E = 50x

Comparison With Peers:

Pidilite is the Peer shown in the RHP. Pidilite is currently trading at P/E of 90. But HP Adhesive is not comparable with Pidilite as the sales of Pidilite is 9500 Crores and HP Adhesive is having only 118 Crores. So, scale is very big for Pidilite to compare with HP Adhesive.

Recommendation on HP Adhesives Limited IPO:

Review and Recommendation of HP Adhesives by InvestorZone is 4/10 1. Nothing much to entice in the company as compared to Pidilite which is a market leader. 2. Company was in loss in FY20 but somehow came in profit in FY21 and clocked a revenue of 10 Crores. 3. Debt = 30 Crores and Equity = 12 Crores. D/E = 2.5x (which is very high). 4. HP Adhesive is coming at P/E of 50x (which is very high).

Lead Manager of HP Adhesives Limited IPO:

  1. Unicon Capital Services Private Ltd

Registrar of HP Adhesives Limited IPO:

  1. Bigshare Services Private Limited

Company Address:

HP Adhesives Limited 11, Unique House, Chakala Cross Road, Andheri East, Mumbai – 400 099, Maharashtra, India. Phone: 022 68196300 Email: investors@hpadhesives.com Website: https://www.hpadhesives.com/

Discussion on HP Adhesives Limited IPO:

2 Comments

    All IPOs are coming at P/E of more than 50…. In the long run very few companies in the past withstand 50 P/E… So, every investor should be very careful in these IPOs. Only apply for listing gain, irrespective of the pedigree of the companies.

    Reply

Leave a Reply