The initial public offering (IPO) of HP Adhesives has received an enthusiastic response as the issue has been subscribed 12.58 times so far on the last day of bidding. The IPO saw applications for 3,18,14,450 shares against 25,28,500 shares on offer. The quota reserved for retail bidders was subscribed 56.12 times, whereas HNI allocation fetched 6.72 times. The portion for institutional bidders attracted 100 per cent bids. The issue consists of issuance of fresh equity shares worth Rs 113.44 crore. The price band for the stake sale is set at Rs 262-274 apeice, and investors can bid for a minimum of 50 equity shares and in multiples of 50 thereof.
Should you subscribe? Here’s what brokerages say
Hem Securities Ltd: Subscribe
The company is bringing the issue at price band of Rs 262-274 per share at p/e multiple of 38x on post issue FY21 eps. Company with its wide product portfolio addressing the needs of varied customers across the industry has experienced promoters with its strong management team having domain knowledge. Also, the company with extensive sales and distribution network has strategically located manufacturing facilities with improving operational efficiency. Hence we recommend “Subscribe” on issue .
Choice Broking Ltd: Subscribe with Caution
For HP Adhesives. there is only one comparable peer i.e. Pidilite Industries Ltd. (Pidilite), having product profile similar to the company. Pidilite is the market leader with over 60-65% market share in the retail adhesive market and had TTM revenue of over Rs. 9,000cr as compared to HPAL’s top-line of Rs. 144cr in FY21. Also, profitability of HPAL is lower as compared to Pidilite, thereby generating a caution on the company’s future profitability margin trend. At higher price band of Rs 274, the company is demanding a TTM P/E multiple of 49.2x, which seems to be at premium considering the small business size. Thus, we assign a “Subscribe with Caution” rating for the issue.
Marwadi Shares and Finance Limited: Subscribe
Considering the TTM (Sept-2021) adjusted EPS of Rs 5.57 on a post-issue basis, the company is going to list at a P/E of 49.23 with a market cap of Rs 5, 035 million while its peer namely Pidilite Industries Limited is trading at a P/E of 89.75. We assign a “Subscribe” rating to this IPO as it is a fast-growing adhesives and sealants company with an established brand presence. Also, it is available at a reasonable valuation compared to its peer.