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HP Adhesives Ltd.

About the Company

HP Adhesives Ltd. is a fast-growing multi-product, multi-category consumer adhesives and sealants company. It is among the leading manufacturing companies in India in the consumer/ bazaar segment of the adhesive industry for its largest product category – PVC solvent cement. It manufactures a wide range of products such as PVC, cPVC and uPVC solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants and PVC pipe lubricant which are sold across India. Besides, they manufacture products for select large PVC pipe manufacturing companies under co-branding or private label on order basis. They also sell ancillary products like ball valves, thread seals and other tapes, products for drainage and architectural solutions through its distribution network.

The aforesaid adhesives and sealant products have applications in multiple industries such as plumbing and sanitary, drainage and water distribution, general purpose building/ construction and interior operations as well as for glazing operations, woodwork, footwear, automotive, foam-furnishing and other varied industries. As of September 30, 2021, their distribution network comprised 4 depots situated in Delhi, Kolkata, Bengaluru and Indore and more than 750 distributors who cater to more than 50,000 dealers in India.

Objects of the Issue

* Funding the working capital requirements;

* Funding capital expenditure for expansion of production capacity at the existing manufacturing facility;

* General corporate purposes;

Valuation

The consumer adhesives industry clocked in 8-10% CAGR between FY15-20. In FY21, the market is valued at Rs 53-55bn and it de-grew by 1-2% due to the pandemic-led reduced construction activity. However, it is expected to recover strongly in H2FY22 driven by a pickup in infrastructure and construction activity and rising demand from end-user industries such as packaging, electronics and woodworking.

We believe the company will benefit from industry tailwinds given its multi -product portfolio, strong distribution network and diversified customer base in both domestic and international markets. Also, the company focuses on manufacturing cost-efficient products with help of the R&D team and also ensures maintaining brand value by keeping quality checks on the products. Going forward, it intends to continue to introduce new product categories, expand manufacturing facilities as well as increase distribution network across India and globally. On the financial front, the company’s performance has been decent. As compared to its peers, the company’s valuation is at a discount. From a long term perspective, we have a positive view on the company.

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SEBI Registration number is INZ000174330

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