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Last Updated : Apr 23, 2019 07:44 PM IST | Source: Moneycontrol.com

Neogen Chemicals IPO to open on April 24; here's all you need to know

Neogen Chemicals (NCL) is manufacturers of bromine-based, and lithium-based, specialty chemicals

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Specialty chemical maker Neogen Chemicals will open its initial public offer for subscription on April 24.

It would be the fourth company coming out with a public issue in the financial year 2019-20, after Rail Vikas Nigam, Polycab India and Metropolis Healthcare.

The issue will close on April 26. The book running lead manager to the offer is Inga Advisors Private Limited and Batlivala & Karani Securities India Private Limited is the co-book running lead manager.

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Here are 10 key things that one should know before subscribing the issue:

Company profile

Neogen Chemicals (NCL) is manufacturers of bromine-based, and lithium-based, specialty chemicals.

Specialty chemicals, including bromine and lithium-based compounds, comprise pharmaceutical intermediates, agrochemical intermediates, engineering fluids, electronic chemicals, polymers additives, water treatment chemicals, construction chemicals and flavours and fragrances.

NCL manufactures specialty organic bromine-based chemical compounds (bromine compounds) and other specialty organic chemical compounds as well as specialty inorganic lithium-based chemicals compounds (lithium compounds and together with the bromine compounds the products). They commenced their business operations in 1991, at Mahape, Navi Mumbai manufacturing facility with a few bromine compounds and lithium compounds.

As on February 28, 2019, NCL manufactured an aggregate of 198 products comprising 181 organic chemicals and 17 inorganic chemicals.

In addition to manufacturing their standard products, NCL also undertakes custom synthesis and contract manufacturing.

Company’s manufacturing facilities are located in Mahape, Navi Mumbai in Maharashtra (Mahape Facility) and Karakhadi, Vadodara in Gujarat (Vadodara Facility).

Neogen has established a customer base of about 1,363 customers of which 1,237 are domestic customers and 126 customers are international customers that include Austin Chemical Company Inc, USA, CBC Co Ltd (Japan), Divi's Laboratories, Laurus Labs, Solvay Specialties India, Thermax and Voltas.

About public issue

The IPO consists of a fresh issue aggregating up to Rs 70 crore by the company and an offer for sale of up to 16,99,600 equity shares by Haridas Thakarshi Kanani and up to 12,00,400 shares by Beena Haridas Kanani (promoters).

The issue price band is fixed at Rs 212-215 per share. Bids can be made for a minimum lot of 65 equity shares and in multiples of 65 equity shares thereafter.

The anchor investor offer period will be one working day prior to the issue opening date, that is April 23.

Amount to garner

The company has aimed to raise Rs 131.48 crore at the lower end of price band and Rs 132.35 crore at the upper end.

Objectives of offer

Neogen will use fresh issue proceeds for repayment of all or a portion of certain borrowings, early redemption of 9.8 percent FRCPS, long term working capital, and general corporate purposes.

The company will not get any money from the offer for sale issue that will go to selling shareholders - Haridas Thakarshi Kanani and Beena Haridas Kanani.

Competitive strength

Here are company's primary competitive strengths:

1) Experienced promoters with domain knowledge

2) Large and diverse array of products

3) Diversified and stable customer base

4) Growth led by continuous investment in R&D

5) Strong management team led by persons with significant experience in the specialty chemicals industry

6) Specialised business model with high entry barriers

7) Established and stable relationship with suppliers

Business strategy

The company believes following business strategies will enable it to continue on a growth path:

1) Expanding production capacities

2) Increasing contract manufacturing portfolio

3) Augmenting growth in domestic and global markets

4) Improving financial performance through focus on operational efficiencies and functional excellence

5) Focus on advanced specialty intermediates that offer higher value addition

6) Competition

Financials

With increased capacity through expansion and acquisition, the company reported 19.7 percent YoY CAGR rise in consolidated operating revenue over FY14-18 to Rs 164.01 crore in FY18. Average business from organic and inorganic compounds stood at 68 percent and 32 percent, respectively, over FY14-18. For the 9M FY19, consolidated operating revenue stood at Rs 159.23 crore.

The company reported a 26.1 percent CAGR rise in consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) over FY14-18 to Rs 28.99 crore in FY18. EBITDA margin improved from 14.4 percent in FY14 to 17.7 percent in FY18. In M9FY19, consolidated EBITDA stood at Rs 27.13 crore with a margin of 17 percent.

The company reported a 30.3 percent CAGR rise in reported PAT over FY14-18 to Rs 10.5 crore in FY18.

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Shareholding

Promoter group holds 95.79 percent stake in the company and post-IPO their shareholding will come down to 70 percent. Public holding will increase from 4.21 percent to 30 percent.

Equity shares held by 10 largest shareholders as of April 11:

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Management

Haridas Thakarshi Kanani is the Chairman and Managing Director of the company. He oversees manufacturing, research and development and general operation and management of company's manufacturing units.

Harin Haridas Kanani is the Joint Managing Director of the company. He heads various business divisions of the company including research and development, business development, quality control, purchase, marketing and finance.

Sanjay Natwarlal Mehta, Hitesh Bharatkumar Reshamwala, Avi Kersi Sabavala and Ranjan Kumar Malik are Independent Directors to the board. Shyamsunder Radeshyam Upadhyay is the Executive Director and Anurag Surana is Non-Executive Director.

Mahesh Mukundrai Tanna is the Chief Financial Officer and Lalit Ashok Karne is the Company Secretary & Compliance of company.

Competition

Its major competitors in India include Aarti Industries, Atul Limited, Mody Chemi Pharma Private Limited, NFIL, Pacific Organics Private Limited, Paushak Limited and Vinati Organics Limited.

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First Published on Apr 23, 2019 08:58 am
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