Stocks

Should you be investing in HP Adhesives Limited IPO?


In this article


HP Adhesives is a fast-growing retail adhesives and sealants company that has a wide range of consumer adhesives and sealants such as PVC, cPVC, and uPVC solvent cement, synthetic rubber adhesive, etc.  They also manufacture these products for selected large PVC pipe manufacturing companies under co-branding or private label on an order basis. Apart from the above products, the company also sells ancillary products like ball valves, thread seals, and other tapes and FRP products for drainage and architectural solutions.

The Company has a distribution network of 4 depots situated in Delhi, Kolkata, Bengaluru, and Indore and more than 750 distributors who cater to more than 50,000 dealers in India. The company’s manufacturing facility is located in Maharashtra, which is a multi-product manufacturing facility.


IPO Brief

  • IPO open from: Dec 15th – Dec 17th 2021
  • Face value: ₹10
  • Price Band: ₹262-274 
  • Market Lot: 50 shares
  • Minimum Investment: ₹13,700
  • Listing on: BSE and NSE
  • Total issue size: up to ₹125.96 crores
  • Fresh Equity Issue: up to ₹113.44 crores
  • Offer for sale: up to ₹12.53 crores
  • Promoters: Anjana Haresh Motwani and Karan Haresh Motwani are promoters of the company which they hold 95.31% of pre-issue paid-up capital.
  • Book running lead managers: Unistone Capital Pvt Ltd

What is an IPO and should you invest in them?


Offer Break-up

The offer is broken up into the following investor classes:    


IPO OBJECT

HP Adhesives Limited IPO Size is ₹125.96 crores and below are the objects of the IPO:

1) Offer for Sale (OFS) 12.53 crores:  The existing shareholders would sell their shares and the company would not receive any part of it from the IPO proceeds.

2) Fresh issue of 113.44 crores:  The money that will be infused into the company will be used as follows:

  • Funding the working capital requirements of the company.
  • Funding capital expenditure for expansion of production capacity at the existing manufacturing facility in Maharashtra and at the additional unit having a proposed construction area admeasuring about 4,532.57 sq. meters.
  • Rest will be for general corporate purposes, subject to applicable laws.

IPO Strengths

  • Constant growing company: The company has grown from a single product to multi-product adhesives and sale its product to pan-India and also in international markets. The company’s revenue registered a CAGR growth of 37.5% in the last 11 years.
  • Wide range of Product Portfolio: Over the last few years, HP Adhesives expanded from a single product to multiple product categories including silicone sealants, synthetic rubber adhesives, PVA adhesives and other sealants.
  • Extensive distribution network across India: The company has more than 750 distributors with having presence in 23 states and 4 union territories.
  • Presence in International markets: HP Adhesives manufactures good quality products so that they can match international quality standards. They primarily export to the Middle East and Indian sub-continent. Their exports business constitutes 17.20% of sales in the Fiscal year 2021.
  • Scope for expansion: Company is in process of setting up an additional unit having a proposed construction area of 4,532.57 sq. meters.

Key Risks

  • Covid-19 pandemic: Its continuing impact and as well as government measures to reduce the spread of COVID-19 may have an adverse effect on business and operations.
  • Absence of long-term arrangements: HP Adhesives do not have any long-term arrangements with distributors & suppliers and any failure in existing arrangements could negatively affect business.
  • Incurred losses in the past: The company has incurred a loss of ₹4.67cr in the financial Year 2019-20. There can be no assurance that it will not incur losses in the future.
  • Promoters and Directors Involved in legal proceedings: Any adverse outcome in such proceedings may have an adverse impact on its reputation & business.

Financials

 (₹ in crores)6M Ended
30-Sep-21
Year Ended
31-Mar-21
Year Ended
31-Mar-20
Year Ended
31-Mar-19
Total Assets355.80328.37295.36277.42
Total Revenue97.17226.55160.19132.51
Profit After Tax23.2155.5721.047.07

Arihant Team
The Arihant Team believes everyone deserves access to sophisticated financial advice. From day one, our mission has been to help make investing easier and accessible to every Indian. Our team of experts are curating informative and research-based article on this blog, to help make investing and managing your money easier for you!

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