Anupam Rasayan public issue: Should you invest in this hot specialty chemical IPO?

Staff Writer   /   March 13, 2021

Surat based, custom synthesis and manufacturing focused specialty chemicals company Anupam Rasayan India has launched its IPO on Friday, March 12, 2021 and will close on Tuesday, March 16, 2021. The price band for the offer has been decided at Rs 553–555 per equity share. The issue aggregating up to Rs 760 crore comprises a complete fresh issuance of equity shares. The company proposes to utilize the net proceeds towards repayment/prepayment of certain indebtedness availed by the company and for general corporate purposes. Read on to know more.

Who is Anupam Rasayan

Anupam Rasayan is one of the leading companies engaged in the custom synthesis and manufacturing of specialty chemicals in India. The company has two distinct verticals which includes life science related specialty chemicals comprising products related to agrochemicals, personal care and pharmaceuticals; and other specialty chemicals, comprising specialty pigment and dyes, and polymer additives.

Anupam Rasayan claims to have developed strong and long-term relationships with various multinational corporations, including Syngenta Asia Pacific Pte. Ltd., Sumitomo Chemical Company Limited and UPL.

As of December 31, 2020, the company operates through six multi-purpose manufacturing facilities based in Gujarat, India; with four facilities located at Sachin, Surat, Gujarat and two located at Jhagadia, Bharuch, Gujarat.

From FY18 to FY20, the company’s total revenue has increased at a CAGR of 24.29 per cent. Despite the impact of the COVID-19 pandemic, the company’s revenue from operations significantly increased by 45.03 per cent to Rs 539.22 crore in the nine months ended December 31, 2020.

The company’s listed peers can be SRF, PI Industries, Aarti Industries, Astec Lifesciences, Navin Fluorine etc.

IPO factbox

CompanyAnupam Rasayan India
Open dateMar. 12
Close dateMar. 16
Allotment dateMar. 19
Listing dateMar. 24
IPO size ₹760 crore approx.
IPO band₹553-555 per share
Bid lot27 shares
RegistrarKFin Technologies

IPO details

The IPO issue is being made through the Book Building Process.

No. of total shares on Offer is 1.35 crore.

The IPO minimum lot size is 27 shares. The shares have a face value of Rs 10.

Valuation

At Rs 555, the stock is available at 104.7 times FY20 earnings.

“We believe valuations are on the higher side given that it has been facing constraints towards generating FCF owing to higher working capital cycle, leading to a bloated balance sheet and thereby subdued return ratios,” says ICICIdirect.

Based on post-IPO enterprise value of Rs 5,754 crore, the operating earning yield of the IPO stock would be around 2.5 per cent.

While the stock asks for higher than peers Price to Earnings, it is cheaper when seen from Price to Book perspective.

Key risk & concerns

1. Client concertation remains a key risk – Top five clients constitute 50 per cent of overall revenue while top 10 clients contribute to the tune of nearly 84 per cent.

2. Higher working capital cycle keeps FCF subdued – The company enters into fixed price annual contract with buyers at the end of calendar year. Similarly, it keeps higher inventory to offset any price fluctuation. This leads to higher working capital cycle and limits FCF generation.

3. Inability to pass on higher RMAT cost to impact bottomline – The company’s key raw materials (RMAT) are para chloro phenol and meta dichloro benzene, whose prices have remained volatile in the past. Anupam Rasayan does not enter into long-term supply contracts with any raw material suppliers while purchase prices for customers are predetermined either annually or for the duration of the agreement. Accordingly, any subsequent variation in price of raw materials may not be passed on to customers and can impact gross margins of the business.

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