Stallion India Fluorochemicals IPO analysis

Stallion India Fluorochemicals IPO (initial public offering) will open for subscription on January 16, 2025 and close on January 20, 2025. Below is a breakdown of the refrigerant gas seller's strengths, weaknesses and growth prospects to help investors make an informed decision. Stallion India Fluorochemicals IPO in a nutshell Quality: Between FY22 and FY24, Stallion India Fluorochemicals reported an average three-year ROE and ROCE of around 20 and 26 per cent, respectively. Growth: Between FY22 and FY24, its revenue grew by 12 per cent, and net profit declined by 16 per cent annually. Valuation: At the upper price band of Rs 90, the stock will be valued at a P/E and P/B ratio of around 48.3 and 2.4 times, respectively. Overview: Stallion India Fluorochemicals is expected to benefit from the expanding Indian fluorochemicals and specialty gases market, which is projected to grow 16-18 per cent annually from 2024 to 2029. This growth trajectory is supported by rising demand from various industries, including electronics, healthcare, and manufacturing. About Stallion India Fluorochemicals Incorporated in 2002, Stallion India Fluorochemicals primarily sells refrigerant and industrial gases. The business involves debulking (breaking down large quantities of gases into smaller units), blending (mixing gases for specific purposes), and processing (treating them to meet quality standards). The company also sells these gases through ready-to-use pre-filled cans and small cylinders. The gases find application in various industries such as air conditioners, refrigerators, fire safety, semiconductors, automobiles, pharmaceutical and glass bottle manufacturing. The company mainly sells its products in Maharashtra and Delhi, contributing to almost 70 per cent of its revenue in FY24. It derives 82 per cent of the revenue from sales of gases and the rest from other products such as cylinders, spare parts, washer pumps, cans and vacuum pumps. It holds a 10 per cent market share in India's fluorochemicals and specialty gas industry. Strengths of Stallion India Fluorochemicals High entry barriers: The fluorochemicals and specialty chemicals business is tough to enter into. It requires specialised knowledge, significant capital investment and strict compliance with regulations. This keeps competition low. Together, the top four companies hold nearly 78 per cent of the market share. Weaknesses of Stallion India Fluorochemicals Revenue concentration: The company derives almost 76 per cent of the revenue from its top 10 customers. Since it has no long-term agreements with them, losing even a key customer can significantly impact the company's financials. Dependence on imported raw materials: As of FY24, the cost of raw materials (refrigerant gases) made up 83 per cent of the company's revenue. Most of the raw material is imported from China, and their prices are vulnerable to the global supply and demand situation. Any disruption could reduce the company's margins. Stallion India Fluorochemicals IPO details Total IPO size (Rs cr) 200 Offer for sale (Rs cr) 39 Fresh issue (Rs cr) 161 Price band (Rs) 85 - 90 Subscription dates January 16, 17 and 20, 2025 Purpose of issue Working capital requirements and capital expenditure Post-IPO M-cap (Rs cr) 714 Net worth (Rs cr) 296 Promoter holding (%) 67.9 Price-to-earnings ratio (P/E) 48.3