Gandhar Oil Refinery makes robust debut; stock zooms 104% over issue price

Gandhar Oil Refinery makes robust debut; stock zooms 104% over issue price

Gandhar Oil Refinery (India) has made a robust stock market debut, with shares listed at Rs 298, a 76 per cent premium over its issue price of Rs 169 per share on the National Stock Exchange (NSE) on Thursday. The stock of lubricants company started trade at Rs 295.40 on the bourses.

Post listing, the stock price of the company more-than-doubled or zoomed 104 per cent to Rs 344.60 on the BSE. At 10:02 AM; it was quoting at Rs 328.85, a 95 per cent premium over its issue price. In comparison, the S&P BSE Sensex was down 0.33 per cent at 66,684.

The initial public offer (IPO) of Gandhar Oil Refinery had received good response from the investors. The issue was subscribed 65.63 times. The portion reserved for qualified institutional buyers (QIB) got subscribed 129.06 times, while non-institutional investors (NIIs) portion subscribed 64.34 times and retail segment by 29.93 times, data shows.

Gandhar Oil Refinery is a leading manufacturer of white oils by revenue with a growing focus on the consumer and healthcare end-industries. 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. The white oil market is the fastest growing segment in the specialty oils sector.

The company plans to expand capacities at Taloja/Silvassa by 100,000 kL/18,840 kL and is focused to grow market share (through expansion of distribution network and entering into new geographies) bodes well for the company’s growth, Sharekhan said in its IPO note.

White oil, a major raw material used in the manufacturing of consumer and healthcare products, is anticipated to be the fastest-growing segment in the industry over the next few years. The company derives a large portion of revenue from the white oil segment, i.e. PHPO, making it a highly attractive proposition. Additionally, the specialty oil industry presents substantial barriers to entry due to the time required for customer empanelment. Additionally, the company is looking to expand its existing capacities at Taloja Silvassa plant which augurs well for the company, analysts at Indsec Securities and Finance had said in IPO note.

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.

The company catered to over 3,500 customers in the financial year 2023, including leading Indian and global companies such as Procter & Gamble (P&G), 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.

Valuation seems reasonable when compared to peers given Gandhar Oil Refinery India's proven track record of robust earnings growth (PAT CAGR of 38 per cent over FY21-23) and high RoE of 32 per cent. Moreover, the company is the largest manufacturer of white oil in India and among the top five players globally in terms of market share.