HP ADHESIVES IPO

IPO Details:

Price Band: 262-274

Cutoff Price: 274

About Company:

HP Adhesives is a fast-growing multi-product, multi-category consumer adhesives and sealants company. For largest product category- PVC solvent cement, the company is amongst the leading manufacturing companies in India in the consumer/ bazaar segment of the adhesive industry. Company manufactures a wide range of consumer adhesives and sealants such as PVC, cPVC and uPVC solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants and PVC pipe lubricant which are sold across India, through an extensive distribution network of distributors, and exported also to several countries, through a network of distributors and direct customers. Company also manufacture these products for select large PVC pipe manufacturing companies under co-branding or private label on order basis. Apart from the above products, the company also sells ancillary products like ball valves, thread seal and other tapes and FRP products for drainage and architectural solutions that are distributed along with our products to the end- customers through our distribution network.

Competitive Strengths:

1. Consistently growing company with established brand presence.

2. Wide Product Portfolio and multiple SKUs.

3. Focusing on multiple end-user industries.

4. Diversified customer-base - Extensive distribution network across India catering to customers.

5. Established presence in International markets, Institutional sales to select large players.

6. Synergy of young and experienced management team with a committed employee base.

7. Efficient manufacturing set-up with scope for expansion.

8. Effective quality checks, thereby reducing batch failure.

9. R&D set up for constant product improvement and new product development.

Strategies:

1. Continue to introduce new product categories.

2. Further expand our distribution network across India and globally.

3. Further strengthen brand image.

4. Expansion of manufacturing facility.

5. Increasing the size of the field staff will help secondary penetration.

6. Enhancing demand by incentivizing the product end- user i.e., applier.

7. Plant automation to improve productivity.

8. Technology integration for all business functions.

9. Continue to drive business based on people-centric policies and practices

Financial Performance:

Revenue of the company is increasing. Company is profitable and cutoff price is at P/E of 36.

Objects of the Issue:

The Net Proceeds from the Issue are proposed to be utilised in the following manner:

1. Funding Capex

2. Funding Working Capital Requirement

Competitors Comparison:

Considering listed companies that are in adhesives business, HP Adhesives seems to be undervalued on the basis of the P/E ratio, whereas it looks overvalued on the basis of P/B ratio.

Grey Market Premium:

Our view: GMP of the IPO is nil as of and company seems to be overvalued. I will not subscribe to this IPO.

Disclaimer: Views are shared for an educational purpose. Please consult your financial advisor or planner before taking any action based on the views or facts shared on this blog.

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