Ellenbarrie Industrial Gases IPO analysis

Ellenbarrie Industrial Gases IPO (initial public offering) will open for subscription on June 24 and close on June 26, 2025. Below is a breakdown of the industrial gas producer’s strengths, weaknesses and growth prospects to help investors make an informed decision.

Ellenbarrie Industrial Gases IPO in a nutshell

• Quality: During FY22-24, the company reported an average return on equity (ROE) and return on capital employed (ROCE) of around 13 and 14 per cent, respectively.
• Growth: Between FY22 and FY24, its revenue and profit after tax grew around 23 and 72 per cent per annum, respectively.
• Valuation: At the upper price band of Rs 400, the stock is expected to be valued at a P/E and P/B ratio of around 68 and 8 times, respectively. In comparison, its only listed peer, Linde India, is trading at a P/E of 125.7 times and a P/B of nearly 15 times.
• Overview: The company, an industrial gas supplier, stands to benefit from rising steel capacity, semiconductor fabs, green hydrogen/ammonia projects that are likely to raise India's gas demand. However, high power costs and operational risks could impact margins and earnings stability.

About Ellenbarrie Industrial Gases

Founded in 1973, Ellenbarrie makes industrial and medical gases, producing oxygen, nitrogen, argon, CO₂ and speciality mixes at eight plants, anchored by a 1,250-tonne per day oxygen unit. Bulk and packaged gases supplied to steel, pharma, chemicals, and healthcare clients generated 84 per cent of its FY24 revenue.

Strengths of Ellenbarrie Industrial Gases

• Robust distribution network: With one of India’s largest fleets of cryogenic tankers, over 35,000 cylinders, 1,445 dealers and dedicated onsite pipeline plants, Ellenbarrie can deliver gases via pipeline, bulk liquid or cylinders, offering customers flexibility and rapid reach.
• Sticky customer base: Long-tenor onsite and bulk contracts plus company-owned storage at customer sites drive repeat business. About 92 per cent of FY24 gas revenue came from repeat customers.

Weaknesses of Ellenbarrie Industrial Gases

• Small market share: Ellenbarrie’s revenue share is just 2-3 per cent versus Linde’s 31  per cent and Inox Air’s 22  per cent, limiting pricing power and making nationwide brand visibility harder to sustain against larger competitors.

Risk report

Company and business

• Will the company be able to scale up its business?

Yes. The demand for industrial gases is growing and the company’s new capacity is largely funded, which should help it scale up.

• Does the company have recognisable brands with client stickiness?

Yes. Ellenbarrie’s brand translates into sticky revenues: repeat customers accounted for 92 per cent of FY24 gas sales and the top 10 clients have stayed with the company for an average of nine years. In addition, its onsite pipeline contracts lock buyers in for up to 15 years.

• Does the company have a credible moat?

No. Other players hold market dominance. However, the company’s long-tenor contracts and its own storage equipment for bulk supply deals create switching costs for customers, giving it a unique advantage.

Financials

• Was the company's operating cash flow positive during the last three years?

Yes. The company's operating cash flow has been positive from FY23.

• Is the company free from reliance on huge working capital for day-to-day affairs?

Yes. Ellenbarrie’s core gas business converts cash quickly and keeps inventory thin, so it is largely free from heavy working-capital dependence for routine operations. However, rising receivables and provisions for credit losses hint at slower collections from a few clients.

• Can the company run its business without relying on external funding in the next three years?

Yes. The company can comfortably run and complete the Uluberia-II project, without external funding for the next three years.

Assessing an IPO requires a careful evaluation of a company's strengths, weaknesses, and growth potential, just like we've outlined for Ellenbarrie Industrial Gases. But wealth creation can only be achieved through a well-researched, balanced stock portfolio.

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Disclaimer: This story is not a stock recommendation. Investors should do their due diligence before investing.

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