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25 October 2023

Arabian Petroleum IPO: Fuelling Growth in Lubricants

Introduction:

The Arabian Petroleum IPO, a fixed price issue amounting to Rs 20.24 crores, has gained significant attention. This IPO consists of a fresh issue of 28.92 lakh shares. Bidding for this offering began on September 25, 2023, and ended on September 27, 2023. Allotment results for the Arabian Petroleum IPO were confirmed on October 4, 2023, and the shares were listed on NSE SME on October 9, 2023. Priced at ₹70 per share, the minimum lot size for an application was set at 2000 shares, requiring a minimum investment of ₹140,000 for retail investors.

Key Players:

The Arabian Petroleum IPO had Hem Securities Limited as the book running lead manager, and Purva Sharegistry India Pvt Ltd served as the registrar for the issue. Hem Finlease acted as the market maker for this IPO.

Stock Performance:

As of October 19, 2023, Arabian Petroleum Limited's stock was trading at ₹83.70. The stock witnessed a decrease of 2.79%, with an opening price of ₹85.00, and the daily range fluctuated between ₹85.00 and ₹83.00. Its previous closing price stood at ₹86.10, with a total traded value of 98,000 shares.

Ownership Structure:

Before the issue, the shareholding pattern of the company was 100%. Post-issue, it was adjusted to 73.45%.

Financial Snapshot:

Arabian Petroleum Limited demonstrated strong financials. As of March 31, 2023, the company's assets amounted to ₹7,650.88 lakhs. The company reported robust revenue figures, with total earnings of ₹24,394.68 lakhs in fiscal 2023. The company's profit after tax was reported at ₹486.48 lakhs. The net worth of the company reached ₹2,202.80 lakhs, with reserves and surplus amounting to ₹1,402.80 lakhs. Total borrowings were reported at ₹3,830.66 lakhs.

Key Metrics:

The IPO presented a Price-to-Earnings (P/E) ratio of 11.51, a Market Capitalization of ₹76.24 crores, Return on Equity (ROE) of 22.08%, Return on Capital Employed (ROCE) of 32.47%, Debt/Equity ratio of 1.75, Earnings per Share (EPS) of ₹6.08, and Return on Net Worth (RoNW) of 22.08%.

IPO's Purpose:

The net proceeds from the issue were allocated to fulfill the following objectives:

1. Meeting Working Capital requirements.
2. General Corporate Purpose.
3. Covering issue expenses.

Expert Opinion:

Arabian Petroleum Limited operates in a highly competitive and fragmented market. The company showcased steady top-line growth for the reported periods and maintained over 10% PAT margins for the last two fiscal years. Based on FY23 earnings, the IPO appears to be fully priced. However, informed investors may consider allocating moderate funds for the medium to long term.

Subscription Status:

The Arabian Petroleum IPO drew substantial interest from investors, achieving an overall subscription rate of 19.91 times as of September 27, 2023. Retail investors exhibited robust enthusiasm, with a subscription rate of 23.19 times.

Conclusion:

The Arabian Petroleum IPO provides investors with an opportunity to participate in a company operating in the lubricants industry, a vital component of the automotive and industrial sectors. As with any investment, careful consideration, research, and risk management are essential.

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