The initial public offering (IPO) of Mumbai-based speciality chemicals maker Rossari Biotech has entered its second day of subscription today. The firm plans to raise to raise Rs 500 crore through the share sale. On July 13, the first day of subscription, the IPO was subscribed 60% against the total issue size. Rossari Biotech IPO received bids for 49,30,030 shares against the total issue size of 8,173,530 shares.
The portion of shares reserved for qualified Institutional buyers was subscribed 41%, non-institutional investors 11% and retail investors 92%. The company raised Rs 149 crore from anchor investors.
The issue will close on July 15. The IPO comprises fresh issue of shares to the tune of Rs 150 crore and sale of more than 1 crore equity shares by the company's promoters through offer-for-sale route.
The issue size is expected at around Rs 494-Rs 496 crore. The face value of each share is Rs 2. Company's market capitalisation is pegged at Rs 2,207 crore.
In terms of offer ratio, 50% of shares are kept for Qualified Institutional Buyers, 15% for NII and not less than 35% for retail investors.
The minimum bid quantity stands at 35 shares in one lot and maximum quantity allows investment up to 470 shares in 13 lots.
Net proceeds from the issue will be utilised for funding working capital requirements, repaying certain debt availed by the company and for general corporate purposes. The equity shares will be listed on the NSE and BSE.
The IPO has been launched after a lull of four months. On March 2, SBI Cards and Payment Services floated its IPO which saw weak response amid a volatile market.
BusinessToday.In spoke to analysts on whether the IPO is a good option for investors to park their money at a time when market has not recovered fully from the coronavirus crisis. Here's what they said.
Analysts at Geojit gave a subscribe call to the issue for long term.
"Current capacity of the firm stands at 1,20,000 MTPA with 82% utilisation while new facility setting up Dahej at Gujarat with a proposed installed capacity of 132,500 MTPA and is expected to start operations in FY21, which will support revenue growth. Post IPO, cash flow of the company expects to improve with reduced debt and capex getting completed by FY21.
At the upper price band of Rs 425, the firm is available at price to earning of 33.8 times FY20 which seems expensive when compared to peers. However, considering return on equity at 44% (last 3-year average), strong revenue growth and expanding margin profile support our 'SUBSCRIBE' rating for long term, " they said.
Keshav Lahoti, Associate Equity Analyst at Angel Broking has given a subscribe call to the issue.
"At the upper end of the price band, Rossari demands PE multiple of 32 times FY20 fully diluted EPS. None of the listed chemical companies has the same business as Rossari. Its specialty chemical peers such as Galaxy Surfactants, Fine Organics, Aarti industries, Atul and Vinati Organics are currently trading at FY 2020 P/E multiples of 24 times, 36.6 times, 30.5 times, 20.6 times and 30.9 times, respectively.
We believe Rossari will command a premium over most of its chemical peers as it is net debt free as well as it has better asset turnover, working capital days, ROE and ROCE better than most of its peers. In the last three years, Rossari has reported 32% and 66% revenue and PAT CAGR due to the strong promoter and management team. As we are positive on the future outlook for the industry as well as the company, we recommend 'Subscribe' to the issue."
Rossari Biotech is a specialty chemicals manufacturing firm with focus on home and personal care, performance chemicals, textile specialty chemicals and animal health and nutrition products.
Its main product categories include; (a) Home, personal and performance chemicals, (b) textile specialty chemicals and (c) animal health and nutritional products. The firm has presence in 17 foreign countries including Vietnam, Bangladesh and Mauritius.
By Aseem Thapliyal