Platinum Industries IPO: Should You Invest?

Platinum Industries Limited, a leading manufacturer of PVC stabilizers in India, has launched its initial public offering (IPO) on February 27th, 2024. Should you join the crowd and invest? Let’s dive deeper. 

About Platinum Industries 

Platinum Industries Limited, incorporated in August 2016, specializes in the production of stabilizers, manufacturing PVC stabilizers, CPVC additives, and lubricants. Their products are utilized in various applications including PVC pipes, profiles, fittings, electrical wires, SPC floor tiles, Rigid PVC foam boards, and packaging materials. The company’s manufacturing facility, spanning 21,000 sq. ft., is located in Palghar, Maharashtra. 

A direct competitor of Platinum Industries is Huhnchem Limited, another leading manufacturer of PVC stabilizers in India. 

IPO Details 

• Subscription Dates: February 27th – February 29th, 2024 
• Price Band: ₹162 – ₹171 per share 
• Minimum Investment: ₹8,742 (47 shares) 
• Listing: BSE and NSE 

Offer Breakup 

The entire issue size of ₹235.32 Crore is a fresh issue. 

IPO Objective 

• The funds raised will be used for: 
• Setting up a new manufacturing facility in Dahej, Gujarat. 
• Repayment of working capital loans. 
• General corporate purposes 

IPO Strengths 

• The company operates an in-house R&D facility in Palghar, Maharashtra, spanning 3,351.82 sq. ft., equipped with modern instruments for product innovation. Technical collaboration with HMS Concept E.U. enhances research capabilities. 
• The company offers various PVC stabilizer products tailored to customer needs, with over 400 grades for diverse applications. Revenue from PVC stabilizers segment contributes significantly to total revenue across fiscal years. 
• The specialty chemical industry faces high entry barriers due to R&D, technical expertise, and regulatory standards. Stringent quality and approval processes limit competition and require significant customer validation. 
• The company upholds rigorous quality control procedures at all stages, including vendor prequalification and batch testing. An experienced analytical lab ensures compliance with specifications before product dispatch. 
• The company plans to broaden manufacturing capabilities by establishing a facility in Egypt through its subsidiary, targeting PVC industries. The move aims to enhance global market reach and proximity to key manufacturing facilities. 
• The company, a prominent PVC stabilizer manufacturer in India, aims for global expansion through customer classification, market penetration strategies, and diversification of product applications. Technical support enhances customer relationships and sales growth. 

IPO Risks 

• The company is expanding operations and establishing distributor and customer networks in new regions. Failure to do so may adversely impact sales, financial condition, and operational results. 
• The company’s delays or cost overruns in setting up proposed facilities may significantly impact the company’s financial condition, operational results, and growth prospects. 
• The company’s sole manufacturing facility in Palghar, Maharashtra poses risks of disruption due to localized social unrest, natural disasters, or breakdown of services, impacting business and financial condition. 
• The company has faced negative cash flows across operating, investing, and financing activities in the past three financial years, which could adversely impact future results and financial condition. 
• Improper storage, processing, and handling of raw materials and finished products may damage inventory, adversely impacting the company’s business, operational results, and cash flows. 
• The business exhibits a significant working capital intensity. As of March 31, 2023, 2022, and 2021, net working capital requirements stood at INR 45.844 lakhs, INR 38.612 lakhs, and INR 3.482 lakhs, respectively. Inadequate cash flows or borrowing may adversely impact business operations and results. 

Financial Performance 

Our outlook 

The PVC market is poised for substantial growth, driven by the pipes and fittings segment, forecasted to achieve an 8-9% CAGR from 2022 to 2027. Construction industry expansions in the MENA region, backed by initiatives like Saudi Vision 2030, will fuel demand. Investments in various sectors will escalate PVC consumption and the need for PVC stabilizers. The global specialty chemicals industry is set to grow, emphasizing strong prospects for PVC-related applications. 

At the upper band of INR 171, the issue is valued at an EV/EBITDA of 12.81x based on FY23 EBITDA of INR 538.58 Mn and P/E of 18.15x based on FY23 EPS of INR 9.42. We are recommending “Subscribe” for this issue. 

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