- 22 Nov 2023
- ICICIdirect
Gandhar Oil Refinery India Limited IPO: All you need to know
The third IPO that opens for subscription this week is Gandhar Oil Refinery India Limited (GORIL). Earlier, we have already covered Tata Technologies IPO and IREDA Limited IPO. GORIL opens for subscription on the 22nd and closes on the 24th of November. In this article, we will look at the various aspects related to GORIL. It will help you decide whether to subscribe or invest in the IPO for the long term.
Gandhar Oil Refinery India IPO: Key Details
Below are the key details related to the GORIL IPO:
- Issue Size: Rs 500.69 crore
- Price Band: Rs 160 - Rs 169
- Issue Details: Fresh Issue of Rs 302 crore + Rs 198.69 crore Offer For Sale (OFS)
- Market Cap: At the upper price band, Rs 1,654 crore
- Minimum Investment: Rs 14,872
Gandhar Oil Refinery India IPO: About the business
Gandhar Oil Refinery India is a leading manufacturer of white oils by revenue with a growing focus on the consumer and healthcare end industries. As of June 30, 2023, their product suite comprised over 440 products, primarily across the personal care, healthcare, and performance oils (PHPO), lubricants, and process and insulating oils (PIO) divisions under the “Divyol” brand.
Their products are used as ingredients by leading Indian and global companies for the manufacture of end products for the consumer, healthcare, automotive, industrial, power, and tyre, and rubber sectors.
They have successfully built relationships with leading oil companies, including SK Lubricants, S-Oil, GS Caltex, and other global base oil suppliers and various Indian oil refining companies for the procurement of base oil, which is their primary raw material.
As of June 30, 2023, their products were sold in over 100 countries across the globe. They catered to over 3,500 customers in FY23, including leading Indian and global companies such as Procter & Gamble, Unilever, Marico, Dabur, Encube, Patanjali Ayurved, Bajaj Consumer Care, Emami, and Amrutanjan Healthcare, supported by their global supplier base and manufacturing operations in India and United Arab Emirates.
Gandhar Oil Refinery India IPO: Industry Overview
The global specialty oil market is characterized by a large product mix and a wide variety of applications across multiple end-user industries. The global specialty oil market value, estimated at $129.90 billion in 2023, is expected to grow to $154.0 billion by 2028, at a CAGR of 3.5%. The specialty oil market is estimated to create an absolute incremental opportunity of ~$24 billion over the next five years driven by increasing consumption of specialty oils in different end-use industries such as consumer, pharmaceuticals, automotive, manufacturing, power generation, and others.
The global white oil market is oligopolistic, with a few players highly active in the market. The top 10 players account for 40-45% of the global white oil market. There is rising demand for premium products based on user awareness, social status, and lifestyle upgrades, particularly personal care, and beauty products.
The Indian specialty oil market is estimated to be $7.33 billion in 2023 and reach $9.30 billion by 2028, at a CAGR of 4.9%. In terms of volume, the market is estimated to be 5,578-kilo tonne (KT) in 2023 and reach 7,098 KT by 2028, at a CAGR of 4.9%.
White oil, the fastest-growing segment of the Indian specialty oil market, is estimated to be worth $0.473 billion in 2023 and reach $0.759 billion by 2028, at a CAGR of 9.9%. In terms of volume, it is expected to reach 1,236 KT by 2028 from 782 KT in 2023, at a CAGR of 9.6%.
Gandhar Oil Refinery India IPO: Listed Peers
GORIL has three listed peers. They are Savita Oil, Apar Industries, and Panama Petrochem. Let us look at the financials of GORIL and listed peers to give you an idea of where the company stands against its peers. We will compare the crucial parameters of FY23 to give you an understanding of the financials of Gandhar Oil Refinery India with respect to peers. Here is the comparison:
- In terms of revenue (FY23), Apar Industries is the largest player, followed by GORIL. However, the bottomline (PAT) is lowest for Gandhar Oil Refinery India. It is a result of the low EBITDA margins.
- The ROE is highest for GORIL and Apar Industries (32.3%). However, Apar Industries wins the race on ROCE, and GORIL comes second.
- Among all these listed peers, GORIL is the only company with debt. The remaining three are debt-free.
- The working capital cycle is lowest for Apar Industries (15 days), followed by GORIL (31) and Panama (64 days).
Gandhar Oil Refinery India IPO: Financials
Let us now look at the most crucial part that one needs to consider while evaluating a new company. Below are the financial numbers of GORIL over the last three financial years:
- The company has reported a revenue of Rs 2,221.00 crore, Rs 3,543.37 crore, and Rs 4,079.44 crore for FY21, FY22, and FY23, respectively. Revenue has grown at a solid 35.54% CAGR in this period. The revenue for Q1FY24 was Rs 1,070.34 crore.
- GORIL's PHPO division is their largest business division and contributed 54.96% of their pro forma consolidated revenue from finished goods sold for FY23 and 56.29% for Q1FY24. The lubricants division and PIO division contributed 25.03% and 9.51%, respectively, of their pro forma consolidated revenue from finished goods sold for FY23.
- GORIL has reported an EBITDA of Rs 248.56 crore, Rs 267.48 crore, and Rs 316.62 crore for FY21, FY22, and FY23, respectively. EBITDA margins for the same period were 12.04%, 7.89%, and 7.76%, respectively. The margins have fallen over this period.
- They have reported a net profit of Rs 161.14 crore, Rs 184.30, and Rs 213.18 crore for FY21, FY22, and FY23. The bottomline has grown slowly compared with the topline.
- For the last three financial years, GORIL has (on the basis of restated data) reported an average EPS of Rs 20.11 and an average RoNW of 31.11%.
- If we attribute annualized FY24 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 6.16.
- Return on Capital Employed (ROCE) for FY22 and FY23 was 46.96% and 41.19%, respectively. ROE for the same period was 39.36% and 32.28, respectively.
- The Working Capital Days have increased from 18.87 days in FY21 to 31.12 days in FY23.
- The percentage of customers placing repeat orders in the quarter ended June 30, 2023, and the FY23, FY22, and FY21 were 83.74%, 69.11%, 68.86%, and 66.37% respectively.
- The debt-to-equity ratio has fallen in recent years. In FY21, the debt to equity ratio was 0.67, which fell to 0.39 in FY23.
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What are the competitive strengths of Gandhar Oil Refinery India Limited?
As per the company, their competitive strength is as below:
- They are the leading market share of the Indian white oils market with significant overseas sales, focused on the consumer and healthcare end industries.
- GORIL has an extensive and diversified customer base and a supplier base comprised of leading oil companies with competitive pricing terms.
- The company has strategically located manufacturing facilities and in-house R&D capabilities.
- It has a resilient, flexible, and scalable business model with a prudent risk management framework.
Risks associated with Gandhar Oil Refinery India
Below are the risks associated with the GORIL:
- They depend significantly on their personal care, health care, and performance oil business division, and downturns in the industries addressed by this business division or an inability to manage sales by the business division effectively, leading to any reduction in revenue from this division could impact the business.
- The company is subject to strict quality requirements standards, and inspections, and the success and acceptance of its products by customers are largely dependent on its ability to meet such quality requirements and standards.
- Delays, interruptions, or reductions in the supply of raw materials to manufacture the products and abrupt fluctuations in the prices of their raw materials may hurt the financials.
- The Promoters and Company are involved in certain regulatory actions and proceedings and investigations in respect of certain criminal proceedings. Any adverse outcome in such matters may adversely affect their business, reputation, financial condition, and results of operations.