Closing Today: Should You Subscribe to Stallion India Fluorochemicals IPO

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Stallion India Fluorochemicals Ltd (SIFL) launched its initial public offering (IPO) on January 16, 2025, with bidding set to close on January 20, 2025. The IPO, carrying a grey market premium (GMP) of 48%, has received a solid response from investors.

However, one should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Stallion India Fluorochemicals IPO Details

  • Issue Details: Mainstream
  • Issue Size: Rs 199.45 crore 
  • Fresh Issue: Rs 160.73 crore
  • Offer for Sale: Rs 38.72 crore
  • Price Band: Rs 85 – Rs 90
  • Lot size: 165 shares
  • Listing Date: January 23, 2025

Stallion India Fluorochemicals IPO Subscription Status

The IPO of Stallion India Fluorochemicals has seen significant demand, achieving a total subscription rate of 32.23x times by January 17, 2025, the second day for bids.

Non-institutional investors led the surge, oversubscribing their allotted shares by an impressive 77.16 times. Retail investors also showed strong interest with a 31.22 times subscription, while the qualified institutional buyers (QIBs) portion was booked 31%.

Overview of Stallion India Fluorochemicals Ltd

SIFL specializes in the sale of refrigerant and industrial gases, along with related products. Its core operations include debulking, blending, processing these gases, and providing pre-filled cans and small cylinders or containers.

SIFL operates four facilities across Maharashtra, Rajasthan, and Haryana. Its products are utilized in a variety of industries, including air conditioning and refrigeration, fire safety, semiconductor manufacturing, automobile production, pharmaceuticals, medical applications, glass bottle manufacturing, aerosols, and spray foam.

Stallion India Fluorochemicals Key Strengths

  • Strong Financial Growth: SIFL has showcased impressive financial performance in FY24, with a 3% increase in operational revenue, a 71% rise in EBITDA, and a 52% growth in net profit compared to FY23.
  • Improving Profitability Margins: SIFL has significantly improved its EBITDA margin from 6.9% in FY23 to 11.3% in FY24, and further to 18.04% in H1FY25. Similarly, the net profit margin rose from 4.31% in FY23 to 6.26% in FY24, reaching 11.7% in H1FY25.
  • Healthy Return Ratios: Despite its relatively smaller scale of business operations, SIFL boasts a Return on Equity (RoE) of 12.54% and a Return on Capital Employed (RoCE) of 13.96% in FY24, placing it among the best in the industry.

Stallion India Fluorochemicals Risk Factors

  • Client Concentration: SIFL faces significant client concentration risk, with a large portion of its revenue depending on a few key clients. As of September 30, 2024, the top ten customers contributed 77% of total revenue.
  • Legal Risks: SIFL and Sanmei have a history of contracts for gas supplies. Sanmei, through its legal representative, has demanded Rs 9.49 crore. Any legal or regulatory proceedings, if initiated, could result in adverse outcomes that may impact the firm’s reputation, financial health, and cash flow.
  • Cash Flow Challenges: SIFL has reported negative cash flow from operating activities in H1FY25, FY24, and FY23. Persistent negative cash flows may hinder operational efficiency and financial stability.

Conclusion: Should You Subscribe to Stallion India Fluorochemicals IPO? 

SIFL holds a strong position in the fluorochemicals market, with a 10% market share. Its focused business strategy and ongoing capital expenditure plans provide significant potential for earnings growth in the coming years.

With increasing demand fuelled by initiatives like "Make in India" and growth in key sectors such as Semiconductors, Electronics, Defence Manufacturing, and Pharma Equipment, they are prioritizing the expansion of their portfolio with environmentally friendly solutions like Hydro Fluoro-Olefins (HFOs) and specialty gases.

With a P/E multiple of 35 based on FY24 earnings, the IPO seems reasonably priced. Additionally, the grey market premium (GMP) for the IPO suggests a strong debut on the stock exchanges.

SIFL is well-positioned to benefit from industry tailwinds and business expansion opportunities. However, its future growth hinges on how effectively it utilizes the IPO proceeds and executes its expansion plans. Considering all these aspects, investors may consider subscribing to the IPO, keeping in mind that the company's ability to deliver on these fronts will be crucial to its long-term performance.

For a deep dive into other IPOs, explore: IPO Corner on Liquide