Heranba Industries Received Green Signal From SEBI To Raise Rs. 700 Crores

The agriculture sector is a backbone for the total economic activities in India since the eve of independence and this sector has been a major employment generator for the Indian working force. No matter what kind of business environment, the Indian economy went through, the administration always come forward to support agriculture and its allied activities. Not only the government has considered the agriculture sector their foremost priority , the success stories of PI Industries, Rallis India, Sumitomo Chemicals, Fine Organics and UPL clears the preferences of cocky investors due to which Heranba Industries has drafted papers for IPO to SEBI.  The issue size of Rs. 700 crores comprises Rs. 60 crores as afresh issue and offer for sale by promoters. According to Draft Red Herring Prospectus, the issue comprises of Rs. 60 crores to be raised from issuance of fresh equity will be utilized for financing working capital requirements and augmenting general corporate purposes.

About the Company

With the vision of “Chemistry is at its Best”, the technocrats Mr. Sadashiv K Shetty & Mr. Raghuram K Shetty formed the company to provide innovative products to farmers to maximize their farm output, which has been achieved by their research and product development divisions in recent years. The company has three manufacturing plants in and around Vapi in Gujarat having corporate office in Mumbai. Heranba Industries are leading manufacturers of Synthetic Pyrethroids like cypermethrin,  alphacypermethrin,  deltamethrin,  permitherin,  lambda cyhalothrinetc and have specialization in crop protection chemical manufacturing. The pesticides range includes insecticides, herbicides, fungicides and public health products for pest control. The company has fully equipped in house laboratory with all the laboratory equipment’s such as HPLC’s, GC’s, Polarimeters, Particle size Analysers, Spectrophotometers and other conventional lab equipment’s.

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Industry Overview

The agriculture sector is full of potential and possesses a long term story, which will keep the momentum in the agrochemical industry intact. As quick as our operations are getting modernized, the agricultural sector is keeping up the pace and new specialized chemicals are highly required to maintain the ongoing productivity. There is no denying the fact that Indian administration has always been concerned towards the agriculture and its allied activities due to which various awareness programs and agriculture progressing schemes have been initiated to upgrade and transform the process of agriculture.

The agro-chemical sector has strong barriers due to requirement of heavy capital base for research and science behind the formulation of chemistry to manufacture agro-chemicals. Moreover, the companies are required various licensing to enter in the industry. Moreover, the difficulty in client acquisition and customer stickiness towards the agro-chemicals companies due to their customization will keep the revenues of these companies intact.

The ongoing tensions with Chinese economy after the spread of Covid-19 have opened gates for Indian agro-chemical sector to undertake major portion of exports to western countries. This would energize the Indian agro-chemical industry to get more clientage in a highly potential market.

Financials

On the financial front, the company had reported a net profit of 97.75 crores for the year ending 2020. The company is almost debt-free having a negligible non-current liability of Rs. 6.14 crores in the balance sheet. EBITDA margins of the company in FY20 are 15% while the revenues from direct operations have been slipped 5%. Earning per share of the company has been doubled from 2018. The company is continuously paying dividends to equity shareholders. In the listed space, the company will face tough competition from PI Industries, Rallis India, Sumitomo Chemicals, Fine Organics and UPL.

Book Runners

Emkay Global Financial Services and Batlivala & Karani Securities India are the book running lead managers to the issue.

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