The IPO of agrochemical company Heranba Industries opened today and by 11:20 am, the issue was 0.25 times subscribed. The Gujarat-based company has has fixed a price band of ₹626-627 per share. It is a crop protection chemical manufacturer, exporter and marketing company based out of Vapi, Gujarat. The company has a strong 19.5% market share in the pyrethroids market and exports to over 60 countries. Pyrethroids find usage in significant applications across pest protection, environmental health and crop care as well as animal health. The issue closes on February 25.
Here are 10 things to know about Heranba IPO:
1) The share allocation in ₹525 crore Heranba IPO is likely to be finalised on March 2nd and listing may happen on March 5th, according to brokerages.
2) The lot size in Heranba IPO has been fixed at 23. Bigshare Services Pvt Ltd is the registrar of the IPO and will manage share allocation and refund.
3) 35% of the issue is reserved for the retail category.
4) Heranba is offering up to 99.8 lakh shares in the IPO, with 90.2 lakh shares under offer for sale and the rest through fresh issue of shares. Post issue, the shareholding of promoters will fall to 74.2%, from 98.8% earlier.
5) The funds ( ₹60 crore) raised through fresh issue of shares will be utilised to finance the company's working capital requirements and general corporate purposes.
6) In FY20, the company had recorded a turnover of ₹951 crore as compared to ₹745 crore in FY18 while profit jumped to ₹97 crore from ₹50 crore.
7) "As of FY20, 49% of its revenues came from the overseas markets which enabled Heranba to sail through the ups and downs locally. Covid-19 also had minimal impact on the company’s operations since all agrochemical companies were allowed to run at full capacities. Heranba’s revenues have grown at a CAGR of 13% from FY18-FY20 whereas its PAT has grown at a CAGR of 44% during the same period. On top of that it has recorded robust average ROE and ROCE of 31.3% and 56% respectively for the last three years," says Nirali Shah, Head- Equity Research, Samco Securities.
8) "The company has also been reducing debt on its books and trades at a reasonable valuation multiple of 25x P/E compared to its peers. The company faces high risk due to shoot up in raw material prices which forms a whopping 70% of its expenses. Moreover, it faces high competition risk from peers such as Rallis India, Bharat Rasayan and Sumimoto Chemical. But despite these risks, Heranba continues to capture a dominant position with sound fundamentals and diversification capabilities. Therefore, we recommend investors to subscribe to this IPO for listing gains. However, investors should also be cautious about the prevailing market sentiment and their own liquidity before aggressively subscribing to all IPOs," she added.
9) Another brokerage Religare said: "On the valuation front, the company is trading at a PE of 25x EPS FY20, which is at a discount to the peers. We have a positive view on the company for the long term, given its strong product portfolio, wide distribution network, valued customers and healthy growth opportunity in the sector. Investors having a long-term view can subscribe to the issue."
10) Emkay Global Financial Services Ltd and Batlivala and Karani Securities India are the book running lead managers to the IPO.
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