Balaji Phosphates Ltd is all set to launch its Initial Public Offering (IPO) in 2025, offering a Book Built Issue of ₹ 50.11 Crores, which consists of a Fresh Issue of ₹ 41.58 Crores (59.40 lakh shares) and an Offer for Sale (OFS) of ₹ 8.53 Crores (12.18 lakh shares). The IPO is set to open on February 28, 2025, and will close on March 4, 2025. Investors can expect the allotment to be finalized by March 5, 2025, with the listing date scheduled for March 7, 2025 on the NSE SME platform.

The price band for the IPO is set between ₹ 66 and ₹ 70 per equity share, which will provide a market capitalization of ₹ 166.44 Crores at the upper price band of ₹ 70. The lot size for the IPO is 2,000 shares, and retail investors will need to invest a minimum of ₹ 1,40,000. High-Net-Worth Individuals (HNIs) are required to invest a minimum of ₹ 2,80,000 by purchasing 2 lots (4,000 shares). This IPO is expected to attract investors interested in the fertilizer sector, particularly those following the NPK and phosphate fertilizer markets.

Company Overview and Financials

Balaji Phosphates Ltd is a key player in the fertilizer industry, specializing in the production of NPK granulated & mixed fertilizers and Zinc Sulfate (21%). The company primarily focuses on the manufacture of Single Super Phosphate (SSP), available in both powder and granulated forms, in compliance with the Fertilizer Control Order of India. The company’s manufacturing facility is located in Dewas, Madhya Pradesh, with an installed capacity of 120,000 MTPA for SSP and 3,300 MTPA for Zinc Sulfate. SSP is the main revenue driver, contributing significantly to the company’s overall sales.

In terms of financial performance, Balaji Phosphates has shown steady growth over the past few years. For the fiscal year ending August 31, 2024, the company’s revenues from operations were ₹ 5,484.66 Lakh, up from ₹ 15,168.02 Lakh in 2023 and ₹ 14,464.12 Lakh in 2022. The company’s EBITDA for 2024 was ₹ 572.55 Lakh, a decline from the previous years, while the Profit After Tax (PAT) stood at ₹ 414.65 Lakh, compared to ₹ 604.05 Lakh in 2023. Despite the decline in PAT, the company has consistently generated profit, and its financials indicate that it is on a stable growth trajectory.

IPO Pricing and Investment Insights

The pre-issue P/E ratio stands at 20.65x, while the post-issue P/E ratio is 27.56x, which is considerably higher than the industry average of 15x. This suggests that the IPO is fully priced and investors may face limited listing gains. The company’s Return on Equity (ROE) for FY24 is 18.89%, and its Return on Capital Employed (ROCE) is 16.70%, indicating efficient capital utilization.

The Grey Market Premium (GMP) for the Balaji Phosphates IPO is currently at ₹ 0, which suggests that no significant price movement is expected prior to listing. The GMP is based on demand and supply factors and should not be used as a reliable indicator for price discovery before the official listing on the stock exchange.

IPO Objectives and Use of Proceeds

The funds raised from the IPO will be utilized for the following purposes:

1. ₹ 1,287.90 Lakhs will be used to meet the company’s capital expenditure needs, allowing for expansion and modernization of its production facilities.
2. ₹ 1,900.00 Lakhs will be allocated for working capital requirements, ensuring smooth operational flow and uninterrupted production of fertilizers.
3. Remaining proceeds will be utilized for general corporate purposes to support ongoing business activities.

Management Team

The company’s promoters include Alok Gupta and Mohit Airen, both of whom have significant experience in the fertilizer industry. Mohit Airen, the Managing Director, has over 20 years of corporate experience and has been with Balaji Phosphates since 2013. Alok Gupta, the Director, brings additional expertise in corporate business management, having been associated with the company for over a decade.

Conclusion

While Balaji Phosphates operates in a steady-growing sector with an established market presence, the valuation at the upper price band of ₹70 per share appears to be fully priced. Investors looking for quick listing gains or long-term growth might find limited opportunities, given the high P/E ratio and the current Grey Market Premium of ₹ 0. Based on the company’s financial performance and market conditions, it is recommended that investors avoid the IPO if they are seeking short-term listing gains. However, those interested in the fertilizer industry and looking for stable growth might still consider the IPO as part of a long-term investment strategy.

The Upcoming IPOs in this week and coming weeks are  NAPS Global.

The Current active IPO are Balaji Phosphates, Shreenath Paper.

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