Rossari Biotech Ltd. India's first IPO since the Covid-19 pandemic disrupted the economy, as company plans to repay debt and promoters look to pare holding. The textile and specialty chemical maker plans to raise Rs 496.25 crore by selling 1.16 crore at Rs 423-425 apiece, according to its red herring prospectus. The IPO consists of a fresh issue and an offer-for-sale by two promoters—Edward Menezes and Sunil Chari, each selling 52.5 lakh shares of company.
The IPO values the company at Rs 2,207 crore at the upper end of the price band, according to BloombergQuint’s calculations. Menezes and Chari hold 42.10% and 42.05% in the company. After the share sale, the total promoter shareholding will fall to 73% from 95%. The rest will be held by public. The company said it would use the net proceeds from the fresh issue to prepay or repay certain indebtedness, including accrued interest, fund working capital requirements and for general corporate purposes.
Shareholding, Pre-IPO and Post-IPO
Business
Incorporated on March 6, 2003, Rossari Biotech Limited (“Rossari Biotech”) is one of the leading specialty chemicals manufacturing companies in India catering to various customers’ needs across FMCG, Apparel, Poultry and Animal Feed industries through its diversified product portfolio comprising Home, Personal Care and Performance Chemicals; Textile Specialty Chemicals; and Animal Health and Nutrition Products.
Company’s business is organized in 3 main product categories
(i) Home, Personal Care and Performance Chemicals;
(ii) Textile Specialty Chemicals; and
(iii) Animal Health and Nutrition Products.
As on May 31, 2020, it had a range of 2,030 different products sold across these categories.
Revenue Breakup
Rossari Biotech operates in India as well as in 17 foreign countries including Vietnam, Bangladesh and Mauritius.
As on September 30, 2019, Rossari Biotech is the largest manufacturer of textile specialty chemicals in India providing textile specialty chemicals in a sustainable, eco-friendly yet competitive manner.
Rossari Biotech manufactures majority of its products in-house from their manufacturing facility at Silvassa and currently setting up another manufacturing facility at Dahej in Gujarat with a proposed installed capacity of 132,500 MTPA.
Major Customers
Company Financial
Company's revenue, EBITD and net profit grew at a compounded annual rate of 32%, 63% and 67%, respectively, through financial years ended March 2017 to 2020.
Its Operating profit margin expanded to 17.4% from 9.2% during the same period
Valuation & Recommendation
Company's consolidated sales were Rs 600.09 crore and consolidated net profit Rs 65.25 crore in FY 2020. At the higher price band of Rs 425, the stock is valued at ~19.9x EV/EBITDA and ~33.1x P/E on FY20 EPS of Rs 12.6 on a post-issue equity share capital of Rs 10.386 crore of face value of Rs 2 each.
However, Considering its debt-free status (post-issue), diversified product portfolio with sharp capacity expansion with low leverage coupled with strong margin and best fixed assets turnover ratio we have a positive outlook on the company’s growth prospects. Due to rising demand for hand sanitizers, disinfectants, cleaning chemical manufactured by Rossari, its business performance has boomed. Thus, We recommend investors to ‘Subscribe’ for this issue.
Peers comparison
Key Risk
- The continuing effect of the Covid-19 pandemic on business and operations is highly uncertain and cannot be predicted.
- Any downturn in the textile industry or an inability to increase or effectively manage sales could have an adverse impact on the company’s business.
- Any disturbance, slowdown or shutdown of its Silvassa manufacturing facility may have an adverse impact.
- The company has high working capital requirements and may require additional financing to meet those requirements.
- Any delay or default in payments from distributors or customers could result in the reduction of the company’s profits.
(The risks have been compiled from the company’s red herring prospectus.)
IPO Details
Post a Comment