Odisha-based fertiliser company Paradeep Phosphates on Friday filed a draft red herring prospectus (DRHP) with capital market regulator Securities and Exchange Board of India (Sebi) to float an initial public offer (IPO).

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CNBC-TV18 had reported on Friday that the company would file its DRHP this week.

The company is involved in the production and marketing of complex phosphatic fertilisers. It is a joint venture between Adventz Group Company, Zuari Agro and Maroc Phosphates, which is a wholly-owned subsidiary of Morocco's OCP.

The proposed IPO of Paradeep Phosphates is estimated at Rs 2,205 crore and is a combination of fresh and existing shares. The public offer comprises fresh issuance of shares worth Rs 1,255 crore, and an offer for sale (OFS) of shares worth Rs 950 crore by existing shareholders, according to the DRHP.

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Existing shareholders Zuari Maroc Phos and government of India will be participating in the OFS. Government of India, which owns a stake of about 19.5 percent in Paradeep Phosphate, is expected to raise around Rs 800 crore through the OFS. Zuari Agro is expected to raise about Rs 50-75 crore.

Proceeds from the IPO will be utilised by the company to part finance the acquisition of a Goa fertilizer plant from Zuari Agro Chemicals, and towards the repayment or prepayment of borrowings.

Financials

Paradeep Phosphates' profit grew 16 percent and revenue 23 percent in the financial year ended March 2021. The company saw positive cash flow of Rs 87 crore after witnessing negative cash flow in the past two years.

Borrowings came down 45 percent in the previous financial year, its profit rose 21 percent over revenue growth of 8 percent, while its borrowings declined 36 percent.

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The company has highlighted the following among its strengths:

Paradeep Phosphates is well-positioned to capture favourable dynamics of the domestic fertiliser industry supported by conducive government regulations.

It is the second largest manufacturer of phosphatic fertilizers in the country. The company is driving raw material efficiency through backward integration of facilities and effective sourcing.

It has a secure and certified manufacturing facility and infrastructure, as well as unutilised land available for expansion.

The company has an established brand name backed by an extensive sales and distribution network.

It has a strong parentage, experienced management team and prominent shareholders.

The company has also mentioned the following risk factors:

Its business is dependent on the performance of the agricultural sector in which its fertilisers are used.

Any developments affecting the performance of the agricultural sector are likely to affect its business, the results of its operations and its financial condition.

The company's business is subject to climatic conditions and is cyclical in nature. Seasonal variations and unfavourable local and global weather patterns may have an adverse effect on the business.

The fertiliser industry in India is a regulated industry. Any change in government policies towards the agriculture sector or a reduction in subsidies and incentives provided to farmers could adversely affect the company's business and the results of its operations.

The company will only one manufacturing facility until the completion of the Goa transaction. Unplanned slowdowns or shutdowns in its manufacturing facility or underutilisation of its manufacturing capacities could have an adverse effect on its business.

The extent to which the coronavirus pandemic affects its business will depend on future developments, which are uncertain and cannot be predicted.

Any delay in acquiring the Goa facility may have an adverse effect on its business.

There are outstanding litigations involving the company, its promoters and its directors.

(Edited by : Jomy Jos Pullokaran)

First Published:Aug 14, 2021 3:48 PM IST