Started in 2009, Rossari Biotech Limited is one of the leading specialty chemicals manufacturing companies in India providing customized solutions to specific industrial and production requirements of the customers primarily in the FMCG, apparel, poultry and animal feed industries through the diversified product portfolio comprising home, personal care and performance chemicals; textile specialty chemicals; and animal health and nutrition products. Company operates in India as well as in 17 foreign countries including Vietnam, Bangladesh and Mauritius. According to the F&S Report, as on September 30, 2019, they are the largest manufacturer of textile specialty chemicals in India providing textile specialty chemicals in a sustainable, eco-friendly yet competitive manner. Company's business is organized in three main product categories – (i) home, personal care and performance chemicals; (ii) textile specialty chemicals; and (iii) animal health and nutrition products. As on May 31, 2020, they had a range of 2030 different products sold across the three product categories. Company manufactures majority of the products in-house from the manufacturing facility at Silvassa in the Union Territory of Dadra & Nagar Haveli. The Silvassa Manufacturing Facility, located on 8.6 acres of land, has an installed capacity of 1,20,000 MTPA. The Silvassa Manufacturing Facility has flexible manufacturing capabilities for powders, granules and liquids. Further, they can interchange capacities across home, personal care and performance chemicals; textile specialty chemicals; and animal health and nutrition products categories, which ensures that they can manufacture any of these products at any point of time depending on the specific requirements of the customers and this facility also has a comprehensive range of testing as well as packaging capabilities. The annual capacity utilization of the Silvassa Manufacturing Facility has grown from 61.88% in Fiscal 2017 to 74.19% in Fiscal 2018 to 93.94% in Fiscal 2019 and to 82.46%. in Fiscal 2020. They are currently setting up another manufacturing facility at Dahej in Gujarat with a proposed installed capacity of 132,500 MTPA which will enjoy proximity to the deep-water, 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. Company has a wide network of distributors through which they sell the products. The pan-India distribution network has over 204 distributors as on May 31, 2020. Company sells its home, personal care and performance chemicals; and textile specialty chemicals in a business-to-business model through the distributors primarily to the customers in FMCG and apparel industries, respectively; and they sell the animal health and nutrition products through distributors either in a business-to-business model or to retailers. Company also has four regional branch offices in Delhi, Ludhiana, Ahmadabad and Surat for marketing of the products to the customers in the North and West India regions. The regional branch office in Surat also has a R&D support laboratory which provides localized and expedient technical support to the customers in that region. They also have 29 distributors spread in over 17 countries. They have also set up international offices in Ho Chi Minh City, Vietnam and Dhaka, Bangladesh as these two are primary overseas markets for the textile specialty chemical products. On financial performance front, Rossari Biotech has posted turnover/net profits of Rs. 260.60 cr. / Rs. 14.29 cr. (FY17), Rs. 300.43 cr. / Rs. 25.40 cr. (FY18), Rs. 517.12 cr. / Rs. 45.68 cr. (FY19) and Rs. 603.82 cr. / Rs. 65.03 cr. (FY20). Thus company has posted good growth over last couple of years on consistent basis. Rossari Biotech has posted an average EPS of Rs. 10.73 and average RoNW of 36.02% for last three fiscals. Issue is priced at a P/BV of 7.52. Listed peers are shown in above table. If we attribute latest earnings of FY20 on fully diluted equity post issue, then asking price is at a P/E of around 34. So this IPO looks fully priced. On BRLM's front, for Axis Bank Limited and ICICI Securities Limited, both have handled around 17 IPOs in last three fiscals, and from last 10 IPOs, 5 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, 5 are trading below issue price and remaining above issue price. ( As on 09.07.2020 ) As per financials, company's growth is good, RoNW is 31.79% for last three fiscals and issue is priced at P/E of around 33.94. When we compare is with other listed players, there is not much on offer. But as this sector has outperformed since pandemic situation, so listing gains may be possible. Performance of BRLM is average. So we give NEUTRAL rating to this IPO. If one can hold for longer period ( 3 -5 years ), then it may give good returns.
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