Rossari Biotech's public issue that consisted a fresh issue of Rs 50 crore and offer for sale of 1.05 crore equity shares by promoters closed with 79.37 times subscription on July 15
Speciality chemical maker Rossari Biotech is set to debut on bourses on July 23 after receiving a stellar response to its Rs 496-crore public issue from investors.
Rossari Biotech will be the first to list during the lockdown and the second to debut after SBI Card IPO in March this year.
Given the appetite during subscription period last week and strong fundamentals, Rossari Biotech is likely to start the first day with 30-40 percent premium over its issue price of Rs 425 per share.
The public issue, which consists a fresh issue of Rs 50 crore and an offer for sale of 1.05 crore equity shares by promoters, closed with a massive 79.37 times subscription on July 15, backed by a strong response from all kind of investors.
"We expect the stock to list at a whopping premium of 30-40 percent on debut day," Astha Jain, Senior Research Analyst at Hem Securities told Moneycontrol.
Manali Bhatia, Senior Research Analyst at Rudra Shares and Stock Brokers also expect the stock to list at a premium of Rs 130-175 which translates to a listing gain of around 30-40 percent over the issue price.
The grey market premium is around Rs 160-175 per share, sources told Moneycontrol.
The upcoming new manufacturing unit at Dahej in Gujarat with a proposed installed capacity of 1,32,500 MTPA would significantly double its capacity and improve the revenue growth even further, she feels.
Rossari Biotech, which provides customised solutions to specific industrial and production requirements of customers primarily in the FMCG, apparel, poultry and animal feed industries, already has an installed capacity of 1,20,000 MTPA at Silvassa which was the only manufacturing facility.
Company has a diversified product portfolio and has a range of 2,030 different products sold across the different product categories as on May 31, 2020.
Company has been able to increase its total revenue from fiscal 2018 to fiscal 2020 at a compound annual growth rate of 41.65 percent, EBITDA at a compound annual growth rate of 56.58 percent and profit after tax has increased at a compound annual growth rate of 60.27 percent over the same period.
It has strong financial ratios, ROCE at 24.79 percent and RONW being highest amongst peers at 31.79 percent. In fact, considering the current market scenario this particular sector on a whole is in focus, especially after COVID-19.
The company operates in the home, personal care and performance chemicals; textile speciality chemicals; and animal health and nutrition segments.
The surge in demand for home, personal care and performance chemicals segment given the spike in demand for sanitizers, disinfectants and handwashes augur well for the company, said Akash Jain of Ajcon Global.
"The company is experiencing robust recovery from June 2020 onwards. Revenue during June 2020 is expected to surpass the average monthly revenue of FY20. Due to the renewed focus on the Home, Personal Care & Performance Chemicals segment and the ability of the company to deliver during critical times led to the addition of many new large clients during the last 3 months," he added.
The company generates around 43 percent of revenue from textile speciality segment, which can be a concern as this sector is hit hard by pandemic, but it has reduced dependence from 72 percent in FY19.
"Rossari Biotech IPO was a great success and subscription levels were above market expectations. We are optimistic on the sector as well as the company as rising "Make in India" campaign would add impetus to the emergence of India as a manufacturing hub for the specialty chemicals," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
"We believe Rossari biotech is well-positioned to tap the shifting global demand by having customised solutions to the apparel, animal & poultry feed and FMCG industries by offering a diversified product portfolio. Considering all the factors and above market demand, we expect a handsome listing gain around 30-35 percent on issue price Rs 425," he said.
Rossari Biotech will utilise its net fresh issue proceeds for repayment/prepayment of certain indebtedness, funding working capital requirements; and general corporate purposes.
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