ROSSARI BIOTECH LIMITED: The chemical and FMCG lead company was started in the year 2003 as ROSSARI LABTECH, by Edward Walter Menezes and Sunil Srinivasan Chari as the promoters holding an equal amount of shares. In 2009, renamed ROSSARI BIOTECH LIMITED. For 16 years, the company could grow into various sectors like
1. Home and personal care
2. Textile specialty chemicals
3. Performance Chemicals
4. Animal health products
5. Nutrition products.
Note: This is completely an information sharing about Rossari biotech in all aspects and there will be no recommendation or promotion of this IPO
IPO:
Currently, with a wide range of over 2000 products, the company has decided to become a public organization by hedging 11,682,033 shares with a face value of Rs. 2, for a value of 496.14 crores through IPO (Initial Public Offerings). The single share will be around Rs. 423 to 425 as per NSE and BSE. The minimum slot will comprise 35 shares.
The IPO dates are between, July 13, 2020, to July 15, 2020.
Let’s have a look at the pros, cons, and fundamental analysis of the company.
Opportunities – Chemical Industry:
Both the Indian and global chemical industries are likely to grow at an immersive rate of around 12% and 6% respectively. Since, there is a trade-related issue with China, one of the growing companies Rossari Biotech will get the opportunity to manufacture many chemical products organic, polymers, etc.
The industry is likely to grow on an average of CARG 10% till 2025, as the demand has increased in domestic and globally.
Existing Shareholding Pattern:
The existing shareholding pattern is majorly held by two partners Edward Walter Menezes and Sunil Srinivasan Chari of 1,952,620 shares each, and the other two people are holding 95,280 shares each at the face value of Rs. 10. So, a total of 4,095,800 shares at face value of Rs. 10.
After, submitting for IPO the face value was Rs. 2. The total shares became 20,479,000. In which the company has decided to hedge its 57% of shares (11,682,033) to the public equity market for two main reasons.
1. Repayment of debts availed by the company – 65 Crores
2. Funding more capital requirement – 50 Crores.
Financial Imperatives (FY-19):
· The overall profit (FY-20) vs (FY-19) – 80 Cr vs 62.2 Cr.
· Profit after tax (FY-20) vs (FY-19) – 65.25 Cr vs 45.68 Cr
· Earnings Per Share (EPS) at Face Value Rs. 10 – 163.2 vs 103.32
· Earnings Per Share (EPS) at Face value Rs. 2 – 32.64 vs 20.
· EPS has shown a CAGR of 60% in the last three years
· Price per Book value P/B is 7.52, according to NAV of Rs. 56.48 on 30th March 2020.
· The current debt ratio of the company is about 0.3.
· P/E (Price to Earnings per share) is likely to be 22-26.
Please check the company financial statement, HERE
Advantages – Rossari Biotech Limited:
· The company is operated in over 18 countries worldwide.
· Diversified product portfolio with manufacturing sites, which addresses the unmet needs of various industries
· Strong R&D focusing on Innovation and sustainability, which is honored by an aggressive sales and distribution team
· Over 45 years of industry expertise is the pillar of the company
· The growth has been robust for the last three financial years with almost CAGR of 40%
· The company has paid a dividend of 200% in FY-18 and 50% in FY-19
· Leading manufacturer of Acrylic polymers in India
· They manufacture the majority of products in-house
Drawbacks – Rossari Biotech Limited:
· When compared to the company’s peers, the turnover is more minimal.
· It’s a debt company, but debt is minimal to be reduced in years forward.
· IPO price is highly-priced nearing 30 times its earning
· P/B is too high around 7.6.
Peer Companies:
Rossari Biotech Ltd has shared a list of its peer companies as follows,
1. Aarti Industries
2. Vinati Organics
3. Atul Ltd
4. Galaxy Surfactants
5. Fine Organics
The peer companies have turnover between 1000-2500 crores with a current P/E of 32(avg).
IPO – Investors Take Away:
· Absolutely, Rossari Biotech Ltd is one of the fast-moving companies in its industry with nearly 2000 products that are highly demandable and required for diversified sectors.
· Even though, the Company has some debt. The debt ratio has likely reduced in the last few years.
· P/E is likely to be on the lesser side when compared to its peer companies
· P/B is a concern as it hooks around 7.6
· Year on year the profits are growing at a double-digit rate which is a point to be considered
Owing to the above points, the industry will continue to grow, but the price per share in IPO is relatively higher. One who is thinking of investing can opt for 1 or 2 sots (35 or 70 shares) and have to hold it for a long period. One who is interested in buying a growing company IPO has to be a long-term investor for a minimum of 10 years.
Dates to Remember:
IPO open date – 13th July 2020
IPO close date – 15th July 2020
Finalization of allotment – 21st July 2020
Shares Credit to Demat account – 22nd July 2020
Market trade starts – 24th or 27th July 2020
Disclaimer:
Investments are related to market risk, kindly go through all the related documents before start investing. This article is completely non-promotional and we have shared the points on the new IPO issue company. We are never involved in promoting this IPO.