Rossari Biotech’s Rs 500 crore IPO opens Monday: Price band, lot size, and what do analysts say

The Rossari Biotech issue will consist of a fresh issue of equity shares of Rs 50 crore and an offer for sale.

After a long pause, the initial public offering (IPO) market is set to witness some action next week with Rossari Biotech launching with its IPO on Monday. The specialty chemicals firm has fixed a price band of Rs 423-425 per equity share for the Rs 500 crore IPO, including an offer for sale (OFS). Rossari Biotech IPO will be first to enter the market after Antony Waste Handling Cell, which had to withdraw its Rs 206 crore IPO in March as the market began to tank. Rossari Biotech has already managed to raise Rs 148 crore from anchor investors, including top fund houses like SBI Mutual Fund, ICICI Mutual fund, and HDFC Mutual fund.

The Rossari Biotech issue will consist of a fresh issue of equity shares of Rs 50 crore and an offer for sale of 1.05 crore shares by the promoters. Each equity share will have a face value of Rs 2 and bids can be made for 35 shares and in multiples thereafter. The IPO will open on July 13 and will close on July 15. In February this year, Rossari Biotech undertook a pre-IPO placement aggregating Rs 100 crore. During the process, the company has allotted 2.35 million shares at a price of Rs 425 per share.

“At the higher price band of Rs. 425 per share, Rossari’s share is valued at a P/E multiple of 33.7x (to its restated FY20 EPS of Rs. 12.6), which is a premium to peer average of 29.5x,” said a report by Choice Broking. With a diversified portfolio, Rossari Biotech is comfortably placed in the industry. At the end of May, the company had over 2,000 products. However, analysts say, concerns at this juncture stem from uncertainties in the world. Choice Broking has a “subscribe with caution” rating on the issue.

Rossari Biotech has a strong fundamental appeal with the top line, EBITDA and net profit CAGR of 32%, 63% and 67% respectively from the financial year 2017 to 2020. The specialty chemical manufacturer informed that its total debt has gone from Rs 27.7 crore in financial year 2018 to Rs 77.2 crore in the last fiscal year. The company has, however, said it plans to trim debt using the net proceeds from the fresh issue. “ With an exposure to over 17 foreign countries, Rossari has expanded to local as well as global markets to mark its presence in the competitive landscape. Robust management and sound corporate governance policy will drive growth going forward and this is already visible in its current return ratios,” said Nirali Shah, Senior Research Analyst, Samco Securities. She added Rossari is a ‘subscribe’ for short and long term investors alike.

With the world grappling with the coronavirus pandemic, a slowdown in the economic growth and demand of the company’s product could be hit. Along with that, there is intense competition in the specialty chemicals space. Not diving into the fundamentals, Vishal Wagh, Research Head, Bonanza Portfolio said that he would advise staying away from a fresh issue keeping in mind that there is uncertainty in the world right now. Rossari Biotech