Mumbai-based Gandhar Oil Refinery (India) Ltd is expected to start the first day first trade with around 30-40% gains on Thursday, November 30, analysts said. They attributed the expected strong listing to its healthy subscription numbers, attractive valuation, strong financials and growing overseas opportunities.

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The ₹500 crore initial public offering (IPO) of Gandhar Oil Refinery, one of the largest manufacturers of white oils by revenue in the financial year 2023, was subscribed 65 times at close.

The non-institutional category's subscription rate stood at 64.34 times, while the allocation for qualified institutional bidders was booked 129 times. The retail portion of the issue was subscribed 30 times.

"Gandhar Oil received better-than-expected subscription demand on the back of reasonable IPO valuation when compared to its peers, which are trading high, scalable business model and enjoying a dominant market share with a niche product portfolio of 440 products catering to diverse consumers and healthcare worldwide," said Rajan Shinde, Research Analyst at Mehta Equities.

Considering the subscription figures and rationale to the offer, Shinde had recommended investors to subscribe for listing gains only. "Hence, we believe a healthy listing gain between 30-40% possible against the issue price of ₹169 per share giving a good room of listing gains due to valuation gap between listed peers and Gandhar Oil."

"With white oil expected to be the fastest-growing segment, given the favourable outlook for end-use industries, Gandhar Oil's comprehensive and diversified product portfolio and service offerings will enable the company to insulate its revenue growth," said Prathamesh Masdekar of StoxBox.

Masdekar said the issue will be fairly valued at a price-earnings of 7.1 times at the upper price band based on the FY23 earnings. He recommended investors who have received allotment to hold their shares with a medium-to-long-term perspective.

Ahead of Gandhar Oil's market debut, the company's shares are fetching a premium of ₹65 in the grey market. The IPO was priced in the range of ₹160-169.

The IPO comprised of a fresh equity issue of ₹302 crore and an offer for sale (OFS) of 1.17 crore shares. Under the OFS, promoter-selling shareholders Kailash Parekh, Gulab Parekh, and other selling shareholders Green Desert Real Estate, and Fleet Line Shipping among others offloaded shares.

The company will not receive any proceeds from the OFS portion. It plans on using the fresh issue proceeds to invest in its overseas joint venture via a loan to finance the repayment of a loan facility availed by the JV named Texol.

The proceeds will also be utilised to fund expansion and capex at its plants in Taloja and Silvassa, along with other working capital requirements.

Gandhar is a producer of Specialty oils and has 440 products across personal care, healthcare, performance oils, Lubricants, and process and insulating oils.

Aside from being the largest manufacturer of white oils, it is also among the top five players globally in terms of market share in the calendar year 2022.

First Published:Nov 29, 2023 1:41 PM IST