Goldman Sachs sees value in this new IPO stock, picks stake post listing

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There is no dearth of successful investors and then there are private equity investors and financial institutions which have impeccable records. Goldman Sachs is one such company which has some sort of expertise in identifying and capitalizing on best deals and bargains. Latest in its trades is a new IPO stock where the investment management firm has taken a significant equity stake.

Paradeep Phosphates – India’s third largest private sector manufacturer of non-urea fertilizers – recently debuted on the bourses with modest gains of nearly 5%. Although the IPO was given a miss by HNI investors, QIBs and retail investors lapped up the offer as valuations were attractive. Additionally, the government of India – which held 19.55% equity stake in the company – made a full exit in the new IPO stock.  

Couple of days after listing, Goldman Sachs India Equity Portfolio announced to have acquired 41,32,211 equity shares in Paradeep Phosphates through open market transactions. Goldman Sachs picked these shares at an average price of INR45.95 per share, amounting to a total investment of INR18.98 crores.

Interestingly, Goldman Sachs was also among the anchor investors in Paradeep Phosphates IPO and had invested INR48 crore by subscribing to 1,14,28,550 shares at the rate of INR42 apiece. As such, Goldman Sachs’ total investment in the new IPO stock stands at close to INR67 crore.

What makes this new IPO stock interesting?

In simple terms, Valuations. The stock is still available at a PE multiple of 8.6 while its Price to Sales ratio stands at 0.44 – both parameters indicating undervaluation compared to its peers while boasting of high ROCE of 15.2%. The company has also posted strong revenue growth in the recent years. It is for these reasons that the IPO got largely positive recommendations from analysts.

CompanyP/EP/SROCE (%)EV/EBITDARevenue growth 3-year CAGR
Paradeep Phosphates8.60.4415.28.1421.72
Coromandel International18.01.4434.611.413.06
Fertilizers & Chemicals Travancore18.81.8837.711.631.3
Deepak Fertilizers12.41.1019.87.724.36
Source: Screener

Paradeep Phosphates is part of the Saroj Poddar-owned Adventz Group which is connected to Birla family. Saroj Poddar married Jyotsna Birla, the second daughter of industrialist KK Birla. Among others, the company produces Di-Ammonium Phosphate (DAP), Nitrogen-Phosphorus-Potassium (NPK), Zypmite, Phosphogypsum and Hydroflorosilicic Acid (HFSA) and its fertilizers are marketed under ‘Jai Kisaan – Navratna’ and ‘Navratna’ brands.

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