Arabian Petroleum IPO Review: Arabian Petroleum is coming up with its Initial Public Offering. This IPO will be open for subscription on September 25, 2023, and closes on September 27, 2023. This is an SME (Small and Medium-sized Enterprise) IPO, and the company is going to be listed on the NSE SME platform.
In this article, we will look at the Arabian Petroleum IPO Review, analyze its strengths and weaknesses and see what unfolds.
Table of Contents
Arabian Petroleum IPO Review : About the Company
The company took over the manufacturing and trading business of Industrial & Automotive Lubricants from the proprietorship firm “Arabian Petroleum” in 2015.
The company is in the business of manufacturing a wide range of Lubricants including Specialty Oils, Coolants etc., used for Industrial and Automotive applications. It has two distinctive product divisions and brands i.e., Automotive Lubricants-Arzol and Industrial Lubricants-SPL.
It also manufactures and packages lubricants on a private label basis for some of the customers for B2B as well as B2C verticals. Some of the clients are BEML, HAL, Mazagon Dock Shipbuilders, Mahindra First Choice Services Limited, Godrej & Boyce Manufacturing Co. Ltd etc.
The domestic and international customers are spread across multiple industries, including pharmaceutical, FMCG, chemicals, civil engineering, electrical appliances, automobiles and contracts from government sectors and associated entities etc. It is also one of the suppliers of lubricants to the Indian armed forces.
It exports products to countries like Guyana, Oman, Qatar, Vietnam, Sri Lanka, Sierre Leone, Zambia, Bangladesh, Chile, Jordan, Seychelles, Maldives, Fiji, Congo, Guatemala, Suriname, Peru, Mauritius, Dubai etc.
The company has an extensive distribution network of 400 dealers and distributors and 9 depots as of March 2023.
The Company’s sales breakdown as of FY23 is as follows, Industrial Lubricants 62.54%, Automotive Lubricants 36.86% and others 0.58%.
Arabian Petroleum IPO Review : Industry Overview
Oil and natural gas are major industries in the energy market and play an influential role in the global economy as the world’s primary fuel source. India is the 3rd largest consumer of oil and lubricants in the world, after the United States & China. Almost 42% of India’s energy consumption comes from Oil and Gas.
India is planning to double its refining capacity to 450-500 million tonnes by 2030. According to IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as the country’s gross domestic product (GDP) is expected to increase to US$ 8.6 trillion by 2040.
In FY23, India consumed 222.3 MMT of petroleum products, up 10.2% from the previous year. This is the highest-ever in the history of the world’s third-largest oil consumer. India’s crude oil production in FY23 stood at 29.2 MMT.
The Growing stature of India in the global market as a sourcing hub for the manufacturing industry and the increase in the export of lubricants from India to the rest of the world will make a huge impact on the lubricant industry. The overall Indian auto components industry, which accounts for 2.3% of India’s GDP currently, is set to become the 3rd largest globally by 2025.
Arabian Petroleum IPO Review : Financials
If we look at the financials of Arabian Petroleum, it has reported assets worth 50.31Cr in FY21 and 76.50Cr in FY23, the company’s assets have grown by ~55% over the last 3 years.
In FY21 and FY23 the company generated revenue of 110.24Cr and 243.94Cr and the profits were 2.87Cr and 4.86Cr, even though the company’s revenue has more than doubled over the last 3 years, it is only able to maintain profit margins of ~2% over 3 years due to high operating expenses.
In terms of return ratios, in FY23 it had an ROE of 22.08% and an ROCE of 32.47%. These ratios indicate a good return on the shareholder’s capital and an efficient use of the company’s resources.
The company reported a Debt-to-equity ratio of 1.75 in FY23, which indicates a high level of debt in proportion to its equity.
Financial Metrics
(Source: RHP of the company)
Competitors of Arabian Petroleum
The listed peers of Arabian Petroleum as per the RHP of the company are Tide Water Oil Co. (India) Limited and GP Petroleums Limited.
Strengths of the Company
- The company has a strong customer base with long-standing relationships.
- The company caters its products to domestic and international markets across multiple industries.
- The company has developed in-house research and development capabilities to understand customer preferences and develop customized product applications to cater to customer-specific needs and maintain customer loyalty.
- The company has a strong distribution network for the sale of its products.
- It offers a wide range of lubricants catering to diverse needs of the customer.
Weaknesses of the company
- The company does not have long-term agreements with its customers.
- There is a high level of competition in the lubricant industry, from renowned brands and companies.
- The fluctuation in the crude oil supply and prices can affect the operations and profitability of the business.
- The trademark used by the company is not registered in its name, so it can face issues from third parties in the future.
- The company’s growth is directly dependent on the automobile and other industries, any adverse impact on these industries directly impacts the operations of the company.
Arabian Petroleum IPO Review : GMP
As the shares of the company are not currently trading in the grey market, the GMP is not available. we shall update the article once we receive the information.
Arabian Petroleum IPO Review : Key IPO Information
| Particulars | Details |
|---|---|
| IPO Size | ₹20.24 Cr |
| Fresh Issue | ₹20.24 Cr |
| Opening Date | September 25, 2023 |
| Closing Date | September 27, 2023 |
| Face Value | ₹10 per share |
| Price | ₹70 per share |
| Lot Size | 2000 shares |
| Minimum lot | 1(2000) |
| Maximum Lots | 1(2000) |
| Investment Amount | ₹1,40,000 |
| Listing Date | October 9, 2023 |
Promoters: Mr. Hemant Dalsukhrai Mehta and Mr. Manan Hemant Mehta
Book Running Lead Managers: Hem Securities Limited
Registrar to the Issue: Purva Sharegistry(India) Pvt.Ltd
Objectives of the Issue
The company intends to utilize the net proceeds from the issue towards funding of the following objects.
- To meet Working Capital requirements
- General Corporate Purpose
- To meet issue expenses
In Closing
In this article, we looked at Arabian Petroleum IPO Review, through this article, we can say that the company has generated good revenue but is struggling to maintain good profit margins and the company has a good business model and a customer base including government bodies which contribute to its growth and profitability.
Arabian Petroleum is an SME(Small and Medium-sized Enterprise) IPO. The minimum investment required and the Minimum/Maximum lot size for this IPO is ₹1,40,000(2000 shares).
What do you think the future holds for the company, Do you believe the company can survive against large players? Are you applying for this IPO? let us know in the comments below.
Written by Bharath K.S
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