Rossari Biotech IPO is slated to open on July 13 in the price band of Rs 423-425 per share. Rossari Biotec IPO entails rasing about Rs. 496.25 crore by means of a a fresh issue of upto Rs. 50 crore and an offer-for-sale by the two promoter, Edward Menezes and Sunil Chari, each selling 52.5 lakh shares. Rossari Biotech IPO is the first to hit the market after the Covid-19 pandemic disrupted the economy. Rossari Biotech Ltd. is a specialty chemicals manufacturer focusing on Textile , home, personal care and performance chemicals.
Rossari Biotech IPO Details
|Issue Period||13th July – 15 July 2020|
|Face Value||₹ 2/-|
|Issue Details||Fresh Issue: upto ₹ 50 Cr|
|+ Offer for Sale of upto 10,500,000 Equity Shares|
|Issue Size (Rs. Cr)||₹ 496.25 Cr|
|Price Band||₹ 423 – 425|
|Bid Lot||35 Equity Shares and multiple thereof|
|Issue Structure :|
|QIB||50% of the offer|
|NIB||15% of the offer|
|Retail||35% of offer (4,086,765 Shares, ₹173.69 Cr)|
|BRLMs||Axis Capital, ICICI Securities|
|Registrar||Link Intime India Pvt. Ltd.|
- ANCHOR ISSUE: Ahead of its IPO, Rossari Biotech raiseed ₹148.8 crore from 15 anchor investors. The anchor investors include Abu Dhabi Investment Authority, Malabar India Fund, Ashoka India Opportunities Fund, Kotak Mahindra (International) Ltd, IIFL Special Opportunities Fund, HDFC Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund, SBI Mutual Fund, Sundaram Mutual Fund, HDFC Life Insurance Company, Mirae Asset Mutual Fund, Goldman Sachs among others.
About Rosari Biotech.
- Rossari Biotech Limited is one of the leading specialty chemicals manufacturing companies in India.
- It caters to various customers’ needs across FMCG, Apparel, Poultry and Animal Feed industries.
- It has a a diversified product portfolio comprising
- Home, Personal Care and Performance Chemicals;
- Textile Specialty Chemicals; and
- Animal Health and Nutrition Products.
- As on May 31, 2020, it had a range of 2,030 different products sold across these categories.
- Rossari Biotech is the largest manufacturer of textile specialty chemicals in the country, providing textile specialty chemicals in a sustainable, eco-friendly yet competitive manner.
- Rossari Biotech manufactures majority of its products at Silvassa and is setting up another manufacturing facility at Dahej.
- It has 2 R&D facilities– one at Silvassa and second in Mumbai.
- Rossari Biotech has pan-India distribution network through 204 distributors and 17 countries through 29 distributors.
- Rossari Biotech operates in India as well as in 17 foreign countries including Vietnam, Bangladesh and Mauritius.
Rossari Biotech: Financials
|Particulars / in cr||FY20||FY19||FY18|
|Revenue from Operations||600.09||516.22||299.06|
|Revenue Growth (%)||16.25%||72.61%||15.29%|
|Profit Before Tax||87.84||63.39||37.47|
|NAV (₹ )||56.48||25.58||17.99|
|Equity Share Capital||10.15||4.4||4.4|
|Reserves as stated||276.53||119.41||82.68|
|Net worth as stated||286.68||123.81||87.08|
|Long Term Borrowings||33.96||0.67||1.29|
|Short Term Borrowings||27.05||3.27||18.83|
|EPS (₹ )||13.42||9.44||5.25|
|Equity Post IPO||10.39|
|EPS (Post Issue) FY19||12.56|
|PE Post IPO||33.84|
|Market Cap in Rs. Cr.||2208|
Rossari Biotech:Objectives of Issue
- Repay or prepay borrowings of ₹65 crore
- Meet working capital requirements of ₹50 crore
- General corporate purposes
- Rossari is largest manufacturer of textile specialty chemicals in India.
- In Fiscals 2020, 2019 and 2018 the revenue from sale of Textile Specialty Chemicals products represented 43.71%,52.13% and 71.54% respectively, of its revenue from operations.
- Rossari’s boitech revenue, operating profit and net profit grew at a compounded annual rate of 32%, 63% and 67%, respectively, thfrom FY 2017 to 2020.It also enjoys healthy Ebitda margins.
- The compnay is currently setting up another manufacturing facilityat Dahej in Gujarat with a proposed installed capacity of132,500MTPA to expand its manufacturing capacity in line with growth in overall business.
- This Dahej Manufacturing Facility will also enjoy a proximity to the deep-water, multi-cargo port of Dahej which is a cost and logistical advantage. The proposed state-of-the-artfacility is to be commissioned in Fiscal 2021.
- In Fiscal 2020, Fiscal 2019 and Fiscal 2018, company’s revenue from exports was11.04%,13.92% and13.77%of its total revenue, respectively.
- Rosarri Biotech customers in the home, personal care and performance chemical products category include RSPL Limited (Ghadi detergent), IFB Industries, Hindustan Unilever, Panasonic India, BSH Household Appliances Manufacturing Pvt Ltd., CICO Technologies, Rentokil Initial Hygiene India and Millennium Papers
- Effect of COVID-19 on company’s business and operations is uncertain
- High dependence on Textile business
- The company has high working capital requirements.
- Raw material accounts 60% of the cost & some of it is linked to price movements in crude.
|Items/Rs. Cr.||Aarti||Atul||Fine Org||Galaxy||Rossary||Vinati|
|CAGR Sales 3 yr||3.91||12.11||9.47||3.18||36.70%||17.65|
|CAGR Profit 3 yr||28.6||53.86||28.18||27.31||65.90%||52.32|
Rossari Biotech IPO: Assessment
Tightening of environmental norms for chemical industry in developed countries and subsequently in China have contributed to the growth of exports from India.
Rossari Biotech focus is on eco-friendly and sustainable chemicals for the entire value-chain of thetextile industry (except dyes).
Rossari Biotech has been increasing the share of products others than textile chemcals and has increased revenues from home, personal care and performance chemicals.
After the share sale, the total promoter shareholding will stand at 73% from current 95%.
Rossari Biotech raised about 100 crore from equity at a fixed price of Rs. 425 per share in February 2020 as part of a pre-IPO placement. This included allotment to some schemes of IIFL Special Opportunities Fund, Mirae Asset, Axis New opportunities AIF-I, ICICI Lombard General Insurance Company Limited, Sundaram Mutual Fund, India Acorn Fund etc.
Rossari ad planned a IPO in March 2020, but postponed it due to downturn in markets on account of COVID 19.
Rossari’s growth in revenues, operating profit and net profit has been high in last three financial years . Its Ebitda margin expanded to 17.4% from 9.2% during this period.
In the RHP Rossari Biotech has shown Aarti Industries, Vinati Organics, Atul Ltd., Galaxy Surfactants and Fine Organics as its listed peers. The companies return ratios are comparable or better than its peers with good growth in last 3 years.
On the Post issue equity, P/E works out to be 33.81, which though not cheap but considering the current craze for chemical companies, there may be some scope for upside.
I intend to apply in Rossari Biotech IPO but chances of allotment are poor due to expected heavy oversubscription.
At present Rossari Biotech IPO is commanding a Kostak of Rs. 400-500 & Grey market Premium (GMP) of Rs. 100 plus. These are based on initial rates.
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Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.