In past 3 years (FY17-FY20), company has delivered stupendous growth on revenue, EBITDA and net profit level, which grew at a CAGR of 42 percent, 57 percent and 60 percent respectively.
Mumbai-based specialty chemical maker Rossari Biotech's initial public offering has fully subscribed on July 14, the second day of bidding, backed by retail and qualified institutional buyers.
The Rs 496-crore public issue was subscribed 2.96 times as it has received bids for 2,42,70,750 equity shares against offer size of 81,73,530 equity shares (excluding anchor book), the data available on the exchanges showed.
The portion set aside for qualified institutional buyers has subscribed 2.7 times and retail 2.5 times, while the reserved category of non-institutional investors saw 4.3 times subscription.
The IPO, which will close for subscription on July 15, consists a fresh issue of Rs 50 and offer for sale of 1.05 crore equity shares by promoters Edward Menezes and Sunil Chari.
The price band for the issue has been fixed at Rs 423-425 per share.
While recommending Subscribe rating to the issue both for short and long term horizon, Astha Jain, Senior Research Analyst at Hem Securities said, "The company launched the issue at P/E multiple of more than 30x at the higher end of price band on post issue FY20 EPS basis. Rossari Biotech has shown strong growth in its financials in the last few years. The company is expected to see strong growth in coming years also after full commencement of Dahej facility."
Robust growth in user industries in India will support growth while emerging opportunities in exports led by clampdown in China and outsourcing opportunity from western countries is expected to spur growth in exports and import substitution which will benefit the company, she feels.
The specialty chemical manufacturer is engaged in the business through its three main product categories – (i) home, personal care and performance chemicals; (ii) textile specialty chemicals; and (iii) animal health and nutrition products. As of May-end 2020, the company had a range of 2,030 different products sold across the three product categories.
It has a manufacturing facility in Silvassa with an installed capacity of 1,20,000 MTPA, while the company is currently setting up another manufacturing facility at Dahej in Gujarat with a proposed installed capacity of 1,32,500 MTPA which will enjoy proximity to the deepwater, multi-cargo port of Dahej. The proposed state-of-the-art facility will be well-equipped with advanced technologies and will be commissioned in fiscal 2021.
Earlier, the company primarily depended on the textile space (nearly 71 percent revenue came from textile in FY18 which reduced to 44 percent in FY20), but steadily company has brought down the revenue share and simultaneously the revenue share of Home & Personal care division has increased and currently it accounts nearly 47 percent of FY20 revenue, which is a big positive for Rossari Biotech.
In the past 3 years (FY17-FY20), the company has delivered stupendous growth on revenue, EBITDA and net profit level, which grew at a CAGR of 42 percent, 57 percent and 60 percent respectively. Its robust growth was reflected in its return ratios with RoCE and RoNW of 25 percent and 32 percent in FY20.
"The company is financially sound company with low leverage in the balance sheet. Increase in capacity, robust management and sound corporate governance policy will drive growth going forward. However, the IPO is valued at a slightly higher premium at P/E 33.8x as compared to average industry P/E of 30x. But given its strong business model, healthy balance sheet, consistent growth in topline and bottomline, strong return ratios justify the valuation and we recommend our investors to subscribe the IPO for the listing gain as well as for long-term investment perspective," Ashika Stock Broking said.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.