Incorporated on September 05, 2002, Stallion India Fluorochemicals (SIFL) is into the business of selling refrigerant and industrial gases and related products. Its primary business consists of debulking, blending and processing of refrigerant and industrial gases, selling of pre filled cans and small cylinders/ containers. The company has four facilities located in Khalapur (Maharashtra), Ghiloth (Rajasthan), Manesar (Haryana) and Panvel (Maharashtra). Each of these facilities is designed and equipped to store gases in a controlled environment, ensuring adherence to the safety standards.

The company gases find application in various industries/segments such as air conditioners & refrigerators, fire fighting, semiconductor manufacturing, automobile manufacturing, pharma and medicals, glass bottle manufacturing, aerosols and spay foam.

The company deal in gases that are broadly classified as fluorochemicals. They are majorly used as refrigerants. Primarily these gases fall in the categories known as - HC (Hydrocarbons), HFCs (Hydrofluorocarbons) and HFO’s (Hydrofluoroolefins).

Fluorochemicals are organic or inorganic compounds that contain one or more fluorine atoms. Fluorine compounds find application majorly in commercial and industrial refrigeration, foam blowing agents, heat pump equipment, and solvents. One of the largest segments of global fluorochemicals market is fluorocarbons. Hydrochlorofluorocarbons (HCFC) are the second generation of fluorine-based gases. HCFC was developed as a more environmentally friendly alternative to CFCs, as they have a lower ozone depletion potential (ODP) than CFCs, although they are still greenhouse gases with a medium/high global warming potential (GWP). As HCFCs contribute both to ozone depletion and global warming, the use of HCFCs is being phased out as part of global legislation. Hydrofluorocarbons (HFC), are synthetic gas gases developed to replace CFC and HCFC. HFC contains fluorine, carbon and hydrogen. HFC have zero Ozone Depleting Potential (ODP). However, they have a notably high Global Warming Potential (GWP). Hydrofluoroolefins (HFOs) are being developed as fourth generation refrigerants, HFO are unsaturated organic compounds composed of hydrogen, fluorine and carbon. HFO are categorized as having zero ozone depletion potential (ODP) and low global warming potential (GWP) compared to HFC and so offer a more environmentally friendly alternative to CFC, HCFC, and HFC.

The company primary raw materials are refrigerant gases which are blended or debulked at its facilities. The company do not enter into long-term supply contracts with any of its raw material suppliers. Most of its raw materials are imported from China.

Shazad Sheriar Rustomji, Manisha Shazad Rustomji and Rohan Shazad Rustomji are the promoters of the company.

The Offer and the Objects

The offer comprises of fresh issue of up to 17858740 equity shares at the upper price band of Rs 90 aggregating Rs 161 crore and Rs 152 crore at the lower price band of Rs 85 and OFS (offer for sale) of up to 4302656 equity shares, aggregating Rs 39 crore at the upper price band of Rs 90 and Rs 37 crore at the lower price band of Rs 85.

The company intends to establish a semiconductor & specialty gas debulking and blending facility in Khalapur, Maharashtra with an aggregate installed capacity of 1,200 tonne per annum and is expected to commence commercial operations by November 10, 2025. The total estimated cost for setting up of the proposed facility is approximately Rs 29.16 crore. Further in a strategic move to expand its presence in south, the company is proposing the establishment of a new plant in Mambattu, Andhra Pradesh. The plant will be set up for refrigerant debulking & blending facility and storage of HFC and HFO refrigerant and their blends with an installed capacity of 7200 tonne per annum and is expected to commence commercial operations by November 10, 2025.

Strengths

The company has over two decades of experience in fluorochemicals debulking bottling & distribution. It specialize in refrigerants gases by blending two or more gases to create new formulations.

The company sell its product under the brand name of Stallion and has strong market recognition in the refrigerant gases industry.

The company caters to a diverse clientele spanning various industries such as air conditioners & refrigerators, fire fighting, semiconductor manufacturing, automobile manufacturing, pharma and medicals, semiconductors, glass bottle manufacturing, aerosols and spray foam, showcasing the relevance and demand for its products across multiple sectors.

The location of plant facilities has been selected to optimize logistical efficiency and seamless production processes. With a focus on proximity to key markets and suppliers, its facilities are positioned to enhance supply chain dynamics and reduce lead times.

Refrigerant gases play a crucial role in the functionality of cooling and air conditioning systems, which have become essential components of daily lives. These gases serve as integral elements in the heat transfer process, enabling the fundamental refrigeration cycle that underlies air conditioning, refrigeration, and various industrial processes.

The market for fluorochemicals and specialty gases has been growing and is further forecasted to grow at a CAGR of 9-11% from US$ 9,700 million in 2024 to US$ 15,000-16,000 million in 2029. The growth is majorly backed by the growing population and rapid urbanization. By application, automotive is the leading user segment for fluorochemicals. A larger population base over the world, warrants a need for more vehicles.

The Indian fluorochemicals and specialty gases market is anticipated to witness robust growth, with a projected CAGR of 16-18% during the forecast period from 2024 to 2029 to reach almost US$ 675-725 million. This growth will be driven by rising demand from various industries, including electronics, healthcare, and manufacturing.

Fluorochemicals play a crucial role in propelling the growth of the pharmaceutical and healthcare sector. The Indian pharmaceutical industry‘s growing demand for innovative and complex drug molecules has driven the need for custom synthesis and advanced fluorination technologies. Specialty gases also play a vital role in medical processes and systems, with customized medical gas mixes utilized in various medical activities, such as patient care, pathology, and research

Weaknesses

The company revenue from operations depends on sale of refrigerant gases which accounts for over 87% of the total revenue as of the end of the September quarter (Q2FY25) and is restricted to certain geographies only.

The company revenue stream is significantly dependent on a limited number of customers. The combined revenue contribution from the company‘s top ten customers, for the six months ending September 30, 2023, and for the fiscal years 2024, 2023, and 2022, stood at 77.3%, 75.7%, 74.8%, and 72.9%, respectively.

The company largest expense, by far, is cost of raw materials. Increases in the cost of raw materials as a percentage of its revenue from operations could have a material adverse effect on results of operations and financial condition.

The company import its raw materials majorly from China. Any restrictions on import of raw materials may impact its business and results of operations.

Zhejiang Sanmei Chemical Industry Co. Ltd. (Sanmei) have issued a notice through its legal representative demanding US$ 1251290 i.e Rs 9.5 crore. In the event that, if any legal or regulatory proceedings are initiated, any adverse outcome arising there from could affect its reputation, financial condition and cash flow.

The company had reported negative cash flows from its operating activities in FY2023, FY2024 and H1FY2025

The capacity utilization of existing plant is influenced by several factors, including periodic fluctuations in the demand for refrigerant gases. The demand and sale for the refrigerant gases is high during the summer season leading to higher/peak capacity utilization while the remaining period experience medium to lower sales volume. As a result overall capacity utilisation for 12 months period averages out to be at lower side.

The company operates in a highly competitive landscape and competes with existing players, including SRF, Gujarat Fluorochemicals, and Navin Fluorine International.

Activities involving its blending process can be dangerous and can cause injury to people or property in certain circumstances.

In the fluorochemicals and specialty gas industry, the introduction of new chemicals and substitutes poses significant risks. These substances, whether intentionally created alternatives or unintentional byproducts, could have unknown health and environmental effects.

The company is required to obtain, renew or maintain certain statutory and regulatory permits and approvals required to operate business, and if it fails to do so in a timely manner or at all, it may be unable to fully or partially operate its business and results of operations may be adversely affected.

Valuation

For FY2024, consolidated sales were up by 3% to Rs 233.24 crore. OPM rose 350 bps to 10.2% which led to 58% increase in operating profit to Rs 23.71 crore. Other income rose 435% to Rs 2.99 crore and interest cost increased 298% to Rs 4.32 crore while depreciation fell 28% to Rs 1.11 crore. PBT increased 64% to Rs 21.27 crore. Tax expenses were 101% higher at Rs 6.48 crore. Net profit increased 52% to Rs 14.79 crore.

FY2024 EPS on post-issue equity works out to Rs 1.9. At the upper price band of Rs 90, P/E works out to be 48.3

As of 15 January 2025, its listed peers such as Navin Flourine International trades at FY2024 P/E of 68.2, SRF trades at FY2024 P/E of 55.3 and Gujarat Fluorochemicals trades at FY2024 P/E of 98.1.

For FY2024, Stallion India flurochemicals Ebitda margin and ROE stood at 11.3% and 12.5% compared to 23.9% and 10.2% for Navin Flourine International respectively, 23% and 13.1% for SRF and 23.1% and 7.1% for Gujarat Fluorochemicals.