Incorporated in 2016, Platinum Industries is a multi-product company in the business of manufacturing stabilizers. The company’sbusiness segment includes PVC (polyvinyl chloride) stabilizers, CPVC (chlorinated polyvinyl chloride) additives and lubricants. It operates in the speciality chemicals industry. Its products find application in PVC pipes, PVC profiles, PVC fittings, electrical wires and cables, SPC (stone plastic composite) floor tiles, rigid PVC foam boards, and packaging materials. Krishna Dushyant Rana, Managing Director, and Parul Krishna Rana, Executive Director, are the promoters of the company.

PVC stabilizers formed 51.17% of the total revenue while CPVC additives formed 7.58%, lubricants formed 26.75%, trading 13.6% and others 0.9% in FY 2023. Trading sales included associated commodity chemicals such as titanium dioxide, waxes, and zeolite PVC and CPVC resin and others included titanium dioxide compound, lead stearate, CPVC resin compounds, and export incentives.Domestic sales were 94.46% and exports was 5.54% in FY 2023.

PVC stabilizers are chemical additives used in the production of PVC based products to enhance the performance and durability of PVC. These stabilizers enhance the thermal stability of PVC by allowing it to withstand heat without significant degradation or loss of physical properties. They prevent the discoloration, embrittlement and degradation of PVC caused by UV exposure, ensuring the longevity and aesthetics of PVC-based applications. They improve the mechanical properties of PVC, such as its impact strength, tensile strength, and flexibility. PVC stabilizers and, thus, contribute to the overall durability and performance of PVC products, making them suitable for a wide range of applications.

CPVC additives, or chlorinated polyvinyl chloride additives, are chemical substances added to enhance the properties and performance of CPVC materials. CPVC additives improve the heat and chemical resistance of CPVC materials, allowing them to withstand higher temperatures compared to standard PVC and withstand exposure to a wide range of chemicals and corrosive substances. This makes CPVC suitable for applications that involve hot water handling such as plumbing systems, industrial pipes, and fire sprinkler systems and for use in chemical processing plants, laboratories, and industrial applications where resistance to chemicals is crucial. CPVC additives improve the mechanical strength and toughness of CPVC materials. They enhance the impact resistance, tensile strength, and dimensional stability, making CPVC suitable for demanding applications where durability and strength are required.

Lubricants (PE wax and lubpacks) are an integral part of PVC formulation. Lubricants are used for the reduction of the friction between the molecules of PVC by lowering the melt viscosity. It also helps in the metal release effect, mould release effect, and reduction in the friction.

The company’s manufacturing facility is located at Palghar, Maharashtra,and is spread across an aggregate parcel of land admeasuring about 21,000 sq. ft. Lead based stabilizers’ installed capacity is 7875 tonnes, while non-lead-based stabilizers’ installed capacity is 19075 tonnes, CPVC additives installed capacity is 5376 tonnes, and lubricants’ installed capacity is 3850 tonnes. The manufacturing facility has obtained ISO 9001:2015 certification for quality management systems and is strategically situated close to JNPT (Nhava Sheva) Port, Maharashtra (JNPT), from where it receivessupply of imported raw materials as well as exports its finished goods to the international market. In addition to its manufacturing facilities, it has a dedicated in-house R&D facility located at Palghar, Maharashtra. It also has a technical collaboration agreement with HMS Concept EU, a sole proprietorship concern of Dr Horst Michael Schiller, who is ascientist with over three decades of experience in the PVC industry.

The company, through its subsidiary Platinum Stabilizers Egypt LLC, intends to establish a project in Egypt, to be spread over an aggregate parcel of land admeasuring about 10,000 sq. mt., to venture into manufacturing of PVC stabilizers (both lead- and non-lead-based), scheduled to commission production by Q4 of FY 2025. Further, it is in the process of setting up a new manufacturing facility at Palghar, Maharashtra, spread across an aggregate parcel of land admeasuring about 14,800 sq. mt.,to be used to manufacture of PVC stabilizers (non-lead based). The installed capacity of the facility is proposed to be an aggregate of 60,000 mtpa of PVC stabilizers (non-lead-based). The company intends to start commercial production at this facility by Q4 of FY2025.

The primary raw materials used in the manufacture of stabilizers include stearic acid, litharge and polyethylene waxes. It purchases raw materials from third party to fill the gaps in the requirements based on production needs for quantity or if the pricing is more favourable. Other raw materials it uses in manufacturing process are primarily sourced from third party suppliers, except metallic stearates, purchased from promoter group entities, i.e., Platinum Polymers and Additives. It does not enter into long-term supply agreement with its vendors. It also imports a few raw materials including stearic acid, polyethylene wax lumps and flakes, titanium dioxide, chlorinated polyethylene, CPVC resins, and others from Indonesia, Japan, China, Germany, and the USA.

The Offer and the Objects

The offer comprises fresh issue of up to 13761225 equity shares aggregating Rs 235 crore at the upper price band of Rs 171 and Rs 223 crore at the lower price band of Rs162.

The company proposes to utilize the net proceeds from the fresh issue towards investment in platinum Stabilizers Egyptfor financing its capital expenditure requirements of Rs 67.72 crore to set up the proposed facility in Egypt, funding of capital expenditure of Rs 71.26 crore to set up the proposed facility in Palghar, funding working capital requirements of Rs 30 crore, and the balance towards general corporate expenses.

The total estimated cost of the Egypt project is Rs 73.75 crore, while that of the Palghar project is Rs 79.27 crore.Both Egypt and Palghar facilities are expected to start commercial production in February 2025.

Strengths

The company is the third largest domestic player of PVC stabilizers in terms of sales, with an around 13.0% market share in FY 2023. The India PVC stabilizers manufacturing landscape is characterized with top 3 manufacturers accounting for 50-55% of the market by value and the balance is fragmented with large number of unorganized players.The top 2 other players are Baerlocher and Goldstab.

The company provides customized products and solutions directly to its customers and through its network of distributors. It undertakes trading activities of associated commodity chemicals such as titanium dioxide and PVC and CPVC resin. It exports products to other countries also.

The EBIDTA grew from Rs 0.17 crore in fiscal 2018 to Rs 50.94 crore in FY2023, registering a CAGR of 158.43 % in six years, because of increase in sales of high margin products, i.e., lead-free products, introduction of new products i.e. CPVC additives, increase in production capacities, and control on raw material purchase costs.

The company diversifies its product portfolio in such way that its products are customised for the customers and scales for each of the geographies it serves. It has varied products for the PVC industry, with multiple product categories such as low lead-based stabilizers, calcium zinc-based stabilizers, and organic-based stabilizers. Within each product category, there are multiple grades depending on application and customer requirements.

Barriers to entry in the speciality chemical industry are high. The specialised nature of products leads to significant differentiation. R&D requirements, technical know-how, capital intensity service capabilities, customer relationships, and engineered or regulated specifications also create barriers to entry.

India is the world‘s sixth-largest chemical manufacturer and accounted for 3.4% of worldwide chemical production in CY2023. The Indian chemical industry was valued at US$252 billion in FY2023 and is expected to grow to US$349 billion by CY2027.

The global PVC stabilizer market is to grow at 3.7% CAGR from 1.52 mt in CY2023 to 1.76 mt by CY2027 owing to the growth in demand for PVC in the magnitude of industry verticals likewise automotive, construction, packaging, and electrical & electronics. The global PVC demand is expected to grow at CAGR of 3.8% from around 50 mt in CY2022 to around 58 mt by CY2026.

The India PVC stabilizer market was at 96 thousand tonne in FY2023 and is expected to grow at 7% CAGR to reach 126 thousand tonnesby FY2027. The India market size by value was at US$224.7 million in FY2023.

Domestic PVC demand is projected to increase in FY2024 and grow over the next four years, primarily due to rising demand from the pipes and fittings segment.

Weaknesses

The company is dependent on a few customers for a major part of its revenue. The Top 5 customers formed 77.85% of total revenue, while top 10 customers formed 86.49% of total revenue in FY 2023.

The company is required to obtain, renew, or maintain certain statutory and regulatory permits and approvals required to operate its business. It it fails to do so in a timely manner or at all, its business, financial conditions, results of operations, and cash flows may be adversely affected.

The capacity utilization for lead-based stabilizers was just 27.7%, while capacity utilization for non-lead-based stabilizers was 25.64%, CPVC additives 12.48% and lubricants 21.49% in FY 2023.

The company is dependent on demand from the industries where its products find application, such as PVC pipes and tubes, PVC profiles, PVC fittings, and electrical wires and cables. Any downturn in such industries could have an adverse impact on the company’s business and results of operations

The company operates in a regulated and evolving industry and its products and offerings are subject to changing laws, rules and regulations and legal uncertainties, thereby adversely affecting its business and financial performance

The company had reported negative cash flow from operation in FY2022.

Improper storage, processing and handling of raw materials and finished products may cause damage to its inventory leading to an adverse effect on business, results of operations and cash flows.

Activities involving its manufacturing process can be dangerous and can cause injury to people or property in certain circumstances.

Reagens India Plastic Additives Private Limited (parent is Italy-based Reagens Group), established a factory in CY2020, with an annual capacity of 42,000 tonnes of PVC stabilisers, while the overall annual capacity including other products such as lubricants and metal soaps at 59,000 tonnes. Reagens India Plastic Additives has started domestic sales but is yet to scale up sales as compared to the top 3 manufacturers in India.

Valuation

For FY2023, consolidated sales were up by 23% to Rs 231.48 crore.The OPM rose 980 bps to 23.3%, leading to 112% increase in OP to Rs 53.86 crore.OIwas almost flat at Rs 1.07as compared to Rs 1.08 crore, while interest cost increased 37% to Rs 2.17 crore and depreciation rose 105% to Rs 1.83 crore. PBT increased 113% to Rs 50.94crore. Tax expenses were 115% higher at Rs 13.35 crore. Net profit increased 112% to Rs 37.58 crore.

FY2023 EPS on post-issue equity works out to Rs 6.8. At the upper price band of Rs 171, P/E works out to be 25.1

As of 23 February 2023, its listed peers such as Supreme Petrochem trades at FY2023 P/E of 28.4 and Apcotex Industries trades at FY 2023 P/E of 22.8.

For FY2023, Platinum Industries’Ebitda margin and ROE stood at 23.3% and 90%, respectively, as compared to 12.5% and 27.0% for Supreme Petrochem and 14.7% and 22.7% for Apcotex Industries.