Stallion India Fluorochemicals IPO

1. Company fundamentals Stallion India Fluorochemicals Limited, established in 2002, specializes in the sale of refrigerant, industrial gases, and other related fluorochemical products. The company's primary business includes debulking, blending, and processing refrigerant and industrial gases, offering products such as pre-filled cans and small cylinders/containers. Between FY 22 and FY 24, Stallion India Fluorochemicals reported an average three-year Return on Equity (ROE) and Return on Capital Employed (ROCE) of approximately 20% and 26%, respectively. The net profit registered a sharp rise of 51.6% year-on-year (YoY) from ₹9.75 crore in FY 23 to ₹14.78 crore in FY 24. The company also has multiple manufacturing facilities across India with 4 facilities located in Khalapur (Maharashtra), Ghiloth (Rajasthan), Manesar (Haryana) and Panvel (Maharashtra). 2. Issue size and split The size of the IPO is small at Rs. 199.45 crore and the minimum investment is Rs. 14,850 for retail investors. The IPO has majority fresh issue of 1.79 crore shares aggregating to Rs 160.73 crores and Offer For Sale (OFS) component of 0.43 crore shares aggregating to Rs 38.72 crores. This is a green flag since we know that the promoters are not offloading too many shares. 3. Brand name and experienced Management Stallion is a prominent player in the flourochemicals market with 10% market share. The company has a professional management and experienced leadership of the promoter Mr. Shazad Sheriar Rustomji. He has a good understanding of supply chain logistics with over 3 decades of experience in the field of refrigerants and specialty chemicals. 4. Valuation The company is fairly priced with a P/E ratio of 48x, based on FY24 earnings post the equity share issuance. It is a small cap company with a market cap of around Rs. 714 crore The valuation is reasonable, given the company's past growth, future growth prospects, and the profitability of the company. 5. Clear Use of Proceeds The proceeds from the IPO will be used to support increased working capital needs, fund capital expenditures for its semiconductor and specialty gas debulking and blending facilities in Maharashtra, finance capital expenditures for its refrigerant debulking and blending facility in Andhra Pradesh, and to cover general corporate expenses. The company will also not receive any proceeds from the OFS, as those will go to the selling promoter after deducting offer-related expenses and applicable taxes. 6. Strong underwriting team Reputable underwriters or investment banks backing the IPO signal credibility and thorough due diligence. Sarthi Capital Advisors is the sole book running leaf manager of the IPO, while Bigshare Services is the registrar for the issue. 7. QIB Subscription and Anchor Investors Observe the subscription momentum throughout the application time to see how qualified investors respond to the issue since it shows that the IPO is considered to be worthy, by people more knowledgeable than retail investors. On day 2 of the IPO, the QIB portion is undersubscribed with only 0.31x subscription showing lack of institutional buyers. Anchor investors also showed less interest in the IPO with only six anchor investors in the anchor book namely Saint Capital Fund, Ashika Global Securities, Craft Emerging Market Fund, Mint Focussed Growth Fund, Ashika India Select Fund, and Leading Light Fund. Verdict: This IPO is balanced but mixed with both pros and cons, you can invest money according to your risk appetite. But if you're specific about getting listing gains, it's suggested to watch the GMP till the closing of the IPO and then apply.