White oil manufacturer Gandhar Oil Refinery is aiming to launch its IPO next week. It aims to mobilize INR 500.69 crores by way of a public offer that includes a fresh issue of shares and an Offer For Sale (OFS) by existing investors. Here are the top things to know about Gandhar Oil Refinery IPO.
#1 Gandhar Oil Refinery IPO: Business Overview
Gandhar Oil is a leading manufacturer of white oils by revenue with a growing focus on the consumer and healthcare end industries. As of 30 June 2022, its product suite comprised over 350 products primarily across the personal care, healthcare, and performance oils (PHPO), lubricants, and process and insulating oils (PIO) divisions under the ‘Divyol’ brand.
The products are used as ingredients by leading Indian and global companies to manufacture end products for the consumer, healthcare, automotive, industrial, power, tyre, and rubber sectors.Â
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#2 Gandhar Oil Refinery: Industry Outlook
White oil is among the fastest-growing segments of the Indian specialty oil market and was estimated to be worth USD 0.43 billion in 2022. This is likely to reach USD 0.69 billion by 2027, at a CAGR of 9.8%. In terms of volume, it is expected to reach 1,128 KT by 2027 from 718 KT in 2022, at a CAGR of 9.5%. The market expansion is being driven by the encouraging growth demonstrated by a broad range of end-use sectors, the steady increase in foreign direct investment, as well as growing government initiatives to support the country’s economy. Indian manufacturers export white oil across APAC, Europe, MEA, and America.
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#3 Gandhar Oil’s Market Position
Gandhar Oil’s comprehensive and diversified product portfolio and service offerings enable the company to insulate its revenue growth from risks associated with product or customer concentration. In FY 2022, the revenue of Gandhar Oil Refinery from white oil products accounted for 64.7% of consolidated manufacturing sales. Gandhar Oil is among the top two manufacturers in the Indian white oil market; considering only domestic sales, the company has a market share of 28% in India.
The company is also India’s largest manufacturer of white oil by revenue, including both domestic and overseas sales. Globally as well, Gandhar Oil is one of the top five players, with ~7.6% market share in white oil in 2021.
#4 Gandhar Oil Refinery IPO: Offer Details
The Gandhar Oil Refinery IPO is scheduled for 22 to 24 November 2023, with an expected price range of INR 160 – 169 per share. The IPO consists of an Offer for Sale (OFS) of 11,756,910 shares, valuing the offering at INR 198.69 crores, and a Fresh Issue of INR 302 crores. It is worth highlighting that the company will not get any funds from the OFS component.
#5 Gandhar Oil Refinery IPO: Manufacturing facilities and R&D
Gandhar Oil Refinery currently operates three manufacturing facilities with a combined annual production capacity of 522,403 kL as of 30 June 2023 with plants located in (i) Taloja, Maharashtra, (ii) the Union Territory of Silvassa, Dadra, and Nagar Haveli and Daman and Diu, and (iii) Sharjah, United Arab Emirates to cater to domestic and overseas demand for the products.
The company has also earmarked INR 27.73 crore from IPO proceeds towards capital expenditure for the expansion of the Silvassa plant through the addition of an automotive oil unit. Similarly, the Taloja plant is currently undergoing expansion of 75,000 kL which is likely to be completed by FY 2024.
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#6 Gandhar Oil Refinery IPO: Geographical presence
As of 30 June 2022, the overseas operations catered to over 100 countries globally. The overseas sales comprise revenue from overseas sales of the company and revenue earned by its subsidiary, Texol, in Sharjah, UAE.
The revenue from overseas sales, based on the Pro Forma Consolidated Financial Information, has grown at a CAGR of 71.22% over the last three financial years from INR 741.36 crore in FY 2021 to INR 1,345.66 crore in FY 2022 and INR 2,173.35 crore in the FY 2023 and was INR 690.56 crore in the quarter ended 30 June 2023, contributing 36.00%, 39.76%, 53.32% and 64.57% of the pro forma consolidated revenue from the sale of products, respectively, in these periods.
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#7 Gandhar Oil Refinery IPO: Suppliers
The company has successfully built relationships with leading oil companies including SK Lubricants, S-Oil, GS Caltex, and other global base oil suppliers as well as various Indian oil refining companies for the procurement of base oil, which is the primary raw material.
#8 Gandhar Oil Refinery IPO: Customers
Gandhar Oil has a diversified customer base that comprised 3,558 customers during FY 2023. Its customers include P&G, Unilever, Marico, Emami, Bajaj Consumer Care, Encube, Patanjali Ayurved, Dabur, Amrutanjan Healthcare, Supreme Petrochem and other leading Indian manufacturers of pharmaceutical products in the PHPO division; Gulf Oil, Adani Ports and Special Economic Zone and other users of industrial machines and equipment in the lubricants division; and Toshiba Transmission and Distribution Systems (India) and other leading manufacturers of transformers and power distribution and transmission companies in the PIO division.
The company has long-standing relationships with several of its key customers and has been able to maintain high customer loyalty. The percentage of customers placing repeat orders in FY 2022, 2021 and 2020 was 69.11%, 68.86%, and 66.37%, respectively.
#9 Gandhar Oil Refinery IPO: Financial Performance and Valuations
The company’s pro forma consolidated revenue from operations grew at a CAGR of 49.59% between the FY 2021 and 2023, which was among the highest CAGR among selected specialty oil peers, and second highest CAGR growth among selected specialty chemical peers.
| Â | FY 2021 | FY 2022 | FY 2023 | Q1 FY 2024 |
| Revenue | 2,221.00 | 3,543.37 | 4,079.44 | 1,070.34 |
| Expenses | 2,129.42 | 3,344.24 | 3,830.84 | 1,004.38 |
| Net income | 98.68 | 160.22 | 201.16 | 53.93 |
| Margin (%) | 4.44 | 4.52 | 4.93 | 5.04 |
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#10 Gandhar Oil Refinery IPO: Margins, and Valuations
| FY 2021 | FY 2022 | FY 2023 | |
| EPS | 12.54 | 18.42 | 23.77 |
| PE ratio | – | – | 6.94 – 7.36 |
| RONW (%) | 24.77 | 32.54 | 32.28 |
| NAV | 55.60 | 70.09 | 95.03 |
| ROCE (%) | 29.37 | 42.10 | 41.19 |
| EBITDA (%) | 6.25 | 6.94 | 7.76 |
| Debt/Equity | 0.18 | 0.28 | 0.22 |
