After a lull in the IPO market since SBI Card issue, Rossari Biotech is inaugurating the IPO season with its Rs 496 crore fresh issue and OFS
The Rs 496 crore initial public offering of Rossari Biotech, the Mumbai-based specialty chemical maker, has subscribed 60 percent on July 13, day one of bidding.
The public issue has received bids for 49,30,030 equity shares against offer size of 81,73,530 equity shares (excluding the anchor book portion), the latest subscription data on the exchanges showed.
The company already garnered Rs 149 crore through its anchor book on Friday.
The reserved portion of retail investors subscribed 93 percent and non-institutional investors 11.2 percent, while the portion set aside for qualified institutional buyers has seen subscription of 41.5 percent.
The first public issue launched during the lockdown period consists a fresh issue of Rs 50 crore and an offer for sale of 1.05 crore equity shares by promoters Edward Menezes and Sunil Chari who are selling 52.5 lakh shares each.
The price band for the issue has been fixed at Rs 423-425 per share and the issue will close for subscription on July 15. Bids can be made for a minimum lot of 35 equity shares and in multiples of 35 shares thereafter.
"There are a number of reasons why Rossari is a subscribe for short and long term investors alike. Fundamentally it is extremely strong with a topline, EBITDA and net profit CAGR of 32 percent, 63 percent and 67 percent respectively from FY17 to FY20," Nirali Shah, Senior Research Analyst at Samco Securities told Moneycontrol.
Rossari Biotech is one of the leading manufacturers of specialty chemicals for the textile space and caters to other categories such as home, personal care, animal health etc. with a list of top-notch client base. With exposure to over 17 foreign countries, Rossari has expanded to local as well as global markets to mark its presence in the competitive landscape.
"A robust management and sound corporate governance policy will drive growth going forward and this is already visible in its current return ratios (RoCE 25 percent and RoNW of 32 percent in FY20). Since its P/E is slightly overvalued at 31x compared to average P/E of 27x, short term investors can subscribe only for listing gains. However, for long term investors can hold on to this stock as it is still a fair deal because the handsome growth and strong book with a mere 0.3 Debt/equity ratio and sufficient cash still justify the valuation," Nirali said.
According to her, one major risk could be its dependence on the textile space, however, they are trying to reduce this exposure eventually (textiles formed 71.54 percent of its revenue in FY18 which is 43.71 percent in FY20). "This is a big positive."
As on May 31, 2020, Rossari Biotech had a range of 2,030 different products sold across these categories. The company manufactures majority of its products in-house from their manufacturing facility at Silvassa (which has 1.2 lakh MTPA capacity) and currently it is setting up another manufacturing facility at Dahej in Gujarat with a proposed installed capacity of 1,32,500 MTPA.It has pan India distribution network through 204 distributors and 17 countries through 29 distributors with operations in India as well in 17 foreign countries including Vietnam, Bangladesh and Mauritius.