Much noise has been created in the investment world by the IPO of Stallion India Fluorochemicals with an oversubscription ratio of 32.12 times.
Such high oversubscription speaks for the robust confidence of investors about the growth prospect and financial health of the company.
The IPO, priced attractively at ₹85-₹90 per equity share, has a GMP of ₹39, which gives a hint towards the listing price of ₹129 per share.
This article sheds light on the financial performance of the company, the details of IPO, and the market position to get a glimpse into why Stallion India Fluorochemicals is going to make all the difference in investor returns.
Company Overview
Stallion India Fluorochemicals belong to the niche but a very high-growth fluorochemical segment. Fluorochemicals are mainly used in pharmaceuticals, refrigeration, and agrochemicals.
Specific product lines offered by the group have been doing well to position it as a market leader in this space.
Financial Performance
1. Revenue and Profit Growth
The financials of the company have been a gradually upward curve. Over FY22-FY24, Stallion India showed revenue growth consistently on YoY basis and profit increases substantially.
| Fiscal Year | Revenue (₹ crore) | Net Profit (₹ crore) | Growth in Net Profit (%) |
|---|---|---|---|
| FY22 | 75.12 | 7.85 | – |
| FY23 | 84.45 | 9.75 | 24.20% |
| FY24 | 102.36 | 14.78 | 51.62% |
In FY24, the corporation has delivered the growth in a net profit of 51.62%, which infers that operational efficiencies and a demand for that product in a market can now be taken away.
2. Return on Equity (ROE) and Return on Capital Employed (ROCE)
Stallion India has displayed very healthy profitability statistics, with a three-year average ROE at 20% and the ROCE at 26%. It reflects that the firm has the capability to generate returns on equity and capital effectively.
| Metric | FY22 | FY23 | FY24 | Three-Year Average |
|---|---|---|---|---|
| ROE (%) | 18.5 | 19.7 | 21.8 | 20.0 |
| ROCE (%) | 24.3 | 25.6 | 28.2 | 26.0 |
IPO Details and Investor Sentiment
1. Oversubscription
The IPO was subscribed 32.12 times along with the equities offered. Hence, it reflects high demand by all categories of investors.
QIBs: 40.5 times oversubscribed
NIIs: 28.3 times oversubscribed
Retail Investors: 24.1 times oversubscribed
The huge subscription will be a pointer towards the high level of confidence amongst investors in the company’s fundamentals and future prospects.
2. GMP
Grey Market Premium (GMP) for Stallion India Fluorochemicals IPO is ₹39, which will be a sign of high demand in the grey market.
Based on the price band of ₹85-₹90 per share, it can be indicated that the listing price will be around ₹129, which gives listing gains approximately around 43%.
The company, at an IPO price band, is placed at a Price-to-Earnings (P/E) ratio of about 17.8x based on FY24 earnings.
This valuation would be reasonable, especially considering the peers in the fluorochemical industry which trade at P/E ratios of 20x-25x.
Growth Drivers and Opportunities
1. Growing Market for Fluorochemicals
The global fluorochemical market is slated to grow compound annually at 6.5% CAGR between 2023 and 2030.
Stallion India will capture growth exactly at the point where an organization has a very strong base established with a niche of its products.
2. Operating Efficiency
This company has three-year average ROCE as high as 26%, which represents high operational efficiency, ensuring sustainable profitability.
3. New Age Product Portfolio
In an industry, high margin and innovative products of fluorochemical make Stallion India distinct and thus grow its prospects for growth.
Risk and Challenges
1. Price Fluctuations of Raw Material
Margins are expected to be influenced by the changes in the raw material prices. Procurement along with cost control will become mandatory.
2. Regulatory Risks
Fluorochemical industry has high environmental regulation. Non-conformity leads to penalties that may disrupt its operations.
3. Competition
While Stallion India has an upper hand over its competitors, the company also operates in a competitive space with the presence of some well-established domestic and international players.
Listing Gains for Investors
Strong financials, positive investor sentiment, and a reasonable valuation offer huge listing gains.
| Factor | Analysis |
|---|---|
| Oversubscription | 32.12 times, indicating strong demand and high listing potential. |
| GMP | ₹39, suggesting a listing price of ₹129 and a 43% premium over the issue price. |
| Profit Growth | 51.62% YoY increase in FY24, highlighting operational success. |
| ROE and ROCE | Strong averages of 20% and 26%, respectively, ensuring profitability. |
The Stallion India Fluorochemicals IPO is an attractive investment opportunity. Its robust financial performance, efficient capital utilization, and strategic positioning in the fluorochemical market make it an attractive bet.
Though risks such as raw material volatility and regulatory compliance exist, the company’s growth trajectory and robust investor confidence outweigh these concerns.
With a listing price of ₹129 and long-term growth potential, Stallion India Fluorochemicals is poised to generate significant returns. It is well worth adding to any investor’s portfolio.
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