MUMBAI: Specialty chemicals manufacturer Rossari Biotech Limited made a stellar stock markets debut on Thursday with the stock ending at ₹752, a 76.94% premium to its issue price of ₹425 a piece. The stock was listed at ₹669.25, 57.47% higher than its issue price.
This is first stock markets listing in financial year 2021 and most importantly after covid-19 outbreak which had dried up activity in the primary markets.
The initial public offering (IPO) open for sale during 13-15 July with a price band of ₹423- ₹425 per share was oversubscribed a whopping 79.37 times. The share sale was meant to raise nearly ₹496 crore.
The proceeds from the fresh issue and the pre-IPO placement will be utilised to repay or prepay borrowings of ₹65 crore, fund its working capital requirements of ₹50 crore and for general corporate purpose, it said in a press statement. The company will not receive any proceeds from the offer for sale.
Ahead of the IPO, Geojit Financial Services had said at the upper price band of ₹425, the stock is available at price to earnings (PE) of 33.8 times FY20 which seems expensive when compared to peers. However, considering return on equity (RoE) at 44%, strong revenue growth and expanding margin profile support its long term prospect, it said.
Lack of long-term agreement with key customers, uncertainty in relation to continuing effect of the covid-19, and osing market share to cheaper imports from other countries are its key risks, according to Geojit.
Keshav Lahoti, Associate Equity Analyst, Angel Broking Ltd said, “None of the listed chemical companies has the same business as Rossari. Its specialty chemical peers such as Galaxy Surfactants, Fine Organics, Aarti industries, Atul and Vinati Organics are currently trading at FY2020 P/E multiples of 24.0 times, 36.6 times, 30.5 times, 20.6 times and 30.9 times respectively."
"We believe Rossari will command a premium over most of its chemical peers as it is net debt free as well as it has better asset turnover, working capital days, ROE and ROCE better than most of its peers,” he added.
In fiscal 2020, the company's total revenues stood at ₹603.81 crore and net profit at ₹65.25 crore. Over the last three years, it has managed to clock a compounded annual growth rate of 41.65% for its revenues and a compounded annual growth rate of 60.27% for its profit after tax. The debt-equity ratio of the company stood steady at 0.23 across fiscals 2018-2020.
The company’s specialty chemicals are used in soaps and detergents, paints, inks, tiles, papers, natural and man-made textiles. It also makes products like shampoos, powders, sprays and creams for pets and nutrition items for poultry. It plans to venture into the construction chemicals market and water treatment formulations market. It operates in India as well as 17 foreign countries, including Vietnam, Bangladesh and Mauritius.
