HindPrakash Industries IPO Review: Should you Invest?

HindPrakash IPO, a SME initial public offering of 2,880,000 equity shares, intends to raise a total of ₹11.52 Crores, including share premium of Rs. 30 per equity share. The investors may subscribe for long term.

The lead managers to the IPO are Hem Securities Limited and the Registrar to this issue is Bigshare Services Private Limited.

HindPrakash Industries Ltd

The company has delivered a steady growth in productivity and has expanded its range of products portfolio from dyes to auxiliaries to speciality chemicals. The company’s expertise in chemical manufacturing has led to expeditiously increase production capacity and expand into new value added products. On the back of its wide range of products, the company offers services to various industries like Dyestuff and Dye intermediates, Textiles, Construction Chemicals, Speciality Chemicals etc.

• The company is situated at Vatva, which is in the heart of Gujarat Industrial Development Corporation, an Industrial Estate
• The company sells quality products at reasonable prices
• It has the advantage of Prime location
• The company has relationships with long-term clients
• The company has integrated all its manufacturing activities for achieving the operational efficiency, and also have a separate laboratory in its manufacturing unit. This step is taken to check the quality before dispatching any material to its clients.
• The company has focus on high value business
• Hindprakash grow their market share in existing geographies and intends to expand its operations to new geographies

HindPrakash IPO Details

The net proceeds will be used for Working Capital Requirements.

• Issue Open: January 15, 2020 – January 17, 2020
• Issue Type: Fixed Price Issue IPO
• Issue Price: Rs 40 Per Equity Share
• Issue Size: 2,880,000 Eq Shares of ₹10 for the total of about ₹11.52 Cr
• Minimum Investment: INR 120,000
• Minimum Order Quantity: 3000 Shares
• Listing At: NSE Emerge SME Platform
• Listing Date: On or Before October 16, 2019
• Pre Issue Holding of the Promoters:100%
• Post Issue Holding of the Promoters:27.63%

Should you Invest?

The company for its last three fiscals, has reported turnover of Rs. 86.12 cr. & net profits of Rs. 2.14 cr. (FY17), turnover of Rs. 87.48 cr. & net profits of Rs. 2.32 cr. (FY18) and turnover of Rs. 97.99 cr. & net profits of Rs. 2.83 cr. (FY19). For H1 of FY20, the company has delivered the net profit of Rs. 1.78 cr. on a turnover of Rs. 50.64 cr. The company’s top line reflects a sudden increase in a pre-IPO year.

Meanwhile, the company’s revenue mix for the last three fiscals consists of 80% from manufacturing activities and 20% from trading (on an average basis). However, for H1 of FY20, this mix changed to 95% and 5% respectively.

On the other hand, if we take account of post issue paid-up equity capital, the issue price reflects it to be at a P/E of 11.7 against the industry average of 13, after we annualized FY20 H1 earnings. This means that the issue is fully priced.

The long term investors may “subscribe” to Hindprakash IPO or may be invested for short term listing gain.