Management

• Padam Kumar Agarwala (Chairman and Managing Director)
• Varun Agarwal (Joint Managing Director)
• Soumitra Bose (Non-Executive Independent Director)
• Ajit Khandelwal (Non-Executive Independent Director)
• Pawan Marda (Non-Executive Independent Director)
• Seema Sapru (Non-Executive Independent Director)
• K. Srinivas Prasad (Chief Financial Officer)

Use of Proceeds

The total issue size is Rs.852.53 cr, which comprises fresh issue of Rs.400 cr and offer for sale of Rs. 452.53 cr. The company intends to utilize a portion of the Net Proceeds towards Repayment/prepayment, in full or in part, of certain outstanding borrowings availed by the Company (Rs.210 cr), Setting up of an air separation unit at our Uluberia-II plant with a capacity of 220 TPD (Rs.104.5 cr) and rest for general corporate purposes.

Competitive Strengths

Leading Manufacturer of Industrial Gases, Well Positioned to Capitalise on Industry Tailwinds EIGL is one of the largest manufacturers of industrial gases in East India and South India, and the market leader in the states of West Bengal, Andhra Pradesh and Telangana, each in terms of installed manufacturing capacity, as of March 31, 2025. They are one of the oldest operating industrial gases companies India, with a rich legacy of over 50 years. The market size of the industrial gases market in India was estimated at US$ 1.22 billion in 2023 and USD 1.31 billion in 2024, and is projected to reach US$ 1.75 billion by 2028, with a CAGR of 7.5%. The large domestic market is driven by Government initiatives such as 'Make in India' and the increasing call for import substitution, as well as demand from sectors such as steel, pharmaceuticals, manufacturing, defence, chemicals, healthcare, energy, pharma and electronics, and their growth prospects.

In Fiscal 2025, it had a market share of approximately 2.85% in terms of revenue, positioning them well to capitalize on the expected growth in the industry. We believe that it can benefit from industry tailwinds due to its operating experience, diversification across products, customer base and capacity to serve a broad range of critical end use industries.

Comprehensive Product Portfolio, Catering to Diverse End-use Industries The company manufactures a wide variety of industrial gases, including oxygen, nitrogen, argon, helium, hydrogen, carbon dioxide, nitrous oxide and acetylene, through which they service a diverse set of industries, with their products finding use in ship building, glass manufacturing, steel manufacturing, pharmaceuticals, welding, fabrication, among others, rendering their consistent supply critical to different industries. EIGL caters to the specific requirements of industries such as steel; pharmaceuticals and chemicals; healthcare; engineering and infrastructure; railways, aviation, aerospace and space; petrochemicals; food and beverages; energy; electronics; manufacturing; defence. They supply various gases, including nitrogen, to large oil and gas companies across multiple locations as nitrogen is used to increase well pressure for better throughput of oil during oil exploration. It offers dry ice, firefighting gases, liquid petroleum gas, medical oxygen, synthetic air, welding mixtures, and other speciality gases, which serve specific customer requirements. Certain of these products witness constant demand owing to the criticality of their functions.

Further, it also offers niche products such as synthetic air, which is a mixture of oxygen and nitrogen, produced by controlled, homogenized mixing and is used as zero gas in the running and calibration of test equipment for environmental monitoring, owing to its limited impurities. It also offers ultra-high purity nitrogen gas, which caters to the requirements of the electronics industry and requires special technical acumen. It also supplies ultra-high oxygen gas which is extensively used in laboratories for various research and development activities, as well as in solar cells, and semiconductors.

As part of their project engineering operations, EIGL leverages their extensive technical know-how for the design, engineering, supply, installation and commissioning of tonnage ASUs and related projects on a turnkey basis for customers across several sectors. They use their knowledge of the industrial gases production process to service the entire value chain for production, liquefaction, storage and application of gases, as part of their project engineering offering.

Long-standing Customer Relationships Leading to Stable Cashflows The industrial gases industry is characterised by high customer stickiness, particularly for large customers, as gas generated is directly supplied by pipelines based on long-term contracts, typically ranging from 15 years to 20 years. As of March 31, 2025, they had 328 bulk customers, with an average contractual tenure of 5 years, with the possibility of renewal at mutually agreed terms. They have entered into an agreement for leasing and operation and maintenance of an ASU plant with one of their customers, a major steel manufacturing company in India, at its Kharagpur, West Bengal facility for 15 years with effect from February 2019. They have also entered into an agreement dated June 1, 2021, for leasing and operation and maintenance of an ASU plant with Jairaj at its Kurnool facility for 15 years. Their infrastructure is integrated with each of these customers as they operate on their premises and supply gases to them via pipelines as per their stipulations.

Diversified Customer Base, Minimizing Concentration Risks The company has established relationships with several Indian customers across industries through over 50 years of business operations. In Fiscal 2025, they sold their products to 1,829 customers, which represented one of the highest number of customers of any gas company in India, indicating a highly diversified customer base with limited concentration risk. They supply products to the Indian armed forces, including, at the Indian Air Force bases in East, South and West India, the Eastern Naval Command bases and multiple Government-owned laboratories. They have been one of the key suppliers to India’s space and defence programme and their products such as liquid nitrogen are used for testing satellites by subjecting them to cryogenic temperatures to check their structural integrity. The company’s marquee clientele base includes Laurus Labs, Dr Reddy’s Labs, GMM Pfaudler, Jupiter Wagons, Hindustan Shipyard, Indian armed forces, Neuland Laboratories Limited, Astec Life Sciences Limited etc.

Expansive Operational and Distribution Capabilities across East and South India EIGL is one of the largest manufacturers of industrial gases in East India and South India, and the market leader in the states of West Bengal, Andhra Pradesh and Telangana. As of March 31, 2025, they operate 9 facilities across East, South and Central India. They were the 1st company to set up a hydrogen electrolyser in Eastern India. They operate oxygen plants in the country, with a capacity of 1,250 TPD as of March 31, 2025.

Over the years they have built efficient distribution networks owing to their production capabilities and their presence in East and South India. They are able to offer their products using different supply options, based on customer requirements. In terms of bulk distribution capability, their fleet of cryogenic transport tankers in circulation is one of the largest in India as of March 31, 2025, which allows them to efficiently deliver their products across the country while maintaining controlled environments. The company believes that its ability to operate without outsourcing project management services enables them to build deep relationships with their customers, customize and operationalize solutions, and create a knowledge base in-house that are able to transpose to subsequent projects. It uses multiple suppliers internationally to source different parts of ASU such as compressors, expansion turbines, and structure items. The scale of manufacturing facilities has also enabled them to build relationships with various suppliers, with whom it is able to negotiate competitive prices owing to order history and volumes.

Peer Comparison

Key Risks & Concerns

Operational risk: Given the hazardous nature of industrial gases, the company’s manufacturing process involving manufacturing and transportation of these gases is subject to inherent risks. Failure to manage these operational risks may adversely affect EIGL’s business, results of operations, cash flows and financial condition.

Customer concentration risk: As of FY25, the company derived ~34.3% of its revenue from its top 5 customers (29.6% in FY24). This exposes the company to risks specific to these customers with respect to any deterioration in their business or substantial reduction in their dealings with the company.

Regulatory risk: EIGL’s operations are subject to extensive government regulations which require a number of statutory and regulatory permits and approvals under central, state and local government rules. Any delay or inability in obtaining, renewing or maintaining such permits, licenses and approvals could adversely affect the company’s operations.

Failure to win government tenders: The company supplies products to certain government entities and PSUs through a competitive bidding process where the contracts are awarded on a tender basis. As of FY25, government/PSU orders accounted for ~27.3% of the company’s total revenue from operations. Thus, failure to obtain relevant orders due to change in qualification criteria, unexpected delays and uncertainties in the tendering process may have an adverse effect on EIGL’s business. Additionally, any delay in receiving payments from such entities may also have adverse impact on the company’s cash flows.

Outlook and Valuation

Ellenbarrie Industrial Gases Limited (EIGL) is a prominent company that focuses on the production and supply of Industrial, medical, and specialty gases. Ellenbarrie is one of the leading and oldest industrial gas suppliers in India, known to provide a wide range of essential gases such as Oxygen, carbon dioxide, acetylene, nitrogen, helium, hydrogen, argon, and nitrous oxide. They are also engaged in providing project engineering services using technical expertise to design, engineer, supply, install, and commission tonnage air separation units (“ASUs”) on a turnkey basis. EIGL has a strong presence as an industrial gas supplier in East and South India catering to the emerging manufacturing hubs in these regions. It owns the cylinders and equipment at the customer facilities which provides a strong entry barrier. The take or pay clause in the supply contracts provides steady revenue and derisks the company from business cycles of the customers. EIGL has an improving margin profile, in-line with the rising share of higher margin Argon gas and onsite projects. Debt repayment from the IPO proceeds will lower interest cost. This along with the capacity addition in H2FY26 is likely to boost profitability in FY26 and FY27.

We believe that EIGL is well positioned for sustained growth due to its extensive product portfolio catering to diverse end-use industries, strong industry tailwinds, expansive operational and distribution capabilities, diversified customer base, long standing relationship with marquee customer base, strong management pedigree, robust distribution network, superior return ratios, healthy track record of growth. On the valuation front, EIGL is valued at 68x FY25 EPS at the upper end of the price band which is reasonable as compared to its peer. Hence, we assign a SUBSCRIBE rating to the issue for the long term.