The initial share sale of Gandhar Oil Refinery (India) Ltd kicked off for public subscription on Wednesday (November 22), and it will remain open for bidding till November 24. The company has bagged about ₹150.2 crore in the anchor round ahead of the IPO opening.

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The Mumbai-based firm has allocated 88,88,018 equity shares to anchor investors at ₹169 per equity share. Among them were Morgan Stanley, Societe Generale, Copthall Mauritius Investment, ICICI Prudential Mutual Fund, HDFC Mutual Fund, Whiteoak Capital, Ashoka India Equity Investment Trust, Turnaround Opportunities Fund, Aditya Birla Sun Life Insurance Company, and SBI General Insurance Company.

Meanwhile, shares of Gandhar Oil Refinery were trading with a premium of ₹76 in the unlisted market today. The GMP was ₹62 on Tuesday.

It is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

What analysts recommend

Analysts at most brokerage firms have advised investors to subscribe to the issue given its attractive valuation, strong financials and growing overseas opportunities.

Sushil Finance: Subscribe for medium to long-term

"The issue is priced at a P/BV (price-book value) of 1.67 based on its NAV of ₹101.35 as of June 30, 2023 and is asking for a PE (price-earnings) multiple of 7.11 times on the upper end of the price band and using diluted EPS (earnings per share) for FY23 and a PE of 7.54 times annualising diluted EPS for Q1FY24," said Sushil Finance.

Looking at all the factors, risks, opportunities and attractive valuation, the brokerage recommended cash rich investors to apply for the issue with a medium to long-term view.

Mehta Equities: Subscribe

Mehta Equities believes the company has created a niche place in white oil and serving diversified industrial users, which gives this company an edge against the peers in the segment. Hence, considering all the parameters, the brokerage has recommended investors to 'Subscribe' to the issue for listing only.

Swastika Investmart: Subscribe

As a top producer of white oils, Gandhar Oil Refinery India Limited's goods are marketed in more than 100 countries worldwide and are used as ingredients by prestigious Indian and international businesses. The consumer and healthcare industries are also top priorities for the business, said Shivani Nyati of Swastika Investmart.

However, the analyst noted that this industry is subject to price fluctuations for raw materials and requires high working capital as well. Secondly, it operates in a very competitive market.

"The company is finally launching its first IPO after abandoning plans to do so in 2017. The issue appears to be fairly priced, with a P/E ratio of 7.10 times. So considering all these factors we will assign a subscribe rating to this IPO," Nyati said.

StoxBox: Subscribe for medium to long-term

"With the issue fairly valued at a P/E of 7.1 times at the upper price band based on FY23 earnings, we recommend investors to subscribe to the issue from a medium to long-term perspective," said Prathamesh Masdekar, Research Analyst, StoxBox.

Ventura Securities: Subscribe

Analysts at Ventura Securities said that Gandhar Oil Refinery is a leading manufacturer of white oils by revenue with a growing focus on the consumer and healthcare end-industries. As of June 30 this year, the product suite comprised over 440 products primarily.

The company’s products are used as ingredients by leading Indian and global companies for the manufacture of end products for the various sectors, the brokerage said.

"The segment in the specialty oils sector and the company is India’s largest manufacturer of 204 white oils by revenue in FY23, including domestic and overseas sales and is one of the top five players globally in terms of market share in the CY22," it said with a 'Subscribe' rating on the IPO.

About the offer

The IPO of Gandhar Oil includes a fresh equity issue of ₹302 crore and an offer for sale (OFS) of 1.17 crore equity shares aggregating to ₹198.69 crore by promoters and investors.

Under the OFS, promoters Ramesh Babulal Parekh, Kailash Parekh, and Gulab Parekh will offload 22.5 lakh shares each. Further, Green Desert Real Estate Brokers, Denver Bldg Mat and Décor TR LLC, and Fleet Line Shipping Services LLC will exit the firm by selling the entire shareholding of 30 lakh shares, 10 lakh shares and 10 lakh shares, respectively.

Proceeds from the issue will be used for the payment of debt and for the purchase of equipment and civil work required for expansion in the capacity of automotive oil at the Silvassa plant.

Additionally, the capital raised will also be utilised for expansion in capacity of petroleum jelly and accompanying cosmetic product division at the company's Taloja plant as well as expansion in capacity of white oils by installing blending tanks at the plant and funding working capital requirements.

The company has kept aside 50% of the offer for the qualified institutional bidders (QIBs), 15% for non-institutional investors (NIIs), and the rest 35% will be allocated to retail investors.

Gandhar Oil Refinery is a manufacturer of white oils with a growing focus on the consumer and healthcare end industries. As of June 30, 2022, the company's product suite comprised over 350 products primarily across the personal care, healthcare and performance oils, lubricants and process and insulating oils divisions under the Divyol brand.

Nuvama Wealth Management (formerly known as Edelweiss Securities) and ICICI Securities are the book-running lead managers to the IPO. The registrar is Link Intime India.

The equity shares of the company will be listed on both the exchanges on December 5, as per the IPO schedule.

First Published:Nov 22, 2023 11:02 AM IST