Initial public offering by speciality chemicals maker Ami Organics opened for subscription on Wednesday. The company has fixed a price band of Rs 603-610 a share for its Rs 570-crore initial share sale. The three-day public offer will open on September 1 and conclude on September 3. The IPO comprises a fresh issue of equity shares worth Rs 200 crore and an offer for sale of up to 60,59,600 equity shares by existing shareholders. The company has reduced its fresh issue size to Rs 200 crore from Rs 300 crore after raising Rs 100 crore in a pre-IPO placement.
Proceeds from the fresh issue will be used towards repayment of certain debt and funding working capital requirements. Half of the issue size has been reserved for qualified institutional investors, 35% for retail investors and the remaining 15% for non-institutional investors.
Ami Organics is one of the leading R&D driven manufacturers of speciality chemicals with varied end usage, focusing on the development and manufacturing of pharma intermediates for regulated and generic APIs (active pharmaceutical ingredients) and NCE (new chemical entity) and key starting material for agrochemical and fine chemicals.
The company has shown consistent financial performance with sales growth at CAGR of 19.5% and restated profit after tax growth at CAGR of 52.3% between the fiscals 2019 and 2021. The financials for 2020-21 doesn’t include revenue from the acquisition of the two plants. Anand Rathi is positive on the long-term prospects of the company. Hence, it recommends a “Subscribe” rating to this IPO.
Considering the FY-21 adjusted EPS (earning per share) of Rs.14.82 on post-issue basis, the company is going to list at a P/E (price to earnings) of 41.16 with a market cap of Rs 2,222.7 crore while its peers namely Aarti Industries and Hikal are trading at a P/E of 54.20 and 46.13 respectively. The brokerage firm is of the opinion that the company has a strong and diversified product portfolio supported by strong R&D and process chemistry skills and is available at a reasonable valuation as compared to its peers.
Based on FY2021 numbers, the IPO is priced at a price to earnings of 35.6 times and EV/EBITDA (enterprise value to earnings before interest tax depreciation and amortization) of 25.7 times at the upper price band of the IPO, which is on the higher side compared to the listed peer group. Company already has a higher market share of 70%-90% in key API’s (active pharmaceutical ingredients) which will limit growth in near future.
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