Should You Invest in Stallion India IPO? Analyst Views on the Refrigerant Manufacturer

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The Stallion India Fluorochemicals IPO has garnered substantial attention from investors. With its roots in Mumbai and expertise in producing refrigerants and industrial gases. Here’s a detailed breakdown of the Stallion India IPO and what it means for investors.

Stallion India IPO Analysts Views

IPO Highlights

The Stallion India IPO aims to raise INR 199.45 crore, consisting of a fresh issue worth INR 160.73 crore and an Offer for Sale (OFS) of INR 38.72 crore by the promoter. Priced between INR 85 – 90 per share, the IPO targets a market capitalization of INR 714 crore. The subscription window opens on 16 January 2025 and closes on 20 January 2025, with the listing slated for 23 January 2025.

Proceeds from the fresh issue will be used for:

  • Working Capital: INR 95 crore
  • Capital Expenditures: INR 50 crore

The allocation of funds underscores Stallion India’s commitment to bolstering its operational infrastructure and expanding its market footprint. By setting a competitive price band, the company aims to attract retail investors while maintaining a valuation that reflects its financial health.

Business Overview

Stallion India specializes in blending and processing refrigerants and industrial gases like SF6, R32, R152a, and R140a. Operating across four facilities in Maharashtra, Rajasthan, and Haryana, the company has carved a niche in industries such as electrical insulation, room air conditioning, and automobiles.

Key Revenue Contributors (FY24):

  • Electrical Insulation: 12%
  • Room Air Conditioning: 38%
  • Automobile Sector: 15%

With ambitious plans to invest INR 50 crore in capital expenditure, Stallion India is focusing on:

  • A greenfield facility in Andhra Pradesh (INR 21 crore)
  • Expansion of operations in Maharashtra (INR 29 crore)

However, its capacity utilization rate—below 50% in FY24—raises concerns about scalability and efficiency. Despite these challenges, the company’s diversification strategy signals its intent to overcome operational limitations.

Financial Performance

Stallion India reported revenue of INR 233.2 crore in FY24, with an EBITDA margin of 11.3% and a net profit of INR 14.7 crore. While the company has demonstrated steady growth, certain financial hurdles persist:

  • Margin Volatility: Gross margins ranged from 16% to 25% between FY21 and H1FY25 due to price variability.
  • Foreign Exchange Risk: Reliance on imported raw materials increases exposure to currency fluctuations.

Despite these obstacles, Stallion India has showcased resilience, adapting to dynamic market conditions with commendable results.

Stallion India IPO Analyst Views

Positive Outlook: Ms Anubhuti Mishra, Swastika Investmart

Ms Mishra recommends subscribing to the IPO, citing the following factors:

  • Strong Market Position: Stallion India’s established reputation and consistent performance bolster its competitive edge.
  • Growth Potential: Strategic focus on geographic expansion and product portfolio enhancement positions the company for long-term success.
  • Operational Expertise: Proficiency in processing refrigerants and industrial gases ensures sustained efficiency.
  • Customer Diversification: A broad customer base across high-growth sectors, including air conditioning, pharmaceuticals, and semiconductors, mitigates industry-specific risks.

“Stallion India’s robust market presence, combined with its growth-driven strategies, makes this IPO a compelling investment opportunity,” said Ms Mishra.

Cautious Perspective: Ms Geetanjali Kedia, SPTulsian Investment Adviser

Ms. Kedia adopts a more cautious stance, highlighting critical concerns:

  • Operational Inefficiencies: Capacity utilization below 50% and high working capital requirements reflect inefficiencies.
  • Foreign Dependency: Over 50% of raw materials are imported from China, increasing exposure to geopolitical risks. A dispute with its supplier Sanmei could lead to a liability of INR 9.5 crore.
  • High Valuation: A PE multiple of 17x, based on annualized EPS of INR 2.69 for H1FY25, appears steep given operational challenges.

“The IPO aligns with peak margins, which may not be sustainable. Investors should proceed with caution,” Ms. Kedia noted.

These analyst views reflect what is the norm regarding brokerage house recommendations for the upcoming IPO. Here is a bigger list of broker recommendations:

  • BP Wealth – Subscribe
  • Elite Wealth – Apply
  • GEPL Capital – Subscribe
  • Jainam Broking – Subscribe for listing gain
  • Samco Securities – Not rated
  • SMC Global – Not rated
  • Ventura Securities – Subscribe

Key Risks to Consider

  1. Raw Material Dependency: Heavy reliance on imported materials exposes Stallion India to forex and supply chain disruptions.
  2. Working Capital Strain: Prolonged inventory and debtor days highlight financial pressure, which could impede growth.
  3. Litigation Risks: The ongoing dispute with a supplier could lead to financial and reputational setbacks.

Conclusion

The Stallion India IPO offers a balanced mix of opportunities and risks. While the company’s market position, strategic initiatives, and diverse customer base present a promising outlook, operational inefficiencies, financial constraints, and external dependencies warrant cautious optimism.

Potential investors should weigh the positive views of Ms Anubhuti Mishra against the cautious recommendations from Ms Geetanjali Kedia. Thorough due diligence aligned with individual risk tolerance and investment goals is essential before making a decision.

By considering the multifaceted aspects of the Stallion India IPO, investors can make informed choices that align with their financial objectives and market outlook.

For more details related to IPO GMPSEBI IPO Approval, and Live Subscription stay tuned to IPO Central.

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