IPO Review: Shree Pushkar Chemicals & Fertilisers’ IPO opens on 25 August


Shree Pushkar Chemicals & Fertilisers’ IPO will open on 25 August for subscription. In its red herring prospectus (RHP), the Mumbai-based said the latest IPO will remain open till 27 August. Shree Pushkar Chemicals & Fertilisers plans to raise INR70 crore through the IPO which will include 20.26 lakh shares from existing shareholders through the offer for sale (OFS) route. The IPO’s price band has been fixed at INR61-65 per share. The company has not disclosed how many shares it plans to sell.

Shree Pushkar Chemicals & Fertilisers

The company produces a wide range of dye intermediates, cattle feed supplement and fertilizers at its two manufacturing facilities located at Lote Parshuram, Maharashtra.

Here is the IPO review for Shree Pushkar Chemicals & Fertilisers from IPO Central.

IPO dates 25 August 2015 – 27 August 2015
Price band INR61 – 65 per share
Category allocation QIB – 50%, NII – 15%, Retail – 35%
Lead managers Keynote Corporate Services Limited
Minimum lot 200 shares and in multiples thereafter
Minimum investment INR12,200 – INR13,000

Selling shareholders

Shree Pushkar Chemicals & Fertilisers is largely controlled by promoter and promoter group. First generation entrepreneurs Punit Makharia and Gautam Makharia hold 1.82 crore shares in the company, amounting to 84.8% equity ownership. India Enterprise Development Fund – a fund of IFCI Venture Capital Funds Limited – holds 24.26 lakh shares in the company, amounting to 11.3% equity stake. According to earlier drafted plans, the fund is substantially cutting its stake in the company through the latest IPO. Following the public issue, India Enterprise Development Fund’s stake in the company will come down to just 4 lakh shares.

Production expansion on mind of Shree Pushkar Chemicals & Fertilisers

Shree Pushkar Chemicals & Fertilisers plans to use the funds for acquisition of a factory and setting up production and effluent treatment plants. The biggest chunk of IPO proceeds will be used towards setting up a new facility for production of reactive dyes, H-Acid, and Vinyl Sulphone. The company plans to invest INR41.6 crore in this regard while INR4.9 crore will be used towards establishing an effluent treatment plant at its existing facility. The company plans to invest INR2.37 crore and INR2.29 crore towards constructing additional godown and acquiring a new facility, respectively. The new facility the company proposes to buy is less than a kilometer away from its existing twin facilities.

Rest of the funds will be used for general corporate purposes.

Financial performance – margin growth and interest reduction are highlights

Shree Pushkar Chemicals & Fertilisers is on a solid footing in terms of financial performance. Top line has grown consistently over the last five years and so has been the trend in profits. It is also good to see that its margins have improved substantially during this period. In fact, the improvement in margins has been substantial in these years.

Shree Pushkar Chemicals & Fertilisers’ financial performance (figures in INR crore)
  FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Total revenues 131.2 150.9 176.5 210.3 266.8
Expenses 126.6 143.6 167.5 196.1 244.0
Profit after tax 2.7 5.3 7.2 10.4 18.6
Net margin (%) 2.1 3.5 4.1 4.9 7.0


Several factors play important role in margin improvements and one of these factors is the reduction in interest costs for Shree Pushkar Chemicals & Fertilisers. In FY 2015, its finance costs crashed to INR5.4 crore in comparison to INR10.6 crore in FY 2014. This was made possible lower utilization of banking limits and prepayment of loans. It is important to highlight the latter as several companies tapping the IPO market this year plan to use funds to reduce debt. Shree Pushkar Chemicals & Fertilisers is ahead of the curve in this regard.

Total debt equity ratio is placed comfortably at 0.59 as on 31 March 2015.

Client concentration

Client concentration is an important criterion to understand a company’s dependence on its biggest clients and Shree Pushkar Chemicals & Fertilisers performs so so here. Revenue from its top five clients as a percentage of total was 37.5%, 50.9% and 45.3% in FY 2013, 2014 and 2015 respectively. This is high dependence on few clients but understandable considering its small scale of operations.

Valuations justified with high growth 

At the lower end of the price band, Shree Pushkar Chemicals & Fertilisers’ shares are valued at a price earnings ratio of 6.8 while the upper end stretches valuations to 7.2 times. Since the company gets nearly 76% revenues from dye intermediates, it is logical to compare it with players like Bodal Chemicals and Bhageria Dye Chem which trade at price earnings ratio of 3 to 4. While Shree Pushkar Chemicals & Fertilisers’ valuations appear to be on the higher side, these are adequately compensated by strong business and margin growth rates.

Million rupee question (we don’t like dollars, you see) – Should you invest? 

The revival of the IPO market in India has seen the return of high valuations and a tendency among promoters and merchant bankers to leave as little on table as possible. As it happens with bull markets, companies get away with this sort of atrocious practices. Shree Pushkar Chemicals & Fertilisers’ IPO pricing is not cheap but definitely not as steep as Manpasand Beverages. There is little to dislike in the latest IPO and considering the performance of listings this year, we shouldn’t be surprised if Shree Pushkar Chemicals & Fertilisers’ IPO turns out to be a winner.


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