Anupam Rasayan IPO Analysis!
Last updated: 09 Mar, 2021 | 06:08 am
Anupam Rasayan is set to raise up to Rs 760 crore via IPO which opens on 12th March, Friday. Here are the details:
About Anupam Rasayan
- Anupam Rasayan is one of the leading companies engaged in the cotton synthesis and manufacturing of specialty chemicals in India.
- The business has 2 verticals: a) Life Science related specialty chemicals that are used in agrochemicals, personal care, and pharmaceutical sector and b) other specialty chemicals such as pigment & dyes, polymer additives, etc.
- The company has a strong long-term relationship with many multinational companies like Syngenta Asia Pacific Pte Ltd, Sumitomo Chemical Company Ltd, and UPL Limited.
- It has 6 manufacturing facilities out of which 4 are situated at Sachin and 2 are located at Jhagadia with an aggregated installed capacity of 23,438 MT.
- Anupam Rasayan faces competition from both domestic and multinational corporations. The Indian specialty chemicals industry is highly fragmented in nature. The key players include PI Industries, Aarti Industries, Navin Fluorine, Coromandel International
- In addition, there are several international players, specifically from China, United States and European Union, engaged in contract manufacturing of specialty chemicals. The table below shows various competitors of Anupam Rasayan.
- Anupam Rasayan has reported lower margins as compared to its listed competitors. The company also lower revenues as compared to its peers. The table below shows total revenues from Anupam Rasayan as compared to its listed peers.
- The company has seen a steady growth in topline over the last 3 years, with revenue from operations increasing from Rs 341 cr in FY18 to ~Rs 529 cr in FY20. The total revenue increased at a CAGR of 24.29% from fiscal 2018-2020.
- Revenues generated from sales to the company’s top 10 customers represented 86.65% and 84.01% of its revenue from operations in FY20 and in the nine months ended December 31, 2020, respectively. This is a cause for concern, as it represents a concentration risk.
- Its revenue consists of 65% of exports and 35% of domestic sales.
- In FY20, and in the nine months ended December 31, 2020, life sciences related specialty chemicals segment accounted for 95.37% and 93.75% of the company’s revenue from operations. In this too, the company derives a major share of revenues from Crop Protection Chemicals (around 65- 72%).
- The company is witnessing good growth in the export segment (CAGR of 33% from FY18-20). The operational margins are healthy and rapidly growing.
- For the six months ended September, Anupam Rasayan reported a profit of Rs 26.48 crore compared with Rs21.74 crore a year ago. Revenue for the period rose 51.5% on year to Rs 355.13 crore.
- The RoNW has been in the range of 9-11% over the last few years.
About the issue
Issue open: 12th March- 16th March 2021
Price band: Rs 553-555 per share
Issue Size: Rs 760 crore (Gross)
Issue Size: The issue by the specialty chemicals company comprises entirely of fresh issuance of shares and the net proceeds would be utilised towards repayment debt and for general corporate purposes
Reservation for QIB: 50% , Retail - 35%, Non institutional Investors -15%.
Employee quota: The company has kept up to 220,000 shares worth Rs 11 crore reserved for employees, who would also be offered a discount of Rs 55 per share.
Bid lot: 27 shares, and in multiples of 27 shares
At the higher end of the price band, Anupam Rasayan IPO is aggressively priced at ~80 times FY20 Earnings Per Share (on a trailing basis), and around ~69 times annualised EPS of 9MFY21. While this is lower than listed peers such as PI Industries (current PE of ~700) and Astec Life Sciences ( current PE of ~460), Anupam Rasayan has lower return ratios as compared to them. As is the case in the IPO season, good businesses are getting priced at aggressive valuations, and Anupam Rasayan is no exception. The management has said that they have completed major Capex plans of Rs. 800 crore in the last three years and expanded capacities are in operations, the company has started yielding benefits with a CAGR of 24.29% in total revenue from FY18 to 9M-FY21 and trends are expected to continue.
Given the company’s steady topline growth, stable margins, good return ratios, strong market share position, and good growth outlook we remain positive on the prospects of the issue.