Started in 2002, Fine Organic Industries Limited is Mumbai based company and the largest manufacturer of oleochemical-based additives in India and a strong player globally in this industry. Company produces a wide range of specialty plant derived oleochemicals-based additives used in the food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries. As at December 31, 2017, company had a range of 387 different products sold under the 'Fine Organics' brand. They are the first company to introduce slip additives in India and they are the largest producer of slip additives in the world. In the 12 months ended December 31, 2017, company had 603 direct customers and 127 distributors (who sold their products to more than 5,000 customers) from 67 countries. The direct customers are multinational, regional and local players manufacturing consumer products, such as Hindustan Unilever and Parle Products, and petrochemical companies and polymer producers globally. FOIL currently has three production facilities: one in Ambernath (Maharashtra) (the 'First Ambernath Facility'); one in Badlapur (Maharashtra) (the 'Badlapur Facility'); and one in Dombivli (Maharashtra) (the 'Dombivli Facility'). As atDecember 31, 2017, these three facilities have a combined installed capacity of approximately 64,300 tonnes per annum and utilisation is over 100% in FY18. Company manufactures some products on a job-work basis by Olefine Organics ('Olefine'), a partnership firm and a Promoter Group entity, at a manufacturing facility in Ambernath, Maharashtra (the 'Second Ambernath Facility'). FOIL plans to take over the operation of the Second Ambernath Facility once Olefine has received the approval to enter into a sub-lease with them from MIDC, which is the owner of the land on which the facility is located, which is expected to occur in the fourth quarter of Fiscal 2018. FOIL is currently planning to set up an additional production facility in Ambernath with a planned installed capacity of 32,000 tonnes per annum (the 'Third Ambernath Facility') and expects it to commence operations in the fourth quarter of FY19. In addition, they are currently planning to set up a new production facility in Leipzig, Germany with a planned initial installed capacity of 10,000 tonnes per annum and 50% equity interest (the 'German Facility') and expects it to commence operations in the third quarter of FY20. FOIL has a dedicated research and development ('R&D') centre located in Mahape, Navi Mumbai. They have developed several new products, such as Acetem, Datem and Lactem, and processes, such as in-house technology for the production of fatty amides for the polymer industry. As at December 31, 2017, company had 596 full-time employees. 191 of their full-time employees work at the corporate and registered offices and 405 of the full-time employees work at the facilities. FOIL primarily use vegetable oils, fats and fatty acids, fatty alcohols, fatty amines and polyols derived from oils such as rapeseed oil, palm oil, palm kernel oil, sunflower oil, castor oil, soybean oil, rice bran oil and other polyols to manufacture their products. When vegetable oils are fractionated, multiple fractions are produced. Only certain fractions are required to produce specific food and plastic additives. They manufacture additives from all the vegetable oil fractions. Using all the vegetable oil fractions in their wide range of additives reduces their raw material costs significantly. As per financial performance, FOIL has posted total income/net profits of Rs. 497.51 cr. / Rs. 20.90 cr. (FY13), Rs. 574.19 cr. / Rs. 61.75 cr. (FY14), Rs. 637.96 cr. / Rs. 53.20 cr. (FY15), Rs. 696.22 cr. / Rs. 76.73 cr. (FY16) and Rs. 819.35 cr. / Rs. 78.15 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 60.94 cr. on total revenue of Rs. 599.21 cr. So company has posted consistent growth over last couple of years except FY15. Company has posted an average EPS of Rs. 24.16 and average RoNW of 27.24% for last three fiscals. Issue is priced at a P/BV of 6.63 as per NAV of 118.04 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 30. As per RHP, industry average P/E ratio is 31 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, two merchant bankers associated with this issue. JM Financial has handled 18 public issues in the past three years. For recent 10 IPOs, 2 issues opened below offer price, one at par and remaining above issue price. Edelweiss has handled 18 public issues in the past three years. For recent 10 IPOs, 3 issues opened below offer price, one at par and remaining above issue price. As per financials, company's growth is good, but bottom line almost same for FY16, FY17 and FY18, RoNW is 27.24% for last three fiscals and issue is fully priced as per latest earnings. Company is planning to set up additional productional facility and this may increase revenues in upcoming years. So we give NEUTRAL rating to this IPO as per current market scenario.
✍️ Post a Comment