Neptune Petro NSE SME IPO review (May apply)

•    The company is engaged in the manufacturing, marketing and trading of variety of bitumen and its related products.
•    Its top and bottom lines galloped from FY23 onwards. Many folds rise in bottom lines for FY23 and FY24 raise eyebrows.
•    It is operating in a highly competitive and fragmented segment that has high volume low margin regime.
•    Based on its financial data, the issue appears fully priced. 
•    Well-informed investors may park funds for medium term.

PREFACE:
This is the first SME IPO under revised rule frame by regulator SEBI. Accordingly for this IPO, -The minimum application size for this IPO is 2,000 equity shares. The term retail individual investor should be read as individual investors applying for the minimum application size. The minimum application size for the IPO is 2 lots. Considering the cap price of Rs. 122, the application amount for individual investors applying for the minimum size will be Rs. 244,000. The minimum application size for HNIs will be 3 lots, i.e., 3,000 shares (3 × 1,000), amounting to Rs. 366,000.

ABOUT COMPANY:
Neptune Petrochemicals Ltd. (NPL) is engaged in the business of manufacturing and trading of a comprehensive range of bitumen products, bitumen emulsions and allied products. With a diverse product portfolio that includes various grades of bitumen, modified bitumen like Polymer Modified Bitumen, Crumb Rubber based modified bitumen and oils, it serves a broad range of industries, particularly the construction and industrial applications. It offers a broad range of products tailored to the needs of the road construction and infrastructure industries.

Neptune is a key player in India's bitumen sector, consistently maintaining a strong market position in bitumen imports in India (Source: www.bitumart.com). Furthermore, Neptune has emerged as the top importer of PKD (packed) bitumen in India for the calendar year 2024 (Source: Rex Fuels-Bitumen Weekly Report-January 27, 2025 to January 31, 2025).

The company is also engaged in the trading of bitumen and Fuel oils in some cases, it sources bitumen and oils from reputed suppliers to ensure high quality and reliability, catering to the needs and requirement of customer. NPL has manufacturing plants across India for bitumen and bitumen emulsions. It is also engaged in trading of bitumen, bitumen emulsion, PMB (Polymer Modified Bitumen), CRMB (Crumb Rubber based modified bitumen) & other value-added Bituminous Products. The company is equipped with both traditionally heated and automated Bitumen decanters at manufacturing units. Its Bitumen Emulsion Plant is self-functional fully automatic batch machine. It produces quality material from all grades of Bitumen and Bitumen Emulsion used for making road & several other constructions and allied industries.

NPL’s strategy is built on focused market segmentation, allowing the company to customize its products to meet the specific needs of its target markets, such as road construction and industrial applications. This focused approach ensures that it remain responsive to changes in demand and market conditions, helping it to maintain an edge and strong customer relationships. The company’s industry experience has allowed it to develop an understanding of market trends, customer needs, and regulatory requirements, enabling it to make informed decisions and maintain strong relationships with suppliers and customers.

With a presence across India and neighbouring countries like Nepal and Bhutan, NPL is well-positioned to continue supporting infrastructure development. The company’s dedication to continuous improvement, customer satisfaction, and strategic growth has helped the Company to reach at current level. As of March 31, 2025, it had 68 employees on its payroll. It also hires contract labour as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6000000 equity shares of Rs. 10 each to mobilize Rs. 73.20 cr. at the upper cap. It has announced a price band of Rs. 115 – Rs. 122 per share. The issue opens for subscription on May 28, 2025, and will close on May 30, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.49% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 5.15 cr. for capex on purchase of plant and machinery, Rs. 14.75 cr. purchase of office space, Rs. 42.00 for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and MUFG Intime India Pvt. Ltd., is the registrar to the issue. Beeline Group’s Spread X Securities Pvt. Ltd. is the market maker and a syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital at a fixed price of Rs. 60 per share in August 2024. It has also issued bonus shares in the ratio of 1500 for 1 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 0.01, and Rs. 57.35 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 16.65 cr. will stand enhanced to Rs. 22.65 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 276.37 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 82.16 cr. / Rs. 0.68 cr. (FY22), Rs. 709.31 cr. / Rs. 10.39 cr. (FY23), and Rs. 675.97 cr. / Rs. 20.82 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 19.47 cr. on a total revenue of Rs. 620.16 cr. More than double net profit on declined top line for FY24 is a bit surprising. Even quantum jump in top and bottom line for FY23 raise eyebrows. 

For the last three fiscals, the company has reported an average EPS of Rs. 9.41 and an average RoNW of 80.29%. The issue is priced at a P/BV of 3.32 based on its NAV of Rs. 36.77 as of December 31, 2024, but its post-IPO NAV data is missing from the offer documents.

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 10.65. Based on FY24 earnings, the P/E stands at 13.28. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 0.84% (FY22), 1.47% (FY23), 3.12%, (FY24), 3.17% (9M-FY25), and RoCE margins of 265.48%, 170.40%, 117.86%, 55.97%, respectively for the referred periods.  

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Agarwal Industries, Nexxus Petro, as their listed peers. They are trading at a P/E of 13.9, and 22.0 (as of May 23, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 61st mandate from Beeline Capital in the last four fiscals including the ongoing one.  From the last 11 listings, all listed with a premium ranging from 0.56% to 146.91% on the listing date.