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Specialty chemical manufacturer Laxmi Organic Industries is looking to raise Rs 600 crore through an initial public offering (IPO). The issue will open for subscription on March 15 and close on March 17.
The company has fixed the price band for the issue at Rs 129-130 per share. Investors can bid for a minimum of 115 equity shares and in multiples, thereafter, translating to a minimum bidding amount of Rs 14,950 at the higher end of the price band. A retail investor can only apply for 13 lots or 1,495 shares for 1,94,350.
The IPO comprises an OFS of Rs 300 crore from promoter group Yellowstone Trust and a fresh issue of Rs 300 crore by issuing 2,30,76,923 shares of Rs 2 face value. After the issue, the promoter shareholding will be reduced to 72.92% from 89.51% at present.
Ahead of the initial public offering, it has raised Rs 180 crore from 15 anchor investors at Rs 130. In the pre-IPO stage, the company undertook a private placement of 1,55,03,875 equity shares, aggregating to Rs 200 crore.
Mumbai-based Laxmi Organic Industries is the leading manufacturer of acetyl and specialty intermediates and the largest manufacturers of ethyl acetate in India with a market share of approximately 30%.
The company is the only manufacturer of diketene derivatives in India and has long-standing relationships with marquee customers like Alembic Pharmaceuticals, Dr Reddy’s Laboratories, Laurus Labs, Neuland Laboratories, Suven Pharmaceuticals, UPL amongst others.
Grey market premium
In the grey market, Laxmi Organic Industries shares were trading at Rs 225, implying a premium of Rs 95 or 73% over the IPO price on Saturday.
“The issue looks moderately priced hence, this issue may get a better response compared to some other IPOs clashing with it,” said grey market tracker Abhay Doshi, founder of Unlisted Arena.
Around 25% of the revenues of the company comes from exports which may boost going ahead owing to the China+1 strategy which would be likely adopted by global players. Capacity expansion from IPO proceeds may drive the revenue further, added Doshi.
Here’s what brokerages have to say:
Anand Rathi – Subscribe (Long-Term)
“At the upper end of the IPO price band, it is offered at 49.81x its FY20 earnings, with a market cap of Rs. 3428 crores. The company has a strong presence in Acetyl Intermediaries & Specialty Intermediates business; further, it is establishing the Fluorospecialty chemicals business. The company also plans to expand and optimise its capacity and product portfolio,” said the brokerage firm in a report.
Ashika Group – Subscribe
“On the higher price band, Laxmi Organics demands a P/E multiple of 37.7x based on annualized post-issue fully diluted EPS of Rs. 3.5 in H1FY21. The issue appears filly priced on the valuation parameters as their listed peers entities Aarti Industries, Atul Ltd., Fine Organic, Navin Fluorine, Rossari Bio and SRF are currently trading at P/Es of around 44.2x, 32.1x, 60.5x, 28.6x, 79.4x, and 33.2x.
Given the growth prospects in the industry, long-standing relations with marquee global customers, expansion plans, and plans to shift for high margin speciality chemicals business, will drive the company’s performance going forward,” said the note.
Marwadi Shares and Finance – Subscribe
“Considering FY20 adjusted EPS of 2.66 on a post-issue basis, the company is going to list at a P/E of 48.82X with the market cap of Rs.34,276 million. The peers of the company namely Aarti Industries Ltd is at P/E of 24.92X and Fine Organics Industries Ltd is at 35.46X. We recommend to ‘Subscribe’ this issue as long-term prospects of this stock look promising with healthy demand from the end-user industry driving revenues for this company,” noted the report by Marwardi Shares and Finance
Primary market expert Dilip Davda: Subscribe for long-term
Based on the company’s financial data, the issue appears averagely priced compared to industry composite and listed peers. However, considering its long-standing relations with marquee global customers and plans to shift for high margin speciality chemicals business, it has bright prospects going forward. Investors looking for a long-term bet may invest in this IPO.
The issue is likely to finalise the basis of allotment by March 22, and the initialisation of funds will take place by March 23. While the credit of equity shares to depository accounts of allottee on March 24. The specialty chemical manufacturer is expected to make its stock market debut on March 25, 2021.
(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing)