IPO Analysis: Anupam Rasayan India

IPO rating- Invest for listing gains 

About the issue 

The company is entering the capital market with its initial public offering (IPO) of equity shares of the face value of Rs 10 each. This will mark the eleventh public offering of the year. The price band of the issue has been fixed at Rs 553 to Rs 555 per equity share. The IPO opens on March 12, 2021 and closes on March 16, 2021. The issue may list on March 24, 2021. Anupam Rasayan IPO has a market lot size of 27 shares. A retail-individual investor can apply for up to 13 lots (351 shares or Rs 1,94,805). Half of the issue is reserved for qualified institutional buyers, 35 per cent for retail investors, and 15 per cent for non-institutional bidders. The objectives of the offer are to make prepayment/repayment of the company's indebtedness including accrued interest along with meeting general corporate purposes. 

About the company 

Incorporated in 1984, Anupam Rasayan is one of the leading companies engaged in the cotton synthesis and manufacturing of speciality chemicals in India. It has two distinct business verticals. One is life science-related speciality chemicals comprising products related to agrochemicals, personal care, and pharmaceuticals, while the other consist of specialty chemicals, comprising speciality pigment & dyes, and polymer additives. It has developed strong and long-term relationships with various multinational corporations, including Syngenta Asia Pacific Pte Ltd, Sumitomo Chemical Company Limited and UPL Limited that has helped the company to expand its product offerings and geographic reach across Europe, Japan, the United States and India. It has been manufacturing products for certain customers for over 10 years. In the six-month period ended September 30, 2020, it had manufactured products for over 45 domestic and international customers, including 15 multinational companies. The Government of India has also recognised the company as a three-star export house. Currently, the firm operates 6 multi-purpose manufacturing facilities in Gujarat (India) with four facilities located in Sachin and Surat while the other two in Jhagadia and Bharuch with an aggregate installed capacity of 23,438 MT. 

Strengths: 

Global footprint in countries like Singapore, USA, Europe, Japan, etc. 

6 automated and strategically located manufacturing facilities. 

Consistent track record of financial performance. 

Diversified and customised product portfolio with a strong supply chain. 

Experienced promoters and strong management team. 

Financials 

For the first six months of the financial year 2020-21, Anupam Rasayan reported a profit of Rs 26.48 crore compared to Rs 21.74 crore, a year ago. The revenue for the period increased 51.5 per cent on a YoY basis to Rs 355.13 crore. The company primarily caters to agrochemical, personal care, and pharmaceutical sectors, which account for over 95 per cent of its revenue. From FY18 to FY20, the company’s total revenue grew by 24.29 per cent annually while EBITDA for FY20 stood at Rs 134.89 crore.

Valuation & recommendation  

Anupam Rasayan is one of the leading companies in India, which is engaged in the custom synthesis and manufacturing of speciality chemicals. It has reported strong revenue growth in the last 3 years and 9 months. It continues to focus on custom synthesis and manufacturing by developing innovative processes and value engineering. The company expands its business by capitalising on industry opportunities and organic & inorganic growth. It diversifies its product portfolio and expands chemistry expertise. It continues to focus on cost efficiency and improving productivity. The company compares itself with other listed counterparts such as PI Industries, Navin Fluorine International, Astec Lifesciences, and SRF. On the upper price band of Rs 555 and EPS of Rs 6.94 for FY20, the P/E ratio works out to be 80x. For the last three years, it has registered average EPS of Rs 6.77 and a P/E ratio of 82x. If we annualise the company's nine-month ending December 2020 EPS for FY21, the P/E works out to be 69x. It means that the company is asking a price of Rs 555 of the upper price band in the P/E range of 69x to 82x. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence, you can invest for a listing gain.