After a hiatus of over 4 months, the primary market street will see an IPO offering by specialty chemicals manufacturing company Rossari Biotech of Rs. 496 crore. Here is a lowdown whether amid the volatility, the new offer from Rossari Biotech can be a good bet for you:
1. Issue Details:
The Rs. 496 crore offer will open from July 13 and July 15 and the price band has been fixed at Rs. 423-Rs. 425 per share. The issue will consist of a fresh issue of equity shares aggregating up to Rs 50 crore and an offer for sale component of up to 1,05,00,000 equity shares.The issue size is pegged around Rs 494-Rs 496 crore.
1. Company details:
Rossari Biotech is a Mumbai based specialty chemicals company with business primarily divided into 3 segments including
i) home, personal care and performance chemicals (HPPC);
(ii) textile specialty chemicals; and
(iii) animal health and nutrition products (AHNP).
In fiscal 2020, Rossari Biotech registered a total revenue of Rs 603.82 crore, EBITDA of Rs 104.53 crore and net profit after tax of Rs 65.25 crore. The firm has been able to increase the total revenue from fiscal 2018 to fiscal 2020 at a CAGR of 41.65 percent, EBITDA at a CAGR rate of 56.58 percent and the profit after tax has increased at a CAGR of 60.27 percent over the same period. In the FY20, the company has a turnover of Rs. 600 crore.
4. Should You Subscribe To Rossari Biotech IPO?
Different brokerages hold a different call on the issue of Rossari Biotech IPO as some give it a ‘Subscribe' call while others give it a ‘miss' on stiff valuation, high customer concentration.
"The company is a leading manufacturer of specialty chemicals, and has a had 100,000 tpa specialty chemical manufacturing plant in Silvassa, Gujarat. Further, it is coming out with another 132,500 tpa at Dahej expected to be complete by March, 2021," said Anand Rathi report with a 'subscribe' call on the IPO.
According to the brokerage, at the higher end (Rs 425/share) of the issue band, the stock is valued at ~19.9x EV/EBITDA and ~33.1x P/E on FY20 figures. Galaxy, Atul and Fine Organics trade at FY20 P/E multiples of 24.3x, 20.7x and 36.3x respectively.
Therefore, Rossari's multiple is within the comfortable range of the sector average.
Further the company's growth prospects on increased capacity as well as increase in demand together with high return ratios and historic growth are compelling points to consider an investment in the offer.
As per another, brokerage house Kotak Securities listed out the positives "The company's diversified product portfolio addresses the needs of varied and long-standing customers across industries. Strong research & development capabilities with a focus on innovation and sustainability will profit the company."
" Rossari's relevant global market is expected to grow from revenue of approximately $127 billion in 2018 to approximately $167 billion in 2023 at a CAGR of 5.6 percent", added the company.