Arabian Petroleum Limited IPO

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i. Arabian Petroleum is in the business of manufacturing wide range of Lubricants including Specialty Oils, Coolants etc used for Industrial and Automotive applications. Their business is categorized into two distinctive product division: (i) Automotive Lubricants – Arzol and (ii) Industrial Lubricants – SPL. They are dedicated to consistently providing products that deliver stellar quality and comply with statutory requirements in the Automotive and Industrial Lubricants domain.

ii. In the year 2019 they further expanded their manufacturing activities to Maharashtra, India and added 2 more blending machines with total installed capacity of 40590 KLPA. Their combined in-house storage capacity of storage tanks at both the manufacturing facilities for base oil, additives, waxes as on date of the Prospectus is approximately 2000 KL and that for semi-finished or finished products is approximately 1000 KL.

iii. In the year 2021 the company was licensed by American Petroleum Institute (API) to use API mark on some of its products like: Arzol Milage Synactiv, Arzol Super Duty and Arzol Synpros

iv. Their domestic and international customers are spread across multiple industries, including pharmaceutical, FMCG, chemicals, steel, rubber and tyre, power, civil engineering, electrical appliances, textile, telecommunication, chemical, cables and conductors and automobile industry etc. Apart from private players, we also derive their revenues under the contracts from the Government sectors (both central and state) and associated entities. Arabian Petroleum is honored to be one of the suppliers of lubricants to the Indian Armed Forces and have successfully delivered lubricant products to Border Security Force (BSF), Indian Air Force (IAF) and Indian Navy across various parts of the country.

v. They have product approval certification from Volvo Group Trucks Technology, Renault Group and MACK Trucks for our product “Milage Synactivs 15W-40” engine oil. We have recently received OEM approval from Bharat Earth Movers Limited (Formerly – BEML Limited) for their entire range of products like Engine oil, hydraulic oil etc.

Competitive Strengths

i. One Stop Shop for All Lubricants
ii. Research and developm0ent capabilities allowing product innovation and customization
iii. Long Standing Relationship with our customers

Objects of the Arabian Petroleum Limited IPO:

The company intends to utilize the net proceeds from the issue towards the funding of the following objects: i. To meet Working Capital requirements. ii. General Corporate Purpose. iii. To meet issue expenses.
DRHP of Arabian Petroleum Limited IPO
RHP of Arabian Petroleum Limited IPO

Arabian Petroleum Limited IPO Details:

Open Date: Sep 25 2023
Close Date: Sep 27 2023
Total Shares: 2,892,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Price Issue IPO
Issue Size: 20.24 Cr.
Lot Size: 2000 Shares
Issue Price: ₹ 70 Per Equity Share
Listing At: NSE Emerge
Listing Date: Oct 09 2023

Promoters And Management:

Mr. Hemant Dalsukhrai Mehta, aged 64 Years is the Chairman and Managing Director of the company. He has completed his B.Com. from University of Bombay in the year 1980. He has an overall experience of 41 years in trading activities and is into the business of trading and manufacturing of lubricants for the last 15 years. He is currently involved in overall business operations of the Company. Primarily he looks after the manufacturing operations and is involved in planning, production and purchase activities of the company. Under his leadership, the company has been successful in expanding its diversified product portfolio Mrs. Darshana Hemant Mehta, aged 57 years is the non-Executive director of the company. She has completed her Master of Science in Physics from University of Bombay in the year 1989. She has an overall experience of 16 years in administrative and marketing operations of the company. Mr. Manan Hemant Mehta, aged 33 Years is the Whole time Director of the company. He holds a degree of B. Tech. in Chemical Engineering and Master of Business Administration in Technology Management from Narsee Monjee Institute of Management Studies. He has an overall experience of 9 years in manufacturing and trading of lubricants. He is currently involved in sales and marketing and quality control operations of the company. Under his leadership, the company has been successful in expanding its customer base.

Financials of Arabian Petroleum Limited IPO:

Particulars ( In Lakhs )
2021
2022
2023
Revenue from Operations 10,999 19,101 24,284
Other Income 26 58 111
Total Revenue 11,025 19,159 24,395
Cost of materials consumed 8,846 16,320 20,792
Change In Inventory -134 -666 -273
Employee benefits expenses 627 925 1,007
Other Expenses 1,034 1,680 1,823
EBITDA 651 900 1,045
Depreciation & Amortisation 139 143 138
Finance Cost 123 175 254
EBIT 513 758 908
OPM (%) 5.91% 4.70% 4.29%
PBT 390 582 654
Tax 102 168 167
PAT 288 414 486
NPM (%) 2.61% 2.16% 1.99%
No.of Shares 108.92 108.92 108.92
EPS 2.64 3.80 4.46

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Arabian Petroleum Limited 243 5 4.46 15.7 70 76
Tide Water Oil Co. (India) Limited 1,854 114 65.71 18.6 1,198 2,088
GP Petroleums Limited 790 25 4.94 13.5 49 248
* All the data is as per FY23.

Recommendation on Arabian Petroleum Limited IPO:

Review and Recommendation of Arabian Petroleum Limited SME IPO by IZ team is 4/10

A) Business Overview:

Arabian Petroleum Limited is involved in manufacturing a wide range of lubricants, specialty oils, and coolants. These products are intended for both automotive and industrial applications. The company has two primary product divisions: 1. Automotive Lubricants: Under the brand name "Arzol." 2. Industrial Lubricants: Under the brand name "SPL." The company has also expanded its manufacturing to Maharashtra, India, and has installed additional blending machines. They have been licensed by the American Petroleum Institute (API) to use its mark on specific products. Their customer base is diverse, including industries like pharmaceuticals, FMCG, steel, power, etc., and they have contracts with both private and government sectors.

B) Object of the IPO:

The company plans to use the proceeds from the IPO for: 1. Meeting Working Capital requirements. 2. General Corporate Purpose. 3. To meet issue expenses.

C) Financials:

The financial performance of the company shows a growing trend: 1. Revenue: Increased from ₹10,999 Lakhs in 2021 to ₹24,284 Lakhs in 2023. 2. EBITDA: Improved from ₹651 Lakhs in 2021 to ₹1,045 Lakhs in 2023. 3. PAT (Profit After Tax): Grew from ₹288 Lakhs in 2021 to ₹486 Lakhs in 2023. 4. EPS: Increased from 2.64 in 2021 to 4.46 in 2023. However, it's worth noting that the Net Profit Margin (NPM) has slightly decreased over the years.

D) Valuation:

The company's IPO is set at a fixed price issue of ₹70 per equity share with a face value of ₹10. The Issue Size is ₹20.24 Cr. It's listed at NSE Emerge.

E) Comparing with Peers:

GP Petroleums Ltd: With a P/E of 13.5, it's less expensive than Arabian Petroleum, which has a P/E of 15.7. Considering Arabian Petroleum's EPS of 4.46 and a P/E of 15.7, it appears moderately priced compared to its peers.

F) Promoters and Management:

The company is led by Mr. Hemant Dalsukhrai Mehta, Mrs. Darshana Hemant Mehta, and Mr. Manan Hemant Mehta. Their collective experience in trading, manufacturing, sales, and marketing adds value to the company's operations.

Conclusion:

Arabian Petroleum seems to be on a growth trajectory, but potential investors may want to consider the decreasing profit margins and how that could impact future profitability. The valuation appears on higher side as compared to peers.

Lead Manager of Arabian Petroleum Limited IPO:

  1. Hem Securities Limited

Registrar of Arabian Petroleum Limited IPO:

  1. Purva Sharegistry India Private Limited

Company Address:

Arabian Petroleum Limited Plot 14-B, Morivali M.I.D.C., Opp. Positive Packaging, Ambernath (W), Ambernath, Thane - 421505 Phone: +0251-2395601 Email: cs@arabianpetroleum.co.in Website: https://www.arabianpetroleum.co.in/index.php

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