KOLKATA, January 17, 2024
Strong financials fuel investor optimism
Debut exceeds expectations, but analysts urge caution.
- Ellenbarrie shares jumped 10% post-IPO.
- IPO was oversubscribed 22.19 times.
- Company’s FY25 profit after tax rose 84%.
- Analysts cite valuation and regional concentration as risks.
Shares of Ellenbarrie Industrial gases had a hot start, and the company’s successful IPO reflects investor confidence in its strong financial performance, which has seen profit after tax jump 84% for FY25.
Ellenbarrie Industrial Gases made a splash on Tuesday, with shares soaring 10% following its market debut. The stock traded at Rs 541.20 on the BSE and Rs 534.60 on the NSE, exceeding even the most optimistic pre-listing expectations.
Listing Details
The Kolkata-based company, known for manufacturing and supplying industrial, medical, and specialty gases, began trading at Rs 492 on the BSE, a 23% premium over the IPO issue price of Rs 400.On the NSE, shares opened at Rs 486, a 21.5% premium. These figures surpassed the grey market premium estimate of Rs 457.
The Rs 852 crore initial public offering, which included a fresh issue of Rs 400 crore and an offer for sale of Rs 452.53 crore, was met with considerable investor interest, resulting in an overall subscription of 22.19 times. NSE data indicates that the IPO received bids for 33.52 crore shares, far exceeding the 1.51 crore shares available.
Investor Participation
Institutional investors showed especially strong interest, with Qualified Institutional Buyers (QIBs) subscribing 64.23 times their allotted quota. The non-institutional investor segment subscribed 15.21 times, while the retail category also demonstrated solid interest, subscribing 2.14 times despite the relatively high investment amount.
On June 23, anchor investors committed rs 255.76 crore, with domestic mutual funds and insurance companies anchoring the book.
Did you know? Ellenbarrie Industrial Gases was founded in 1973.
Financial Performance
Investor enthusiasm seems to be fueled by Ellenbarrie’s robust financials. The company reported an impressive 84% year-on-year increase in profit after tax, reaching rs 83.29 crore for FY25. Revenue also saw a significant rise, increasing by 20% to Rs 348.43 crore. Additionally, the company boasts EBITDA and net profit margins of 36% and 27% respectively, positioning it among the top performers in the sector.
According to Harshal Dasani, Business Head at INVasset PMS, “Ellenbarrie Industrial Gases made an emphatic debut on the bourses, listing at over Rs 500 – a solid 30% premium to its issue price. As one of India’s oldest industrial gas manufacturers, with a 50+ year legacy and nine operational facilities across southern and eastern India, the company commands a strong presence in oxygen, nitrogen, acetylene, and argon production.”
Valuation Concerns
despite the strong debut, analysts advise caution. Is the stock overvalued? “At listing, the stock trades at ~80x FY25 earnings, which is steep on the face of it. But valuation is frequently enough contextual,” dasani said,pointing to Ellenbarrie’s high margins as a supporting factor. Still, the company’s concentrated regional presence and reliance on cyclical industries like steel and healthcare raise some concerns.
“over 85% of Ellenbarrie’s business comes from repeat bulk buyers – which ensures customer loyalty but also heightens dependence. Any slowdown in steel demand or medical oxygen off-take could sharply affect revenue,” Dasani added.
Future Plans
Ellenbarrie plans to use the IPO proceeds to reduce debt, fund a 220 TPD air separation unit at its Uluberia-II plant, and for general corporate purposes. Established in 1973, the company currently serves over 1,800 clients across sectors like steel, pharmaceuticals, petrochemicals, defense, and railways from its eight production facilities.
With a successful debut behind it, investor focus will now turn to Ellenbarrie’s ability to maintain consistent performance and expand beyond its current regional strongholds. “The listing premium reflects investor belief in the company’s profitability and positioning – but maintaining that confidence will hinge on steady performance in a capital-intensive, demand-sensitive industry,” Dasani concluded.
Understanding the Industrial Gas Market
Ellenbarrie Industrial Gases’ remarkable initial public offering (IPO) and subsequent market performance highlight the dynamic nature of the industrial gas sector.this market is crucial for various industries, serving as a backbone for manufacturing, healthcare, and infrastructure across India. Industrial gases are essential for processes like welding,cutting,and medical applications,making the sector relatively stable,but also subject to economic fluctuations.
The industrial gas market is segmented into several key areas: oxygen, nitrogen, argon, and specialty gases. Oxygen and nitrogen are used extensively in steel manufacturing, while argon is common in welding and fabrication. Specialty gases cater to high-tech industries,including electronics and research. Ellenbarrie’s diversified product portfolio, strong financial results, and strategic footprint across Southern and Eastern India have positioned them well.
Market Dynamics and Competitive Landscape
The industrial gas market’s success depends on the interplay of several factors, including the health of the manufacturing and healthcare sectors, regulatory environments, technological advancements, and of course, the overall economic climate. While the demand for medical oxygen and nitrogen often remains consistent, changes in construction and infrastructure spending can quickly influence demand from industrial sectors, like steel and manufacturing.
The competitive landscape is diverse,with both large multinational corporations and several regional players like Ellenbarrie. Competition is based on factors such as pricing, reliability of supply, geographical reach, and the capacity to offer innovative solutions. The company’s established presence as 1973 provides them with a meaningful advantage over new entrants, reflected in its impressive repeat customer base and its ability to secure long-term contracts.
Did you know? Industrial gases are frequently enough produced via cryogenic air separation, a highly efficient process.
As mentioned, Ellenbarrie faces potential challenges such as dependency on cyclical industries; however, it also enjoys opportunities for expansion. For example, India’s growing healthcare sector and rapid infrastructure development should drive demand. Furthermore,increasing industrialization across the nation promises expanded prospects for industrial gas suppliers.
To mitigate risks, Ellenbarrie could explore diversification by broadening its customer portfolio. Focusing on high-growth sectors like pharmaceuticals and expanding its geographic footprint beyond select regions might improve its overall resilience.
A focus on strategic investments, such as the plans to fund a new air separation unit, will be vital to their long-term prospects. Capital expenditure plays a critical role in maintaining and extending the capacity to meet rising demands.
Actionable Insights for Investors
For investors considering Ellenbarrie, here’s what to keep in mind:
- Monitor Market Trends: Keep a close watch on trends in the steel, healthcare, and infrastructure industries.
- Evaluate expansion Plans: Assess the company’s progress toward new facilities, such as the Uluberia-II plant.
- Track Financial Performance: regularly analyze the financial reports for revenue growth, margin stability, and debt management.
- Consider Regional Concentration: Evaluate how the geographic concentration affects overall risk.
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