Ellenbarrie Industrial IPO review (May apply)

•    The company is engaged in manufacturing and supplies of industrial gases, having long term association with its customers.
•    The company marked growth in its top and bottom lines for the reported periods.
•    Based on its recent financial data, the issue appears aggressively priced.
•    The company enjoys virtual monopolistic situation being an Indian manufacturer of industrial gases.
•    Though its aggressively priced, well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Ellenbarrie Industrial Gases Ltd. (EIGL) is in an industry dominated by multinational organizations. EIGL is one of the oldest operating industrial gases companies in India, with a rich legacy of over 50 years. (Source: F&S Report) It manufactures and supplies industrial gases including oxygen, carbon dioxide, acetylene, nitrogen, helium, hydrogen, argon and nitrous oxide, as well as dry ice, synthetic air, fire-fighting gases, medical oxygen, liquid petroleum gas, welding mixture and speciality gases catering to a wide range of end-use industries. It is one of the important manufacturers of industrial gases in East India and South India, and the market leader in the states of West Bengal, Andhra Pradesh and Telangana, each in terms of installed manufacturing capacity, as of March 31, 2025. (Source: F&S Report)

Its service offerings include project engineering services, where it leverages extensive technical know-how for the design, engineering, supply, installation and commissioning of tonnage air separation units ("ASUs") and related projects on a turnkey basis for customers across several sectors. The company also offers turnkey solutions involving medical gas pipeline systems, where it assists healthcare facilities in designing, installing, commissioning, operation and maintenance of medical gas pipeline systems. In addition, it supplies products and medical equipment to healthcare facilities, which include anesthesia workstation, spirometers, ventilators, sterilizers, bed-side monitors, and lung diffusion testing machines.

EIGL is present across multiple modalities of supply, namely onsite, bulk and packaged, whereby it offers products through a combination of supply mechanisms, including pipelines connected to customers, cryogenic tankers and cylinders. It has a robust distribution network, with the third highest number of transport tankers, cylinders and customer installations in India. (Source: F&S Report).  Its portfolio of industrial and medical gases serves critical functions across industries for public and private entities, such as steel (Jairaj Ispat Limited, Rashtriya Ispat Nigam Limited, and a major steel manufacturing company in India, among others); pharmaceuticals and chemicals (Dr. Reddy's Laboratories Limited, Laurus Labs Limited, among others); healthcare (All India Institute of Medical Sciences, West Bengal Medical Services Corporation Limited , Chittaranjan National Cancer Institute, among others); engineering and infrastructure (a major construction company in India, a major electrical equipment manufacturing company in India, GMM Pfaudler Limited, and Air India Engineering Services Limited, among others); railways, aviation, aerospace and space (Jupiter Wagons Limited, multiple railway workshops across India and a space research organization, among others); petrochemicals (major oil marketing public sector undertakings in India); and defence (Hindustan Shipyard Limited, among others), which has enabled it to diversify revenue streams and limit concentration within specific industries. 

Further, it supplies products to the Indian armed forces, including, at the Indian Air Force bases in East, South and West India, the Eastern Naval Command bases and multiple Government-owned laboratories. The company also supplies products to multiple railway workshops and railways hospitals across East and South India. It operates nine facilities across East, South and Central India, of which five facilities are located in West Bengal, two in Andhra Pradesh, one in Telangana and one in Chhattisgarh, as of March 31, 2025. These facilities include three bulk manufacturing plants along with cylinder filling stations, two standalone cylinder filling stations, two onsite pipeline facilities in Kharagpur, West Bengal at the site of one of customers, a major steel manufacturing company in India, one onsite facility in Kurnool, Andhra Pradesh at the site of its customer, Jairaj Ispat Limited ("Jairaj") and one onsite facility in Nagarnar, Chhattisgarh at the site of one of customers, a steel manufacturing company in India owned by the Government of India. As of March 31, 2025, it had 281 employees on its payroll and additional 85 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of fresh equity shares issue worth Rs. 400.00 cr. (approx. 10000000 equity shares at the upper cap), and an Offer for Sale (OFS) of 11313130 equity shares (worth Rs. 452.53 cr. at the upper cap). Thus, the overall IPO size is for 21313130 shares worth Rs. 852.53 cr. at the upper cap. The company has announced a price band of Rs. 380 – Rs. 400 per equity shares of Rs. 2 each. The issue opens for subscription on June 24, 2025, and will close on June 26, 2025. The minimum application to be made is for 37 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 14% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 210.00 cr. for repayment/prepayment of certain borrowings, Rs. 104.50 cr. for setting up of an air separation unit at its Uluberia -II plant, and the rest for general corporate purposes. 

The three joint Book Running Lead Managers (BRLMs) to this issue are Motilal Oswal Investment Advisors Ltd., IIFL Capital Services Ltd., and JM Financial Ltd., while KFin Technologies Ltd., is the registrar to the issue. Motilal Oswal Financial Services Ltd., and JM Financial Services Ltd. are the syndicate members.

Having issued/converted initial equity shares at par, the company issued bonus equity shares in the ratio of 1 for 17 in March 2006, and 1 for 3 in June 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 5.29, and Rs. 10.49 per share. 

Post-IPO, its current paid-up equity capital of Rs. 26.19 cr. will stand enhanced to Rs. 30.45 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 6089.95 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 223.71 cr. / Rs. 28.14 cr. (FY23), Rs. 290.20 cr. / Rs. 45.29 cr. (FY24), and Rs. 348.43 cr. / Rs. 83.29 cr. (FY25). 

For the last three fiscals, the company has posted an average EPS of Rs. 4.69 and an average RoNW of 20.83 %. The issue is priced at a P/BV of 15.70 based on its NAV of Rs. 25.48 as of March 31, 2025, and at a P/BV of 7.69 based on its post-IPO NAV of Rs. 52.05 per share (at the upper cap). 

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 73.13. Based on FY24 earnings, the P/E stands at 134.23. Thus, the issue is aggressively priced. 

The company has reported PAT margins of 12.58% (FY23), 15.61% (FY24), 23.90% (FY25), and RoCE margins of 6.07%, 10.93%, 13.71% respectively, for the referred periods.

According to the management, their projects are having around 25% power cost and they are working on renewable energy aspect to reduce their power cost and hopes to arrive at some favorable situation by around FY2026 end.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a dividend policy in July 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Linde India as their listed peer. It is trading at a P/E of 124 (as of June 20, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
The three BRLMs associated with this offer have handled 69 IPOs in the last three fiscals including the ongoing one, out of which 16 issues closed below the issue price on listing date.