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Last Updated : Jul 20, 2016 02:48 PM IST | Source: Moneycontrol.com

Advanced Enzyme Tech IPO opens: Should you subscribe?

Most analysts seem to be impressed with the IPO and recommend subscribing it. The proceeds of the fresh issue will be used towards repayment/pre-payment of certain loans availed by Advanced Enzymes USA and general corporate purposes.

 
 
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Advanced Enzyme Technologies initial public offering (IPO) opens for subscription on July 20. Price band has been fixed at Rs 880-Rs 896 per equity share to raise over Rs 411 crore through its issue.

The IPO comprises fresh issue of equity shares worth Rs 50 crore and an offer for sale (OFS) for up to 4,034,470 scrips by promoter group shareholders, along with Kotak Employees Investment Trust, Kotak India Venture Fund I and Kotak India Venture (Offshore) Fund. It has already garnered around Rs 123 crore from as many as 15 anchor investors. Little over 13.71 lakh shares were allotted to the anchor investors at Rs 896 apiece, the upper end of the price band for the Rs 411 crore IPO.

So, should retail investors subscribe it?

Most analysts seem to be impressed with the IPO and recommend subscribing it. The proceeds of the fresh issue will be used towards repayment/pre-payment of certain loans availed by Advanced Enzymes USA and general corporate purposes.

Betting on the issue, Anand Rathi says that given its scale of operation is very low (below Rs 300 crore), it has immense scope and opportunity to grow. Advanced Enzyme Technologies has 20 years experience and is second only to global leader Novozymes. The enzyme industry is highly concentrated because manufacturing of enzymes, enzyme products and enzyme solutions requires specialised knowledge of enzyme fermentation.

"At upper end pricing of the IPO values Advanced Enzyme at 24.7 times earnings in FY2016. It is available at PE of 20.3 times its FY17 earnings. The company has no listed peer in India while global enzymes leader Novozymes trades at a PE ratio of 35.5," it says in a report.

Hem Securities recommends subscribing citing attractive valuations. It says Advanced Enzymes Technologies looks reasonably priced as compared to its Novozymes. "The company is bringing the issue at price band of Rs 880-896 per share thus converting in price to equity multiple of 25-26 on post issue FY16 eps of Rs 35 per share," it says.


Ajcon Global recommends investors to subscribe the issue. At the upper end of the price band of Rs 896, the IPO is valued at 25.5 times at FY16 Post issue P/E which is cheap as compared to its immediate global peer Novozymes.


Best factors in favour of Advanced Enzyme are that it is largest Indian enzyme company, specialised business model with high entry barriers which has financial stability and stable cash flows. The company also has lean balance sheet with virtually no debt and first player in Indian enzymes market tapping equity markets.

Close

Geojit BNP Paribas recommend subscribing the issue as it finds issue to be at a reasonable valuation given the specialised business model, integrated presence across the enzyme value chain coupled with strong R&D & manufacturing capabilities.

Reliance Securities recommends subscribing to the IPO on back of high return ratios, reasonable valuations and healthy earnings/EBITDA growth.


However, Angel Broking has a neutral rating as it believes that the company’s scale of operations is small in comparison to its global peers and its business is dependent on few products. "We believe the price fully discounts all the positives. Thus, we recommend a neutral view on the issue," it adds.

Things to know about the company

On consolidated basis revenue from operations grew by 31 percent to Rs 294 crore in FY16 over previous year. Advanced Enzyme Technologies net profit grew 56 percent at Rs 79 crore with margins at 27 percent in FY16. EBITDA growth was 52 percent at Rs 138 crore on YoY basis and margins at 47 percent.

It has posted CAGR of more than 20 percent in its operating profit & profit after tax from FY12 to FY16 while on margin front it is successfully able to post more than 40 percent margin on operating level while it is more than 20 percent margin on net profit level for FY16.

The company manufactures enzymes using all four natural origins plant, animal, bacterial and fungal. It operates through two business verticals healthcare and nutrition (88 percent of sales; human and animal nutrition) and bio-processing (12 percent of sales; food processing and non-food processing). It offers products to its global clientele of over 700 customers spanning across 50 countries.

The company has a portfolio of 400 proprietary products developed from 60 indigenous enzymes.

Globally, it ranks among the top 15 companies in sales rankings. In the domestic market, it is second only to global leader Novozymes. Competitorsinclude players like Biocon, Novozymes (Denmark), DSM Nutritional Products,DuPont Danisco, Amano Enzymes (Japan), AB Enzymes (UK) and BASF.

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First Published on Jul 20, 2016 09:00 am
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