IPO Alert: HP Adhesives files for going public

The adhesives and sealants markets in India were worth ₹101 billion in the year 2020. Besides, these markets are expected to grow at CAGRs of 8.5% and 7.0%, respectively, by 2025, resulting in a possible combined value of ₹150 billion.

HP Adhesives recently filed preliminary papers with capital markets regulator SEBI to raise funds through stock sale. The initial public offer (IPO) comprises a fresh issue of 41.40 lakh equity shares and an offer of sale of 4,57,200 equity shares by the promoter, as per the draft red herring prospectus (DRHP).

Proceeds from the fresh issue would be used for funding working capital requirements of the company and funding capital expenditure for expansion of production capacity at the existing manufacturing facility. The company also plans to add new products to its existing portfolio.

Company Profile

HP Adhesives is one of India’s multi-product and multi-category consumer adhesives and sealants company. It manufactures a wide range of consumer adhesives and sealants such as PVC, cPVC, and uPVC solvent cement, synthetic rubber, gasket shellac, and PVC pipe lubricant, which are sold across India.

HP Adhesives also sells ancillary products like ball valves, thread seal, tapes, and FRP products for drainage and architectural solutions. As of June 30, 2021, the distribution network comprised 4 depots and more than 750 distributors who cater to more than 50,000 dealers in the country.

Financials

In the first quarter of 2021, the Mumbai-based company had revenues of ₹845.1 million, compared to ₹1.18 billion in the previous year’s quarter. The company enjoyed profits of ₹100.5 million vs. a loss of ₹48.8 million. Earnings per share were ₹7.74, compared to a loss per share of ₹3.64.

Meanwhile, HP Adhesives has entered into agreements with banks for short-term and long-term borrowings. As of March 31, 2021, its total borrowings were ₹422 million. Any failure to comply with these agreements could cause termination of the credit facilities or foreclosure of the company’s assets.