The seventh public offer of this month, that of Heranba Industries, has hit Dalal Street today. This Gujarat-based crop protection chemical manufacturer, exporter, and marketing company is one of the leading domestic producers of synthetic pyrethroids with a 20 per cent market share, and has presence in a wide range of products across the entire value chain of synthetic pyrethroids. It has an extensive 9,400 dealers or distributors supported by 21 stock depots spread across 16 states and 1 union territory in India.
STRONG FINANCIALS: Over the past three years, Heranba's revenue grew at a CAGR of 13.3 per cent to Rs 951 crore in FY20 while its EBITDA and net profits grew at much faster pace of 21.4 per cent and 44.4 per cent, respectively, during the period. "Company's return ratios are superior to peers (ROE is above 30%). It has a strong financial position and has been generating positive cash flow," said an Angel Broking IPO note.
As on FY20, Heranba has domestic and exports revenue share of 52 per cent and 48 per cent respectively. Out of the total exports revenue approximately 73 per cent of the contribution is from top 10 countries with China contributing the highest share of 28 per cent. Going forward, the company intends to foray into the highly regulated markets of US and Europe, where they have already received few registrations of techincal in European markets. "Hence, foraying into the regulated markets is in turn likely to enhance revenue visibility coupled with improved margin profile of the company going forward," highlighted an Antique Stock Broking IPO note.
LEGAL PROCEEDINGS: There are outstanding legal proceedings involving the company, promoters and certain directors. Directors, Sadashiv K. Shetty, Raghuram K. Shetty, Sujata S. Shetty and Vanita R. Shetty were disqualified to act as director under Section 164(2) of the Companies Act, 2013 in the past. One of the group companies, Shakti Bio Science Limited was declared a "Wilful Defaulter" by Cosmos Bank during the period June 30, 2016 to December 31, 2017.
VALUATIONS: The company has priced its issue at a PE of 25x which is at a discount to the peers-- its peers such as Rallis India, Sumitomo Chemicals and Bharat Rasayan are trading at a trailing PE of 23.1, 47.3 and 27.0, respectively. "We have a positive view on the company for the long term, given its strong product portfolio, wide distribution network, valued customers and healthy growth opportunity in the sector," pointed a Religare Broking IPO note.
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